Hong Kong Hotels Pivot to Long-Term Stays Amidst Shifting Market Dynamics

Hong Kong's hotel industry is undergoing a significant transformation as many establishments, particularly those previously used for quarantine, are now offering long-stay options. This strategic shift is a direct response to the decline in traditional tourism and business travel, forcing hotels to seek alternative revenue streams and compete with serviced apartments for a finite pool of guests.

Key Takeaways

• Hotels are slashing prices to attract long-stay guests, impacting the serviced apartment market.
• Co-living startups are partnering with hotels to facilitate the transition to monthly leases.
• Visitor arrivals have plummeted, leading to significantly lower hotel occupancy rates.
• This pivot offers a lifeline for hotels struggling with the downturn in the tourism sector.

The New Competitive Landscape

Following the relaxation of quarantine rules for inbound travelers, hotels that previously served as quarantine facilities are now facing a surplus of vacant rooms. With fewer business travelers and tourists returning to Hong Kong, these hotels are compelled to lower their rates to attract guests. This aggressive pricing strategy is directly impacting the serviced apartment sector, as hotels begin to capture market share previously held by long-term rental providers.

Derek Sun Wei-kong, managing director of Signature Homes, noted that hotels often offer substantial discounts for extended stays, such as 14-day packages, which can be renewed. This makes them a more attractive option for individuals seeking longer accommodations, thereby creating a competitive challenge for traditional serviced apartment operators.

Co-Living Startups Bridge the Gap

To navigate the unprecedented downturn in the tourism sector, Hong Kong co-living startup Dash Living is actively assisting hotels in transitioning to monthly lease models. Since the onset of the pandemic, Dash Living has seen a surge in opportunities, collaborating with several hotels to offer long-term rental solutions.

Eddie Sit, Dash's head of marketing, explained that many hotels, facing difficulties due to the sharp decline in visitor arrivals—which fell by 97.2 percent year-on-year in a recent period—viewed long leases as a viable strategy for survival. Dash Living, founded in 2014, manages over 1,300 units across Hong Kong and Singapore, including co-living spaces, serviced apartments, and hotel rooms.

Hotels Embrace Monthly Leases

Several hotels are now partnering with Dash Living to implement monthly leasing. Properties like The Aberdeen by Ovolo and The Sheung Wan By Ovolo are among those adopting this model. For hotels lacking the infrastructure or manpower for long-term leases, Dash Living's established practices have proven beneficial.

For instance, The Aberdeen, which was previously used for quarantine before renovations, is now offering monthly leases starting at approximately HK$7,500 (US$966) for a 215 sq ft room, with prices varying based on lease duration. The most premium units can reach up to HK$27,000 per month. This adaptation reflects a broader trend within the Hong Kong hospitality industry to diversify offerings and secure revenue in a challenging market.

Sources

• Hong Kong long-stay landlords battle desperate hotels for finite guests as former quarantine rooms flood
  market, South China Morning Post.
• Start-up Dash Living helps Hong Kong hotels switch to monthly leases, ride out pandemic slump, South China Morning Post.