Mainland Chinese hotel operators are anticipated to greatly expand their involvement inHong Kong's hotel industry, possibly supplanting well-known brands in the years ahead, as per analysts.
At present, Western and international hotel operators hold a dominant position in Hong Kong's hospitality sector, with Chinese companies having a limited presence. Some of the more prominent mainland-based companies include BTG Homeinns, which manages both high-end and mid-range hotels in Hong Kong, such as the Wharney Hotel in Wan Chai, Oasis Avenue in Tsim Sha Tsui, and Oasis Aurum 181 in Sai Ying Pun.
Nevertheless, mainland brands showed considerable room for expansion, according to Hannah Jeong, executive director and head of valuation and advisory services at CBRE Hong Kong.
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"Chinese companies are expanding their influence, and this is a global pattern," stated Jeong, noting that since 70 percent of visitors to Hong Kong originate from the mainland, Chinese hotels "need to establish their presence" in the city.
The change indicates the increasing aspirations of Chinese hotel operators to venture beyond the mainland, potentially providing them with an advantage in drawing in hotel property owners, as stated by CBRE.
Hotel management usually involves different business structures, like a master lease - in which the hotel owner rents the property to an operator - or hotel service management, where the operator oversees the hotel for the owner.
Chinese hotel chains typically favored new properties, but because of the limited availability of such options in Hong Kong, they were prepared to vie for space by providing more favorable terms to property owners and landlords, she mentioned.
The timing may offer advantages to Chinese hotel operators. As hotel management contracts or leases typically last for five years, asset owners who made compromises during the Covid-19 pandemic might now look to negotiate new terms as these agreements come to an end, presenting a chance for mainland companies, according to Jeong.
The expected arrival of hotel operators from the mainland aligns with three growing trends that may boost their visibility in Hong Kong, as stated by Wei Junya, vice-president of investment sales in Greater China at JLL.
The initial trend involves evolving tastes among travelers.
As the biggest source of tourism in Hong Kong, mainland tourists are increasingly looking for hotel experiences that match their cultural background, Wei mentioned. Chinese companies have demonstrated "exceptional ability in meeting this need via established digital systems such as WeChat mini-programs and membership integration," he further noted.
The second trend focuses on optimising assets, with mainland Chinese operators able to boost their profit margins via centralized purchasing systems, improved operational efficiency, and AI-powered dynamic pricing, as stated by Wei.
The third trend, according to Wei, was the attraction of Hong Kong as a trial area for mainland companies aiming for international expansion.
Although Hong Kong's tourism sector is seeing an inconsistent recovery, top-tier hotels have completely recovered, with their average daily rate hitting HK$2,145 (US$273) during the first five months of the year—nearly equaling the 2018 figure of HK$2,149, as reported by CBRE.
In contrast, budget hotels are providing attractive prices to draw in a broader spectrum of travelers. Between January and May, Hong Kong received more than 20 million international tourists, indicating it was likely to surpass last year's total of 44.5 million by 12 per cent, though the projection remained 22 per cent short of the 2018 peak, according to CBRE.
Although the arrival of new hotel operators might offer travelers more choices, additional elements also contribute to the industry's success, as stated by Lawrence Wan, senior director and head of advisory and transaction services for retail at CBRE Hong Kong.
"To draw visitors to Hong Kong, hotels are just one aspect," he stated. "Key elements include the standard of service we deliver, the new attractions we present," and approaches aimed at promoting extended visits instead of merely day trips, he added.
The function of the government andretailersProviding a wide range of experiences is essential, Wan stated.
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This piece was first published in the South China Morning Post (www.scmp.com), a top news outlet covering China and Asia.
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