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Light at the end of the tunnel | Hong Kong hotel market update: October 2022

Hong Kong SAR’s hotel sector has been challenging, yet opportunistically active this year, depending on whether viewed from an operational or investment perspective.

The recent removal of compulsory hotel quarantine for inbound travellers is expected to provide the industry with a much-needed boost. However, as local travellers are likely to head outbound in the upcoming holiday season, the question is: can the city do enough to attract international visitors back quickly?

On 26th September 2022, quarantine restrictions were lifted and replaced by the new ‘0+3’ policy, whereby no compulsory hotel quarantine is required. Visitors must undergo three days of medical surveillance during which, according to issued guidelines, “inbound persons are free to go out but are obliged to comply with the city’s ‘Amber Code’ restrictions under the Vaccine Pass, followed by a four-day self-monitoring period”.

The Return2HK and Come2HK schemes from the Mainland and Macao have also been widened with no quota application required under each scheme. This is a positive step forward, as the city looks to open and move past the sector’s operating difficulties.

However, until the border with the Mainland is fully open, the sector will continue to face challenges. Pre-COVID-19, Mainland inbound overnight visitors accounted for over 70% of the hotel room nights. In the shorter-term, Hong Kong’s hoteliers will have to mainly compete for business from international arrivals.

With that as a backdrop, it is important to understand how the sector has fared this year.

Amid operating challenges, hotel industry performance improves in H1 2022

The fifth COVID-19 wave earlier this year sent Hong Kong into lockdown resulting in an extremely challenging operating environment. Certain hotels signed up to the HKSAR Government’s Community Isolation Facility Hotel Scheme (CIF). This boosted much-needed cash flow whilst serving as a temporary solution to accommodate the rising COVID-19 cases.

Other hotels continued in the Designated Quarantine Hotel Scheme (DQH). Flight and route cancellations resulted in numerous lost bookings and significant revenue loss during the first quarter. Non-quarantine hotels, especially at the luxury end of the market, suffered the most with the restrictions all but eliminating local demand and revenue from F&B/banqueting.

  • Restrictions eased as we transitioned through second quarter and while rates took a slight dip, hotel occupancy improved, resulting in the first half of 2022 outperforming the first half of 2021 on an average basis, according to figures provided by the Hong Kong Tourism Board (HKTB).

  • H1 2022 average occupancy was up at 63.5% compared with 56% in H1 2021.

  • Average room rates in H1 2022 were at HKD 1,038 versus HKD 836 in H1 2021.

  • Revenue Per Available Room (RevPAR) in H1 2022 stood at HKD 659 versus HKD 468 over the same period last year.

  • June 2022 saw occupancy rise to 75% (versus 64% June 2021) with an average rate of HKD 1,086 per night, up 36% year-on-year.

  • As we entered the second half, July’s data revealed a continuation at these levels, with supply sitting at 322 hotels comprising 89,521 keys.


Hong Kong Hotel Occupancy (%) 2021-2022

Source: Hong Kong Tourism Board (HKTB)

Hong Kong Hotel Average Rate 2021 & 2022

Source: Hong Kong Tourism Board (HKTB)

While the hotel sector’s average performance figures depict an improving scenario when compared to H1 2021, they alone do not tell the full story. The situation for operators has been mixed. Many have faced extreme difficulties, while a select few hotel groups have performed relatively well across their portfolio with a combination of quarantine and non-quarantine hotels.

Hong Kong Hotel Occupancy (%) by Tariff Type/Rating 2022

Source: Hong Kong Tourism Board (HKTB)

In the first quarter, luxury (High Tariff A) operators experienced a torrid time, with occupancies in the 10%-40% range. The situation improved over the first half, with average occupancy at 49% and average rates of HKD 1,643 (up 14.1% over H1 2021).

Mid-scale (Medium Tariff) and upscale hotels (High Tariff B) performed better, with occupancies at 64% and 72% respectively and their average rates up 29.2% and 47.6% over H1 2021. Figures from the early part of the year were perhaps ‘boosted’ by some guests checking-in to isolate away from other household members.

However, with most operators under pressure, the question is where has this left the hotel investment market?

Actionable insights

Hong Kong’s challenging operating environment served as a catalyst for opportunistic hotel acquisitions

Hong Kong saw five hotel transactions in the first half of 2022 with a total deal value of approximately HKD 6,197,000,000 (c. USD 790m), reflecting over 11% of all hotel transactions across Asia-Pacific in the same period this year. The hotels — three and four-star midscale assets — were mainly acquired for repositioning as co-living, extended-stay and student accommodations.

Investors have been targeting under-performing assets, attracted by a combination of pricing and the ability to service longer-stay guests with a flexible accommodation product, lower operating expenses and more stable returns. The hotels also enable operators to pivot back to short-term guests as the market opens.

Working with strong operating partners remains key to unearthing any potential value-add

Private equity real estate funds including AEW, PGIM, Hines and Angelo Gordon, in conjunction with operators such as Weave Living, Crystal Investment and Dash Living, have been the most active over the last 6 to 12 months, with other funds also looking to invest in assets or operating platforms.

The local hotel group, Magnificent Hotels Investment Limited, has taken advantage of this demand and pricing dislocation to cycle out of and into certain assets.

Major Hotel Transactions H1 2022


Grand City Hotel

Sai Yin Pun

Bay Bridge Retreat & Spa

Travelodge Central

Rosedale Hotel Kowloon

Hotel Sav

Hung Hom

No. of Keys







GFA (sq. ft.)








(HKD million)






Price per key

(HKD million)






Price per sq. ft (HKD)






Source: Colliers Research

In total, 1,620 hotel rooms transacted in the first half of 2022, reflecting an average price per key of HKD 3.825 million and an average price per square foot of HKD 11,055. Excluding the acquisition of the Bay Bridge Lifestyle Retreat and Spa (as this transacted at a significant discount to valuation), the average price per key was HKD 4.03 million and the average price per square foot was HKD 13,875 for these mid-scale hotels.

For investors and operators, pricing alone has not been the only determining factor. Location, access to transport and layout are critical to operational efficiency and success.

Holistic ESG strategy for renovations and operations is crucial to enhance the asset’s value and appeal

As we look to the rest of 2022 and 2023, continued inflation and rising interest rates are likely to result in banks further tightening their lending criteria, especially for hotels in Hong Kong.

The upcoming end to the ‘principal repayment holiday’ may pose some systemic risk. This could provide a perfect platform for seasoned hoteliers and/or opportunistic funds to step into the market, with a series of transactions already under discussion for the rest of this year.

Investors remain cautiously active with wider macro-economic factors and geo-political concerns at the forefront

Operationally, performance is ramping up and several hotel brands are looking to enter the market. Following the abrupt cancellation of the Designated Quarantine Hotel (DQH) scheme, there may be some initial negative impact and revenue shortfalls as operators revert to normal operations.

While the various holidays should boost revenue, many locals may travel out of Hong Kong with easing restrictions, potentially reducing local staycation demand. Competition will be fierce as hoteliers look to attract inbound visitors. The anticipated relaxation for banqueting is expected to further drive non-room revenue.

The 3-day ‘Amber Code’ places a restriction on incoming visitors from dining out and going to bars (amongst other things) and this will frustrate the wider hospitality community and place continued pressure on F&B operators. Calls for a ‘0+0’ policy remain loud. However, new hotels are opening, the most recent being The Fullerton Ocean Park Hotel, which is currently in its soft launch phase.

As the city opens, a major issue facing the hospitality sector is shortage of labour

While some operators have managed their staffing levels well, for others finding and enticing workers back to the sector is proving challenging. This further emphasises the importance of staff wellness and retention as a major component for hotel owners’ and operators’ environmental, social and governance (ESG) strategy.

The latest removal of quarantine restrictions should point Hong Kong in the right direction. The ability for airlines to ramp up capacity is another key part of the puzzle. However, the border with the Mainland needs to open fully to make a meaningful difference. There is a need for the city to react faster to maintain international competitiveness and retain and attract talent.

While challenges lie ahead, recent changes suggest there is light at the end of this tunnel. Uncertainty and volatility with the wider market will produce opportunities for both hotel operators and investors. Hong Kong, for the moment, is re-focusing on being Asia’s World City.


We are extensively working with hotel owners, operators, investors, developers, banks and restructuring specialists across the region. We welcome the opportunity to understand your business needs and collaborate with you to accelerate your success.

For more strategic advisory on hotel assets or to accelerate the success of your hotel asset portfolio in Asia Pacific, contact Shaman Chellaram or our team of Valuation and Advisory Services experts today.


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Shaman Chellaram

Senior Director | Asia

Valuation & Advisory Services

Hong Kong

As Senior Director Valuation & Advisory Services Asia at Colliers, I leverage my 18-years of strategic and investment advisory experience to work closely with my clients to maximize the potential of their hotel and commercial real estate assets in Hong Kong and across key regional and international markets.  This includes acquitistion and disposal advisory,  asset repositioning,  market entry, portfolio diversification, operator selection, hotel and mixed-used development, hotel tokenisation, ESG, transaction advisory and M&A.   

Advising from both an operational and investment perspective,  my clients include hotel and resort investors, hotel operators, serviced apartment groups, co-living groups, developers, PERE funds, REITs, family offices,  private investment groups and UHNWIs. 

By understanding my clients' needs, I draw on our Colliers global platform and capaibilities to provide solutions and accelerate our clients' success, whether in Hong Kong or overseas.   

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