Major Hong Kong hotels expect to report lower earnings for the year but believe that the city will retain its global standing as one of the world’s biggest tourism hubs in the long term.
Hong Kong’s tourism industry is going through a period of uncertainty and disquiet as political protests entered the eighth week without any signs of abating.
It’s unclear how the drama will further unfold after Hong Kong and Macau Affairs Office, Beijing’s top policy body for the two cities, broke its silence and slammed the protests at a press briefing Monday.
The past three days were nail-biting for Hong Kong’s tourism players. For the first time, tourism was used as a way to get the pro-democracy voice heard internationally, as seen by the protests supported by the flight attendants union at Hong Kong International Airport last Friday.
Much to the relief of the industry, that turned out to be peaceful with no disruptions in airport operations. A march on Saturday in the small town of Yuen Long, near the border with China, however, saw a reported 24 people hospitalized. Demonstrations continued in the central business district on Hong Kong island on Sunday, with police firing tear gas.
Demonstrators are demanding the complete withdrawal of an extradition bill, greater democracy, an independent investigation of alleged use of hired thugs by mainland China on July 22 in Yuen Long, and for the city’s leader, Carrie Lam, to go.
There Are Still Tourists
Tourism has not come to a standstill in Hong Kong, but there is a softening in business and a slower pickup pace for new bookings. But the unstated worry is that tourism will come to a halt if China clamps down hard on the movement and another Tiananmen Square happens.
At present, major hotel chains based in Hong Kong interviewed by Skift said Hong Kong tourism is not burning but it is, yes, torched.
They accept the inevitability that earnings will be softer this year, especially when even before the protests they were already impacted by the China-U.S. trade war and Brexit.
The U.S. and the United Kingdom., Hong Kong’s top long-haul markets, showed little growth in the first five months of the year over the same period last year. Latest available figures from Hong Kong Immigration Department recorded a 1.7 percent increase in arrivals from the U.S. to 539,869 from January to May, and 0.1 percent from the UK to 258,559 visitors.
“We definitely see a softening in our business results at our Hong Kong hotels this year, but that is the inevitable ripple effect from the global repercussions from the economic and geopolitical events that began a year ago,” said Stefan Leser, CEO of the Langham Hospitality Group.
“Certain segments at our Hong Kong hotels have seen a slowdown, such as corporate and incentive groups, but we find that leisure travel is holding steady. We are fortunate that local revenue streams such as weddings, F&B, and social celebrations remain robust with more enquiries and restaurant reservations for 2019 and beyond than seen in the previous years,” he added.
Wharf Hotels Management, which operates Marco Polo Hotels and Niccolo Hotels, sees a similar development.
“There is no way we are not affected. However, it is business as usual for all our hotels,” said Wharf President Jennifer Cronin.
“There is definitely some softening of demand across the segments, as per the overall city’s tourist numbers although historically, MICE [meetings, incentives, conventions, and exhibitions] and business travel are historically slower during this period.
“There has been some cancellations or postponement of events, but all the major trade fairs and exhibitions for which Hong Kong is globally renowned are still scheduled for the second half of the year.”
Like Leser, Cronin sees the leisure market holding up this summer, attributing it to a “recalibration of key market segments” for Hong Kong, such as “more leisure and a shift towards Asia-Pacific since long-haul business is down from the U.S. and the UK.
“Marco Polo Hong Kong Hotels are still maintaining their marketshare and leading market position, with an active focus on the leisure segment during this summer period,” said Cronin.
Hong Kong immigration figures show greater growth for Hong Kong from short-haul markets (excluding mainland China and Macau) in the first five months. This grew 4.3 percent to 3.4 million over the same period in 2018, whereas long-haul markets barely grew at 0.4 percent to 1.9 million.
Its figures for June and July aren’t available yet. However ForwardKeys’ figures show a vacillating impact. Flight bookings to Hong Kong from Asian markets (excluding mainland China and Taiwan) fell 9 percent from June 16 to 29, over the same period last year, and 2.2 percent from June 30 to July 13. From July 14 to 20, however, there was 13.4 percent jump.
“This left the team [at ForwardKeys] believing that people probably delayed their bookings rather than deciding not to come,” said a spokesman for ForwardKeys. “Usually, domestic political unrest deters tourists. However, there is no evidence that tourists are unsafe in Hong Kong. Also, the demonstrations have been on Sundays so it doesn’t seem as if the working week has been disrupted much either.”
Abercrombie & Kent in Hong Kong claimed it had not been affected by ongoing demonstrations, other than “a few concerned enquiries,” said Executive Director Gerald Hatherly.
“We do receive e-mail messages, most of these from the U.S., about the situation and if it is safe to visit. We reply in the affirmative and explain the situation concerning the demonstrations — that while these are ongoing, they have not impacted any tourist activities. We try to provide a balanced and honest overview and point out that the demonstrations have been peaceful and are concentrated around government offices. In the case of the Yuen Long incident, we did report on this to our international offices and that this was an isolated incident and the violence that occurred was orchestrated by members of the local triads,” he said.
Reason for Concern
While tourism has not been decimated by the protests, the word “yet” hangs in the air as any escalation or huge violence will certainly change the stakes.
“If the demonstrations continue and if there are more reports of violence or more extreme actions on the part of the demonstrators and more aggressive police action, this can change the dynamics and it could well impact travel into Hong Kong,” said Hatherly.
For the time being, Hong Kong’s reputation for safety and security, and its role as an international travel and financial services center, have helped to keep things in perspective, added Hatherly, but this goodwill can go quickly if things worsen.
“This type of uncertainty is detrimental to our business in Hong Kong and the tourism industry in general,” said Peter Borer, chief operating officer of The Hongkong and Shanghai Hotels. “We are concerned about any action that damages the image of Hong Kong and affects travelers. We hope the protests remain peaceful.”
He added, “In terms of outlook for the coming year, we are concerned about the impact of the political protests on tourist arrivals as well as broader economic stability in Hong Kong. We are concerned about the effect this will have on our operating results, considering the majority of our group’s interests are based in Hong Kong [including The Peninsula Hong Kong, the Peak Tram and Peak Tower, and the Repulse Bay]. We will continue to monitor the situation.”
But Borer emphasized that the group’s commitment to Hong Kong remains as solid as the grand old dame hotel in Kowloon.
“We are a group with more than 150 years of history, and during challenging times such as the present, we have always maintained a steadfast focus on building a long-term sustainable business. We retain a conservative capital structure to help insulate our business against volatility. We continue to invest in improving our assets and developing our people with training, learning and development opportunities, as well as investing in technology and digital capabilities to enhance our marketing efforts. We have some innovative initiatives to drive business, including our ongoing multiyear contemporary art program, Art in Resonance, to engage guests and local visitors to our hotel,” he said.
It’s business as usual too for Wharf, another old Hong Kong name. “Our industry is both seasonal and cyclical, therefore we are optimistic there will be a rebound in the market,” said Cronin.
“We continue to work closely with our key corporate accounts and provide up-to-date information to ensure they are confident in their business requirements for Hong Kong. Hong Kong continues to be a vibrant and dynamic city with easy connectivity to the Greater Bay Area and beyond, with constantly new evolving experiences, new world-class heritage spaces, a diverse variety of cuisines and dining discoveries, as well as 263 islands with some of the most spectacular hiking in the world. Hong Kong never fails to impress.”
Hong Kong is Not Burning
At present, Singapore and New Zealand are among countries that have issued advisories. These aren’t high alerts, however; rather they advise citizens to avoid all protests and demonstrations. The U.S. and Canada advisories for Hong Kong remain at Level 1, in which citizens are advised to exercise normal precautions.
The mainstream media predictably is chastised for creating the perception of “a city burning.”
“It’s far from the truth,” said Cronin. “Hong Kong continues to function normally. We are all given adequate notice of protest locations should you need to avoid these areas.”
Added Hatherly: “Hong Kong is both safe and secure — there is no reason not to visit.
“I realize that international news outlets are reporting on this and showing video clips depicting the most aggressive actions of the police as well as the Yuen Long incident. I am not downplaying these as they did occur, and it is worrying, but these are isolated and not the normal behavior of either the police or the demonstrators.”
In the end, Cronin believes global travelers today can judge better. Paris and France have been subject to the yellow vest movement since last November, but this hasn’t stopped the global traveler from enjoying Paris or the countryside, she said.
“In a world of instant communications, I believe the traveler has never been better informed and, as tourists, can handle their travel itineraries so much better. We are in a position to manage these situations. Let’s hope we can turn around the current perception of Hong Kong too,” she said.
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Photo credit: Pro-democracy demonstrators take to the streets of Hong Kong. Bloomberg