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“The Impact On Tourism Is Huge:” Hong Kong Hotel Crisis Erupts Amid Escalating Protests ​​​​​​​

Summary:
Hong Kong might not be able to avoid a financial crisis this year or next despite possible stimulus packages to shore up its faltering economy amid violent protests across the city. This has led to a rapid decline in tourism, forcing major hotel chains in the city to substantially slash room prices. Yiu Si-wing, a Hong Kong lawmaker representing the tourism industry, told Bloomberg that hotel revenue is expected to crash 50% this month thanks to escalating protests. She said visits from mainland China account for 80% of arrivals are significantly lower due to social unrest. Yiu said hotel occupancy rates averaged 90% in 1H19, could drop by as much as 33% or more in 2H19. Arrivals from the mainland to Hong Kong, a significant source of consumption for the city, could grind to a halt.

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Hong Kong might not be able to avoid a financial crisis this year or next despite possible stimulus packages to shore up its faltering economy amid violent protests across the city. This has led to a rapid decline in tourism, forcing major hotel chains in the city to substantially slash room prices.

Yiu Si-wing, a Hong Kong lawmaker representing the tourism industry, told Bloomberg that hotel revenue is expected to crash 50% this month thanks to escalating protests. She said visits from mainland China account for 80% of arrivals are significantly lower due to social unrest.

Yiu said hotel occupancy rates averaged 90% in 1H19, could drop by as much as 33% or more in 2H19. Arrivals from the mainland to Hong Kong, a significant source of consumption for the city, could grind to a halt.

"The impact on tourism is huge," Yiu told Bloomberg. She said at least half of the mainland visitors due in August had canceled their plans. Yiu said top-trending topics on Chinese social media platform Weibo this week included several incidents of where violent protestors attacked government forces.

Some mainland Chinese are shunning Hong Kong because of the risks associated with its airport being closed down for an extended period of time.

Grace Huang, a 20-year-old Wuhan University student, told Bloomberg her layover at Hong Kong International Airport was horrifying earlier this week. "I fear I'm going to be beaten," she told Bloomberg, as thousands of protestors successfully locked down the airport for several days.

Beijing resident Jasmine Ji, 23, delayed her trip to Hong Kong because she feels protestors would target her for being a Chinese citizen.

"I feel like my personal safety could be severely threatened if they find out I speak Mandarin or am a Chinese citizen," she said. "I won't fly to Hong Kong airport until the situation and protests are settled there."

Chinese officials and state-run media outlets launched an information war against the protestors, describing them as violent extremists.

Hong Kong officials have suggested a recession could be imminent due to social unrest.

Hong Kong Financial Secretary Paul Chan Mo-po on Thursday announced a $2.43 billion stimulus package to shore up the economy during the social and economic turmoil.

Paul warned that a possible recession could be imminent: "The situation we are in now is like the typhoon No 3 signal has been hoisted and the typhoon is heading towards us," he said. "We need to get prepared before it gets worse."

Paul downgraded Hong Kong's GDP growth forecast for the year to 0 to 1%, from 2 to 3% previously.

He said the city could slide into a technical recession in the current quarter.

InterContinental Hotels Group Plc, a British multinational hospitality company that owns Crowne Plaza and Holiday Inn chains, said the protests in the last several months have contributed to a slowdown in business travel in the region.

Other hospitality companies with exposure to Hong Kong are also feeling the pinch: Sun Hung Kai Properties, owner of Four Seasons Hotel Hong Kong, and New World Development Co., which operates the Grand Hyatt Hong Kong, have seen their stocks enter bear markets in the last month.

Yiu said the downturn in Hong Kong hospitality industry had forced many hotels to slash their room rates by substantial amounts.

A typical room at Conrad Hotel, owned by Hilton Worldwide, is $159 per night this weekend, that's a 40% discount versus two months ago.

Marriott International Inc. and Shangri-La Asia Ltd. have also cut room rates for their Hong Kong hotels.

Hong Kong could be the first domino to fall that kicks off the next global recession.

Tyler Durden
Tyler Durden (a pseudonym) represents the idea that a return to truly efficient markets is a possibility and a necessity. After having experienced the inner workings of capitalism at various asset managers and advisors, Tyler believes that the current model is flawed and a deleveraging at every level of modern society is needed to reinspire the fundamental entrepreneurial spirit.

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