Hong Kong hotels counting on city’s resiliency
Hong Kong hotels counting on city’s resiliency
15 JULY 2020 8:47 AM

Hong Kong has been a hotbed of political unrest in the last few months, and while COVID-19 has not helped the situation, hoteliers there are confident that recovery leading to long-term success is likely.

REPORT FROM HONG KONG—Hong Kong has been in the news over the last 18 months due to political protests and, more recently, for a new security law passed by the Chinese government, but sources said the special autonomous zone is poised for a bright future.

Another blow is the 14 July executive order signed by U.S. President Donald Trump that stripped the SAR of its special trading status with the U.S. that dates back to 1984.

Hong Kong was a U.K. colony until 1997, and under the handover agreement to China certain freedoms and conditions were allowed, clauses the U.K. government said the new law has canceled.

Despite the political unrest and global threat of COVID-19, visitors should return to what is a unique and vibrant tourism and business market.

Jesper Palmqvist, area director, Asia-Pacific at Hotel News Now’s parent company STR, said Hong Kong is in a very tight spot with both the political challenges along with COVID-19 implications, but within in the last month or two there have been definite performance highlights among its hotels.

“Saturday staycations in Hong Kong are bringing … occupancies up to 50% recently, and they used to be 40% a month ago,” Palmqvist said. “Weekday baseline has also lifted from 30% to almost 40%, so there has been a lift in general.”

He said the lowest point in the COVID-19 era was between February and April when occupancy hovered around 20%.

“So, certainly some kind of improvement in that sense,” he said. “That’s for overall Hong Kong, (but) within the area there are variations, with Mongkok area higher and Central lower.”

Simon Manning, chief sales and development office at Hong Kong-based Langham Hospitality Group, said Hong Kong is an international business hub that won’t be kept down for long.

“The business community is very optimistic on the future economy of Hong Kong,” Manning said. “Whilst there are political issues in the short term, the long-term prospects … remain firm and confident.”

He added that business recovery is being hampered by a travel ban for all but Hong Kong residents, a ban that is in place through 18 September.

Staycations and staff
Laura Offe, managing director of Hong Kong-based consultancy firm The Box Partnership, said there also is a two-week quarantine procedure for resident arrivals.

“Sure, it’s a disaster,” she said.

Offe’s family also owns three restaurants in Hong Kong and one in Paris, all part of Meraki Hospitality Group. She comes from a hotel industry family, her father being Jean-Michel Offe, the group’s founder and the former EVP of development and innovation at Shangri-La Hotels, which has four hotels in Hong Kong.

“Hotels were hit with the protests, but at least they still had tourists, but as soon as COVID-19 hit, all traveling just stopped,” Offe said. “In March or February, occupancy was 7%.”

Offe added she, too, has seen evidence of staycations, but that staffing has been greatly affected.

“Hotels had given unpaid leave to (staff to) mitigate losses as much as possible, but in March layoffs started, and this continues,” she said. “The fear is that is only the beginning.”

Some staff also saw periods of unpaid leave during the 2019 protests, sources said, and the pain is being felt in procurement chains, too.

“Suppliers are affected, and there is a snowball effect that is massive,” Offe said. “Government has put into place a subsidy scheme, but this started in June, so for some this is too late.”

She added one note of optimism is the city’s capitalist makeup: its resistance in past crises like the 2003 SARS outbreak and the 2008 Great Recession.

“Hong Kong is a very capitalist city, all about business, so seeing this from past crises, business was always able to bounce back, and if they could not, then they were not supposed to survive,” she said.

UK carrot
Following the imposition of the new security law, the United Kingdom offered a route to citizenship for Hong Kong passport holders. Sources said this and similar promises in 1997 appear appealing in theory but not so much in practice.

Offe said she is unsure if the U.K. scheme is guaranteed for the long term.

“It appears great at first, but when it is looked at it becomes more daunting,” she said.

Ultimately, Offe and other sources said international guests will forget about current political squabbles.

“Not for people in Hong Kong, but for those coming for pleasure, yes,” Offe said. “The law might be good for business, but it does not do anything to reconcile differences.”

She said that the hotel and hospitality companies looking to survive must start again focusing on marketing.

“Always in some situations it is hard to justify the (return on investment) of marketing campaigns, but busy are the ones who continued to do marketing,” she said.

Offe’s Meraki group follows Hong Kong’s hotel chains in understanding the importance of controlling costs and being as cost efficient as possible.

“We adapted to what we could do,” she said. “For instance, we were not very keen on being on delivery apps, but that became urgent. We also changed menus so as not to have to order as much produce.”

Slowly, things are seeing improvement in Hong Kong, but a settling down of the political landscape and a relaxation of travel rules after mid-September will aid business.

“The overall hope is that the current trend continues, both with more staycations and potential transit passenger nights but also hope about a gradual increase in allowed mainland travelers,” Palmqvist said.

“Restaurants are doing very well,” Manning added. “When the border reopens with the mainland, we believe our tourism and occupancies will dramatically improve.”

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