HK Hotel Room Yields Seen Rising 10% In 2005

[HenryTo]

INTERVIEW: HK Hotel Room Yields Seen Rising 10% In 2005
By Ruby Chan

Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--The Hong Kong Hotels Association expects average room yields for hotels in the city to grow 10% this year, underpinned by the business travel market.

The projected rise in room yield - revenue per available room - is markedly lower than growth of 50% in 2004. But that expansion was inflated by a very low base in 2003, when Hong Kong's leisure and travel market was affected by the SARS crisis.

"We are optimistic about the number of international travelers this year as business traffic is robust. The demand for hotel rooms is good, especially as there will be many international events and exhibitions in 2005," said HKHA's executive director, James Lu, in an interview.

Chief among the events will be the World Trade Organization's ministerial meeting in December and the opening of a Disneyland in September.

Hong Kong's main listed hotel assets are Hongkong & Shanghai Hotels Ltd. (0045.HK), which owns The Peninsula, one of the city's most famous hotels, and Shangri-La Asia Ltd. (0069.HK), which owns two Shangri-La hotels in the territory. Singapore-listed Jardine Matheson Holdings Ltd. (J36.SG) has a majority stake in the Mandarin Oriental, another landmark hotel in Hong Kong.

Hong Kong's 100-plus hotels had an average room yield of HK$706.6 last year, according to the Hong Kong Tourism Board. Lu expects a room yield of about HK$777 in 2005.

He expects the average hotel occupancy rate in Hong Kong's around 50,000 hotel rooms to increase one percentage point in 2005, from 88% last year, which was the highest rate since 1996.

"Eighty-eight percent is a very high level and it will be hard to go much further," said Lu.

"We know for sure that there will be more tourists after Disneyland opens in September, but we can't predict the impact on hotel occupancies," said Lu.

Many of those visitors are expected to come from mainland China, who have been behind the recovery in Hong Kong's tourism industry since Beijing relaxed travel restrictions in 2003.

A Disneyland is being constructed on Lantau Island, the biggest island in the Special Administrative Region, and will have two hotels with a combined 1,000 rooms.

"Many of those tourists are expected to come from China, and we don't know whether they'll stay in hotels," Lu said.

He said despite the surge in mainland visitors to Hong Kong, many stay with relatives rather than in hotels - and only half of the 12.25 million mainland visitors that came to Hong Kong last year stayed overnight.

Founded in 1961, the HKHA oversees the development of hotels in Hong Kong. It also operates hotel reservation centers at the Hong Kong International Airport.

Lu expects 5,000 hotel rooms to be added in the city this year.

New hotels coming on stream in 2005 include the 118-room Landmark Mandarin Oriental and the 396-room Four Seasons Hotel Hong Kong in Central.

Lu said a further 2,000 to 3,000 rooms will likely be added in 2006.

"For every 1,000 new hotel rooms, hotel groups employ 600 to 700 more staff," said Lu.

Hong Kong's hotel industry employs 28,000 people.