Hotels in Hong Kong Report Strong RevPAR Growth

According to STR Global, RevPAR at hotels in Hong Kong grew 8.7% year-to-August 2012 to HK$1,520.61, supported by buoyant occupancy levels that remained well above the 80% mark.

This RevPAR performance resulted from the highest occupancy and ADR achieved for a January-to-August period since 2000.

"Hong Kong, as a financial centre and hub for conferences and events, is a strategic gateway for conducting business with China and the rest of the world," said Elizabeth Randall Winkle, managing director at STR Global. "Hoteliers in Hong Kong have benefited from continuous annual demand growth since 2010, helping to reach the highest performance levels since 2000. Whilst economic activities are expected to remain challenging during the rest of 2012 and into 2013 in China and globally, we expect to see, according to our latest forecast, occupancy to level off around the 84% mark until the end of 2013, and ADR growth to slow slightly to 3.6%."

Hong Kong's RevPAR for the first eight months of 2012 benefited from ADR growth (+8.3 in Hong Kong dollars or +5.7% in Chinese Renminbi) and high occupancy levels, which has remained above the 80% mark since October 2010.

Looking at the past 12 years, the recent peak performances were supported by increasing demand, which grew 2.9% on a compound annual growth rate (CAGR) for the January-to-August period over the past 12 years with supply increasing 2.4% CAGR over the same period.

Focusing on hotel performance by market segment, Hong Kong Island's luxury and upper upscale hotels saw the highest ADR YTD, reaching HK$2,381.2 (+6.4%) or CNY1,941.2 (+3.8%). Hong Kong Island upscale and upper midscale hotels reported the highest occupancy level, ADR increased by 12.3% in HK$ or 9.7% in CNY YTD.

Upscale and upper midscale hotels in Kowloon saw the highest RevPAR growth YTD, led by an increased ADR of 11.6% (HK$) or 8.9% (CNY). Benefiting from a positive exchange rate between the HK$ and the CNY, Kowloon luxury and upper upscale hotels saw increased ADR YTD in local currency, leading RevPAR to reach HK$1,762.6 YTD (+5.3%).

Just miles away from Hong Kong's booming hotel market, Shenzhen and Guangzhou reported declining occupancy whilst ADR in local currency supported RevPAR YTD. As China's hubs for industrial and new technology industries, both cities experienced tougher market conditions as hotel supply increased and demand weakened. Shenzhen's hotel demand declined 3.3% YTD, whilst new hotel supply increased by 2.0% YTD. New openings in 2011 included the St. Regis Shenzhen, two Super 8 hotels, a Crowne Plaza and Friends International HNA Grand Hotel.

Guangzhou's demand declined by 1.1%, whilst new supply increased by 3.8% YTD. Since August 2011, the city saw eight additional hotels including a Four Seasons, Westin, Marriott, Oakwood Premier, Ibis and Super 8.

As the economic environment remains challenging, all three markets are expected to see pressure on occupancy levels and stable ADR growth at least in the short term. However, Hong Kong-a gateway destination with limited options for new hotel developments, is expected to continue to report high performance levels.

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