Why Hong Kong hotels remain a coveted real estate investment this year

There has not been any significant distressed assets in the sector despite the pandemic. 

Hong Kong’s hotel property sector is becoming one of the most sought-after investments for those seeking value-added opportunities this year. A number of investors are also converting hotel assets into co-living spaces.

According to CBRE, in the past six months, foreign funds have acquired Butterfly on Prat, Hotel sáv Hong Kong and Travelodge Central Hollywood Road, with plans to incorporate co-living or student accommodation elements in the redevelopment. In mid-February, the Town Planning Board received the application to convert the ibis Central and Sheung Wan into a residential building. 

In early April, CBRE successfully advised on the transaction of the Rosedale Hotel in Kowloon, which will be renovated into a co-living space according to the buyer’s plan, and ready to open mid next year.

Despite the ongoing pandemic in Hong Kong, the hotel industry has not seen any significant distressed assets. CBRE found in its 2022 Asia Pacific Investor Intentions Survey that the number of investors expecting a discount on hotel assets dropped from 99% in 2021 to 78% this year, suggesting an improvement in asset price.

The Revival of Tourism with Restrictions Lifted

As the fifth wave of COVID-19 outbreak gradually comes under control, the Hong Kong SAR government is also relaxing certain social distancing measures as well as lifting the flight ban and cutting down the hotel quarantine period for arrivals in April. The move is expected to provide some breathing space for the industry.

Mainland tourists have been the main source of tourism in Hong Kong, accounting for nearly 80% of visitors in 2019. Currently, travel across the Hong Kong-Mainland border remains limited – a situation that will continue to be challenging given the ongoing pandemic outbreak in Mainland China.

Stephen Lin, Director, Valuation and Advisory Services, CBRE Hong Kong, said: "While the industry is longing for the recovery of the tourism market, hotels have been looking at ways to maintain operations and boost occupancy by pursuing the staycation or quarantine hotel approach. It is now a good time for hotel operators and investors to look into what value-added opportunities the assets have to offer.”

Click here to view the full report of CBRE Asia Pacific Hotel Market Outlook - Trends to Watch in 2022.