The tourism industry in Hong Kong a major contributor to the economy of Hong Kong. The hotel industry plays an integral role in this. The industry is facing a range of constraints at present which include general economic factors, such as inflation, labour shortage and high labour cost and specific threats, such as airport capacity. Perhaps the most important constraints however, is an emerging serious shortage of hotel accommodation. Hence, the tourism industry in Hong Kong is facing a period of reduced growth or even negative growth.
Due to various reasons, insufficient new hotel development has been committed and existing stock is being lost through redevelopment. There is a major implication on land use planning in Hong Kong. On the demand side, over the last two decades, visitor arrivals to Hong Kong has increased by some ten percent per annum. The number of hotel rooms has never grown as fast as visitor arrivals. According to the figures from the Hong Kong Tourist Association, hotel occupancy in 1993 was 87% (1994’s figure not yet available), which is very close to the operational capacity of 90%.
Apart from that, from now till 1998, there are some 3,000 new rooms planned to be built. However, there are also plans to re-develop some of the existing hotels, such as Hilton, Miramar and Victoria. There is a urgent need that some measures, both long and short terms, must be introduced to encourage new hotel development and at the same time discourage re-development of existing hotels. 1. 2 Scope of the paper The purpose of this paper is to analyze the current and projected situations, through data analysis and discussion with representatives from the trade; identify appropriate short and long terms measures to rectify the situation.
It may involve specific zoning for hotel development; relaxation on plot ratio for hotel development; change in the Buildings Ordinance, etc. in order to achieve continuous growth for our tourism industry. 1. 3 Method of study Data, facts, information and views contained in this paper are basically collected from various sources and approaches. Most of the tourism statistics are obtained from the Research Department of the Hong Kong Tourist Association. Apart from that unstructured discussions were conducted to collect information and opinion from trade representatives and related professionals.
Part of the data are extracted from the Visitor and Tourism Study for Hong Kong1 commissioned by the Hong Kong Tourist Association as I am a member of the working group, hence, involved in various stages of discussions and meetings and accessible to the most primary data. 1. The Study was commissioned by the Hong Kong Tourist Association in cooperation with the Planning Department with a view to formulate a visitor and tourism strategy suited to the future needs of Hong Kong and to recommend appropriate courses of action to implement a selected strategy.
– 1 – I would like to take this opportunity to thank Dr. Ted Pryor, Principal Government Town Planner of the Planning Department and Mr. Tim Bellman of Roger Tym ; Partner of their most valuable advice given to me. Chapter 2 Economic and Social Importance of Hong Kong Tourism Industry 2. 1 Visitor Expenditure The tourism industry plays a vital part in the Hong Kong’s multi-faceted economy and social activities. The number of visitor arrivals has increased from 3. 657 million in 1985 to 9. 331 million in 19942, an increase of 255% in a decade.
Visitors involved themselves in many economic activities, sectors that received the most direct benefit are hotels, restaurants, retail shops, tour operators and airlines. Total visitor expenditure in Hong Kong in 1994 amounted to HK$64,263 million3, or an average of HK$6,699 per capita during their stay in Hong Kong. With these, it helps stimulate economic activity. It is important to note that tourism receipts are a direct addition to the foreign exchange earnings for Hong Kong. The main measure of the value of an industry to the economy is its contribution to Gross Domestic Product (GDP).
According to the Visitor and Tourism Study for Hong Kong, the value-added contribution of tourism industry to GDP in 1993 was 7. 9%4. 2. 2 Employment Tourism industry is primarily a ‘service-oriented’ industry and relies heavily upon people for delivering a service. A principal argument made for encouraging the development of tourism is that it produces jobs. Also from the Visitor and Tourism Study for Hong Kong that the tourism sector provided direct employment for 83,000 people and a further of 46,000 people in supporting services. It is now the fourth biggest employer after the wearing apparel, banking/finance and transport sectors5.
2. 3 Standard of Living The main benefits of tourism, apart from the provision of jobs, it increases income and improves standard of living and amenities for local residents. Increase in tourist traffic and expenditures permit a relatively faster improvement in standard of living. During the past few years, there were various major large scale development projects, mostly tourism related, such as the Hong Kong Science Museum (completed in May 1991), Redevelopment of the Hong Kong Stadium (completed in March 1994), the Peak Town (to be completed in 1996), the Ocean Park’s 5-year development scheme launched in 1993.
2. Research Department, Hong Kong Tourist Association (1994), Tourism in Hong Kong – The Figures, Hong Kong. 3. Ibid. 4. Hong Kong Tourist Association (1994), Visitor and Tourism Study for Hong Kong, Hong Kong, p. 4. 5. Hong Kong Tourist Association (1994), Visitor and Tourism Study for Hong Kong, Hong Kong, p. 4. – 2 – 2. 4 Government Revenue Tourism industry also makes a very significant contribution to the Government revenue through direct and indirect taxation. The revenue specifically generated from tourism industry is collected in various forms, including hotel accommodation tax, airport departure tax, etc.
To cite a few examples, in 1991/92, the hotel accommodation tax was HK$265. 9 million, the airport departure tax was HK$1,120. 3 million6. Apart from these revenue sources, tax revenue are collected from various forms and sources, such as airport concessions, aircraft landing and parking charges, fuel tax, profit tax derived from hotels, tour operators, travel agents, etc. 2. 5 Conclusion As one of the major industries in Hong Kong, tourism industry has a very significant impact on balance of payments, government revenue and employment.
It has high development prospects provided that the government, the tourism planners and developers and other investors all work in close collaboration to improve the tourism plants, tourist facilities and infrastructure to meet the expectation and demands of our overseas visitors, our role as an international city will be further strengthened. Chapter 3 Visitor and Hotel Development Trends 3. 1 Visitor Trends Based on the latest figures available from the Research Department of the Hong Kong Tourist Association, in 1994, 9,331 million visitors came to Hong Kong, of which 7.
387 (79. 2%) were international visitors and 1. 944 (20. 8%) were from mainland China7. On average, the average length of stay was 3. 9 nights8. Over the last 20 years, the number of visitors coming to Hong Kong has increased by around 10% per annum. As commented in the Visitor and Tourism Study for Hong Kong that “the number of visitors (excluding PRC) has double every five to nine years. In recent years (after the lifting of outbound travel restriction), visitors from PRC doubled every two to four years and total visitors (including PRC) have doubled every six to seven years”9.
This has been a very significant growth in terms of visitor arrivals for Hong Kong, however, the number of hotel rooms has never grown as fast as this. 6. Census and Statistics Department, Hong Kong Government (1993), Annual Digest of Statistics, 1992 Edition, Hong Kong, p. 119. 7. Research Department, Hong Kong Tourist Association (1994), Tourism in Hong Kong – The Figures, Hong Kong. 8. Research Department, Hong Kong Tourist Association (1995), Visitor Profile Report, Hong Kong, p. 1. 9. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.7. – 3 – 3. 2.
Hotel Development Trends Up to the late 1980’s, hotel development has been growing in harmony with the number of visitor arrivals. The average annual increase in new hotel rooms has been around 1,100 over the last twenty years. During the last ten years (from 1984 to 1994), the annual average hotel occupancy has been rather steady, in 1985, the annual occupancy was 88% and in 1991, it dropped to as low as 75% (a respectable level by international standards) and by 1994, it increased to 85%10.
A point to note here is the fact that 90% occupancy is the operational limit, hence, 85% average occupancy is, in fact, approaching saturation points already. 3. 3 Hotel Supply Situation As at the end of 1994, there were 33,490 rooms in 85 HKTA member hotels and guesthouses11. During the last two years (1993 & 1994), there were addition of 2,559 new rooms, but during the same period, 2,458 rooms ceased operation, a net gain of 409 rooms (Figure 3. 1) or 1. 2 % increase from 33,534 rooms in 199212.
It is obvious that the addition of new rooms is by no means compatible to the growth in visitor arrivals. It is also obvious that there is a trend that hotels ceased operation as their sites are more valuable for development as office buildings, in 1993 & 94, seven hotels, namely, Lee Gardens Hotel, China Harbour View Hotel, China Merchants Hotel, Ambassador Hotel, Harbour Hotel, Hotel Fortuna and Emerald Hotel. Apart from the above, there are also plan to re-develop major hotels, such as the Hilton Hotel, the Hotel Victoria and the Sheraton Hong Kong Hotel13. 3. 4 Development Economics
It is vital to understand development economics in the contest of current hotel supply situation, why hotels are being developed and shy some existing hotels are being redeveloped. The relatively few firm plans for development of new hotel and the planned redevelopment of existing hotels are clear indication that commercial office development provides a significantly higher returns than hotel development. As stated in the Visitor and Tourism Study14, it is because: 1. Developer of a commercial site is faced with a permissible plot ratio of at most 10 for the hotel room portion.
The hotel concession on plot ratio may raise the total plot ratio for the development in many cases closer to 15. However, an office on the same site has a permissible plot ratio of 15. 2. A hotel is a single, massive form of and relatively long term investment. They are profitable businesses but expensive to run. An office can be sold or leased to a wide variety of occupiers of different size units. The office, once developed, is comparatively management free. 10. Research Department, Hong Kong Tourist Association (1994), A Statistical Review of Tourism 1993, Hong Kong, p.
43. 11. Research Department, Hong Kong Tourist Association (1995), Hotel Supply Situation, No. 1, Hong Kong, p. 1. 12. Ibid. , pp. 6-7. 13. Nisha Gopalan, Hotels find no firend in Government, Eastern Express, 10th April, 1995. 14. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, pp. 20-22. – 4 – Figure 3. 1: Changes in number of rooms in 1993 – 1994 Year Hotel Number of Gain/Loss Rooms (+/-) Year End 1993 Silvermine Beach Hotel +135 Regal Hong Kong Hotel +423 Ritz Carlton Hotel +216 Gold Coast Hotel +443
BP International House +495 Lee Gardens Hotel -660 China Harbour View Hotel -310 Other Adjustment -232 +510 1994 BP International House (Extension) +41 South China Hotel +204 Peninsula Hotel (Extension) +145 Pearl Seaview Hotel +253 YMCA International House (Extension) +145 Other Adjustment +59 China Merchants Hotel -285 Ambassador Hotel -313 Harbour Hotel -156 Hotel Fortuna -187 Emerald Hotel -315 -409 Source: Research Department, Hong Kong Tourist Association – 5 – 3. The unit construction costs of a business-class hotel may well be higher than those for a Grade A office.
There would be significant outfitting and marketing costs before the hotel room became operational and occupied. Office building would usually be simpler, quicker and cheaper to construct. With all these reasons listed above, it is clear that a hotel is more expensive and less viable than office in a comparable location. Existing hotels in prime location may interprets as an under-performing investment, once opportunity arise, owner may than redevelop them as offices, typical example is redevelopment of the Lee Gardens Hotel in Causeway Bay and another example in the pipeline is the Hilton Hotel in Central.