Only one hotel property has changed hands successfully, albeit at a steep discount, so far this year compared with seven in the first eight months of 2019. Last year’s total investment volume came to HK$9.9 billion (US$1.28 billion) via 10 transactions, according to Colliers International.
The city’s tourism industry has been devastated by international travel restrictions, particularly those preventing mainland Chinese visitors from crossing the border. It had already been struggling badly last year when anti-government street protests deterred visitors.“Coupled with the social unrest, travellers cannot come. Hotels have no business. Occupancy rates are now just at 10 to 20 per cent, with not even enough [revenue] to pay workers,” said Francis Li, international director and head of capital markets in Greater China for Cushman & Wakefield. “Even the big hotels incur losses. I think it is not an isolated phenomenon, but the general market [is like this].”It is hard for hotel property owners to find buyers at the moment, though if the price is discounted a lot some may be tempted to bet on a potential recovery if the pandemic is resolved within about a year, Li added.
“Why should they buy? They cannot collect rent and would lose money every day,” he said. “Buying now is taking a risk. [There is no possibility of getting] a reasonable return immediately after buying.”
ITC Properties Group in late August sold the 94-room Le Petit Rosedale Hotel in Causeway Bay for HK$460 million to Wang Dingben, a non-executive director of the Hong Kong-listed China New Economy Fund, according to ITC’s filing to the stock exchange. The hotel and its holding company incurred a loss of HK$49.24 million for the year ended March 2020.
The price represents a 34.3 per cent discount from the original asking price at HK$700 million, agents said. The price per room, at HK$4.89 million, is 13 per cent below that paid by “shop king” Tang Shing-bor for what is now called the Hotel Ease Causeway Bay, at HK$5.62 million, in September 2017.
“Market recovery will remain slow until essentially the connection with China is re-established,” said Shaman Chellaram, senior director of capital markets and investment services in Hong Kong at Colliers. “As a result of the events of the last year and with the lack of international visitors, we are seeing a repricing of certain hotel assets.”
Meanwhile, the buyer of the Queen’s Hotel in Sai Wan, Grand Fortune Overseas Holdings, cancelled the HK$310 million deal in late August, less than a month after signing the purchase agreement, losing 10 per cent, or HK$31 million, in deposits, according to agents. The original owner of the Queen’s Hotel once asked for HK$450 million.
Hong Kong’s landlords may turn shopkeeper to survive retail crash
The Hong Kong Reese Hotel in Aberdeen on August 25 was sued by landlord Central Well Limited for not paying rent, rates and interest from March to August amounting to HK$16.92 million, according to a writ from the High Court.
It was sued on two other occasions before that, for rent from July last year to February. The landlord has already won a lawsuit for about HK$13.78 million owed between July and November last year. The Reese Hotel did not immediately respond to a request for comment.
The Vela Boutique Hotel in Causeway Bay was also sued by the landlord for rent amounting to HK$20.72 million in June. Vela did not respond to a request for comment.
“I think landlords, hotel owners and hotel operating companies have to work together in partnership to work through this time,” said Chellaram. “Because it’s a challenging market for all parties.”
