Hospitality Sector Has the Potential to Lead the Recovery of Hong Kong’s Real Estate Market

The number of tourist arrivals has picked up in 2024. With about 44.5 million visitors, there was an increase of 30.9% over 2023. With that, overall occupancy rates increased from 82% to 85%. The new year also started promising with just under 4.8 million visitors in January 2025, edging closer to figures seen pre-pandemic.

Against this background, average daily rates (ADRs) decreased versus 2023 by about 4% overall. Medium Tariff Hotels performed above average, declining less than High Tariff A and B hotels and showing stronger improvement on occupancy rates. This is indicative of the current cost-consciousness of tourists, especially from Mainland China. The strong Hong Kong Dollar against other currencies exacerbated this pattern. Going forward, the re-introduced 3% tax on hotel accommodation will lead to an increase in rates to be paid by guests. While there might be a slight negative impact on guesthouses and lower tariff hotels where guests are typically more price sensitive, we do not expect a major deterrent for overall demand.

The new supply of confirmed hotel projects is limited in the near future. Four new hotels with a total of about 1,200 rooms are expected be completed between 2025 and 2026. Most notably, the Kimpton will provide just under 500 rooms to the Tsim Sha Tsui area.

To help increase the positive momentum for Hong Kong’s tourism industry, the government outlined their vision and strategy for further development in the recently released Development Blueprint for Hong Kong’s Tourism Industry 2.0.

The blueprint proposes four development strategies:

1. Nurture and Develop Tourism Products:

• Focus on integrating tourism with culture, sports, ecology, and mega-events:
• Opportunities for hotel developers, investors and operators: 
• Utilise Kai Tak Sports Park (KTSP)to host international sports events like Rugby Sevens and attract international events like Art Basel and LIV Golf Pro Tour.
• Develop green tourism, island tourism, and eco-friendly initiatives which include the development of large-scale integrated resort projects. An example is the ex-Lamma Quarry site which will be developed into an area for resorts by the Development Bureau. The government will actively facilitate and assist private companies with developments.
• Facilitate yacht tourism and the construction and operation of yacht berthing facilities in the expansion area of the Aberdeen Typhoon Shelter the ex-Lamma Quarry area and the waterfront site near Hung Hom Station.
• Work with the HKJC to promote horse racing tourism and related catering packages together with cruise and MICE itineraries to cater towards high value-added visitors.
• Enhance Kai Tak Cruise Terminal (KTCT) as a hub for international cruise itineraries. The KTSP and KTCT will be linked via a continuous promenade with clusters of retail/dining outlets. The commercial land adjacent to the cruise terminal has yet to be sold with the potential of hotel development.
• Upgrade iconic attractions like Hong Kong Disneyland, Ocean Park, and Victoria Harbour.
• Focus on Lantau Island, East Kowloon and the Kai Tak Development Area, as well as relevant areas in the Northern Metropolis to become new tourist hotspots. The proposed Smart and Green Mass Transit Systems in East Kowloon and Kai Tak will enhance connectivity and increase the attractiveness of the area for tourism. 



Opportunities for hotel developers, investors and operators:

• High-Value Accommodation Development: Investing in luxury and boutique hotels that cater to high-value overnight visitors can capitalise on the strategy to attract affluent travelers. The government has made clear that it wants to focus on quality over quantity and will push for higher value-added tourism. Henderson Land is already trying to capture this potential by building a new 91 room upscale hotel under its Miramar brand in TST.
• Diversification of Hotel Offerings: There is an opportunity to develop themed hotels or unique lodging experiences, for example eco-friendly hotels, luxury nature resorts, or cultural heritage stays in relevant locations. 
• Sustainable Tourism Initiatives: Investing in green building certifications and eco-friendly amenities can attract environmentally conscious travelers and green hotel investing.

2. Visitors from All Parts of the World Gather in Hong Kong:

• Diversify visitor source markets, with a focus on attracting high value-added overnight visitors.
• Strengthen Mainland China as a core market while exploring new markets like the Middle East and ASEAN. A focus is increasing the number of affluent visitors from the gulf region. Hotels with prayer facilities and others will be promoted by the government.
• Promote MICE and cruise tourism. Higher purchasing power and spending make this group particularly attractive for the hospitality sector. The government will allocate additional funding of HK$200 million for MICE events.



Opportunities for hotel developers, investors and operators:

• Expansion into New Markets: Targeting new visitor source markets, such as the Middle East, Southeast Asia and India, can drive demand for hotel accommodations tailored to these demographics. Hotels that can offer facilities catering to these groups will have higher chances to be promoted by the government. 
• Event and Conference Facilities: Developing or enhancing venues for mega-events, conventions, and exhibitions can cater to the increasing demand for business and event tourism, particularly as Hong Kong aims to position itself as a hub for international events.

3. Intelligent and Convenient Travel to Hong Kong:

• Promote smart tourism through technology like AI, big data, and e-payments.
• Enhance visitor experiences with smart itineraries, multilingual guides, and improved network infrastructure.



Opportunities for hotel owners, and operators:

• Smart Hospitality Technology: Investment in smart hotel technologies can enhance guest experiences and operational efficiency. This is especially important as a reduction in operating costs will make hotel investments more attractive from an income perspective. Automated communication, booking and check-in tools, and AI chatbots can are some of the examples that can help to lower costs. 

4. Quality Services for Visitors:

• Attract talent that is digitally skilled. This will be crucial since staff shortages are contributing to high operational costs. Manpower shortage in the tourism industry is expected to be up to 14,000 by 2028. Currently, this is one of the key issue troubling hotel operator’s bottom lines. 
• Improve service quality and infrastructure, including upgrading tourist facilities. This includes the construction of large-scale convention and exhibition venues, like Phase 2 of the AsiaWorld Expo expansion, the expansion of Airport City and the Wan Chai North Redevelopment project. The Government is committed to ensuring a sufficient supply of hotels. There will be greater flexibility in land use as necessary to facilitate relevant projects.



Opportunities for hotel developers, owners, and operators:

• Renovation and Upgrading Existing Properties: Existing hotels may require renovations to meet the new quality standards and service enhancements, presenting opportunities for investors to upgrade their existing assets.
• Mixed-Use Developments: Combining hotel facilities with retail, dining, and entertainment options can create appealing destinations for visitors, enhancing revenue streams and asset value.
  
  

The Blueprint outlines promising government initiatives to support the private sector in revitalising Hong Kong’s tourism and hospitality industry. Companies should leverage government initiatives and incentives for hospitality related investments. Together with fundamental headwinds, the hospitality sector is poised to lead the recovery of Hong Kong’s real estate market. By 2029, the tourism industry's value added is expected to increase by 60% to HK$120 billion, and employment by 45% to 210,000, highlighting significant opportunities.

With our long-standing expertise on valuations and advisory in the hospitality sector and ample resources and data from our support functions, our team is best suited to guide you on these opportunities. Whether you are developer, owner, operator, investor or new entrant into the hospitality sector, we can advise you and conduct valuations on site assessment and development feasibility, acquisition and disposal, redevelopment and repurposing scenarios, cashflow and scenario analysis, and financial reporting among others. Please reach out to one of our experts to know more on how to best take advantage of the government’s direction and a promising outlook in the hospitality sector.