HONG KONG: Hotels in Hong Kong are expected to show stronger reliance on mainland travelers, as the global economic recession takes a heavy toll on the visitor numbers from the US and Europe and as new central government policies encourage and facilitate visits from the mainland, market experts told China Daily.

Hit hard by the volatile economic conditions at the time, visitor arrivals to Hong Kong from January to September dropped 2.8 percent to around 21.2 million. Travelers from long-haul markets including the US, Europe and Australia slumped 9.2 percent, the biggest fall among all regions, according to the latest figures by the Hong Kong Tourism Board.

Despite the sluggish travelers' number in the long-haul markets, arrivals from the mainland have maintained growing momentum by advancing 3 percent to around 12.9 million for the first nine months.

Amid the challenging business environment, the hotel sector in Hong Kong may have to switch its focus to the mainland and other short-haul regions, in order to sustain business growth.

James Lu, executive director of Hong Kong Hotels Association, said the short-haul markets, including the mainland and South-East Asian countries, will continue to bring a significant number of travelers to hotels in Hong Kong in the foreseeable future.

"The number of hotel visitors from long-haul markets, including the US and Europe, is still lagging behind the level before the global financial crisis. However, a remarkable rebound has been found in the mainland and South-East Asian region," Lu said.

The association believes the hotel business will remain stagnant in 2010, while a complete recovery will occur only in 2011, given the unstable economic conditions in the US, the high global unemployment rate and the diminished export figures on the mainland.

"If exports in the Pearl River Delta and the Yangtze River Delta improve, it will help boost the exhibition numbers in the country and bring more exhibitors to the mainland and Hong Kong," Lu said.

Weak consumer spending has also affected the occupancy rate and room rate in local hotels.

According to the Hong Kong Tourism Board, around 57.1 percent of all visitors to Hong Kong from January to September this year stayed in the city for at least one night, compared with 58.5 percent the same period last year.

Hotel occupancy across all categories of hotels, meanwhile, dropped 3 percentage points to 76 percent. Occupancy in Yau Ma Tei and Mong Kok, with more medium-tariff hotels, amounted to an average of 83 percent, the highest among all locations in Hong Kong.

The average hotel room rate also plunged 15.1 percent year-on-year in September to HK$1,042.

"General room rates in local hotels have been gradually picking up, but the price in the fourth quarter will still fall 10 to 15 percent from a year earlier," Hong Kong Hotels Association's Lu said

The economic recession has had the greatest impact on High Tariff A hotels, the highest ranking hotels in the city, as they reported a 73 percent occupancy rate and an average room rate of HK$1,911 in September. High Tariff B hotels posted 78 percent occupancy and HK$768 room rates, while Medium Tariff hotels came in at 77 percent and HK$447.

Donald Cheng, a hotel analyst at Taifook Securities, expects hotels in Hong Kong to operate under pressure next year.

"The local hotel market may face challenges for at least another year in 2010, as a volatile and difficult operating environment continues this year under the shadow of the worldwide financial crisis and swine flu pandemic," Cheng said.

However, Cheng said the number of mainland visitors will continue to grow in a long term, benefiting from the continuing support initiatives from the central government.

In particular, the hospitality and tourism industries can look forward to mainland visitor upsurges, as a result of recent immigration and visa policy changes. "With the liberalizing of the Individual Visit Scheme and a further relaxation of exit restrictions for residents from a number of mainland provinces, we estimate the number of arrivals from the mainland could reach 21 million by 2011," Cheng said.

(HK Edition 11/21/2009 page2)