Total visitor expenditure in Hong Kong in 1994 amounted to HK$64,263 million3, or an average of HK$6,699 per capita during their stay in Hong Kong. With these, it helps stimulate economic activity. It is important to note that tourism receipts are a direct addition to the foreign exchange earnings for Hong Kong.
The main measure of the value of an industry to the economy is its contribution to Gross Domestic Product (GDP). According to the Visitor and Tourism Study for Hong Kong, the value-added contribution of tourism industry to GDP in 1993 was 7.9%4.
2.2 Employment
Tourism industry is primarily a 'service-oriented' industry and relies heavily upon people for delivering a service. A principal argument made for encouraging the development of tourism is that it produces jobs. Also from the Visitor and Tourism Study for Hong Kong that the tourism sector provided direct employment for 83,000 people and a further of 46,000 people in supporting services. It is now the fourth biggest employer after the wearing apparel, banking/finance and transport sectors5.
2.3 Standard of Living
The main benefits of tourism, apart from the provision of jobs, it increases income and improves standard of living and amenities for local residents. Increase in tourist traffic and expenditures permit a relatively faster improvement in standard of living. During the past few years, there were various major large scale development projects, mostly tourism related, such as the Hong Kong Science Museum (completed in May 1991), Redevelopment of the Hong Kong Stadium (completed in March 1994), the Peak Town (to be completed in 1996), the Ocean Park's 5-year development scheme launched in 1993.
2. Research Department, Hong Kong Tourist Association (1994), Tourism in Hong Kong - The Figures, Hong Kong.
3. Ibid.
4. Hong Kong Tourist Association (1994), Visitor and Tourism Study for Hong Kong, Hong Kong, p.4.
5. Hong Kong Tourist Association (1994), Visitor and Tourism Study for Hong Kong, Hong Kong, p.4.
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2.4 Government Revenue
Tourism industry also makes a very significant contribution to the Government revenue through direct and indirect taxation. The revenue specifically generated from tourism industry is collected in various forms, including hotel accommodation tax, airport departure tax, etc. To cite a few examples, in 1991/92, the hotel accommodation tax was HK$265.9 million, the airport departure tax was HK$1,120.3 million6.
Apart from these revenue sources, tax revenue are collected from various forms and sources, such as airport concessions, aircraft landing and parking charges, fuel tax, profit tax derived from hotels, tour operators, travel agents, etc.
2.5 Conclusion
As one of the major industries in Hong Kong, tourism industry has a very significant impact on balance of payments, government revenue and employment. It has high development prospects provided that the government, the tourism planners and developers and other investors all work in close collaboration to improve the tourism plants, tourist facilities and infrastructure to meet the expectation and demands of our overseas visitors, our role as an international city will be further strengthened.
Chapter 3 Visitor and Hotel Development Trends
3.1 Visitor Trends
Based on the latest figures available from the Research Department of the Hong Kong Tourist Association, in 1994, 9,331 million visitors came to Hong Kong, of which 7.387 (79.2%) were international visitors and 1.944 (20.8%) were from mainland China7. On average, the average length of stay was 3.9 nights8.
Over the last 20 years, the number of visitors coming to Hong Kong has increased by around 10% per annum. As commented in the Visitor and Tourism Study for Hong Kong that "the number of visitors (excluding PRC) has double every five to nine years. In recent years (after the lifting of outbound travel restriction), visitors from PRC doubled every two to four years and total visitors (including PRC) have doubled every six to seven years"9. This has been a very significant growth in terms of visitor arrivals for Hong Kong, however, the number of hotel rooms has never grown as fast as this.
6. Census and Statistics Department, Hong Kong Government (1993), Annual Digest of Statistics, 1992 Edition, Hong Kong, p. 119.
7. Research Department, Hong Kong Tourist Association (1994), Tourism in Hong Kong - The Figures, Hong Kong.
8. Research Department, Hong Kong Tourist Association (1995), Visitor Profile Report, Hong Kong, p. 1.
9. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.7.
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3.2 Hotel Development Trends
Up to the late 1980's, hotel development has been growing in harmony with the number of visitor arrivals. The average annual increase in new hotel rooms has been around 1,100 over the last twenty years.
During the last ten years (from 1984 to 1994), the annual average hotel occupancy has been rather steady, in 1985, the annual occupancy was 88% and in 1991, it dropped to as low as 75% (a respectable level by international standards) and by 1994, it increased to 85%10. A point to note here is the fact that 90% occupancy is the operational limit, hence, 85% average occupancy is, in fact, approaching saturation points already.
3.3 Hotel Supply Situation
As at the end of 1994, there were 33,490 rooms in 85 HKTA member hotels and guesthouses11. During the last two years (1993 & 1994), there were addition of 2,559 new rooms, but during the same period, 2,458 rooms ceased operation, a net gain of 409 rooms (Figure 3.1) or 1.2 % increase from 33,534 rooms in 199212. It is obvious that the addition of new rooms is by no means compatible to the growth in visitor arrivals.
It is also obvious that there is a trend that hotels ceased operation as their sites are more valuable for development as office buildings, in 1993 & 94, seven hotels, namely, Lee Gardens Hotel, China Harbour View Hotel, China Merchants Hotel, Ambassador Hotel, Harbour Hotel, Hotel Fortuna and Emerald Hotel. Apart from the above, there are also plan to re-develop major hotels, such as the Hilton Hotel, the Hotel Victoria and the Sheraton Hong Kong Hotel13.
3.4 Development Economics
It is vital to understand development economics in the contest of current hotel supply situation, why hotels are being developed and shy some existing hotels are being redeveloped. The relatively few firm plans for development of new hotel and the planned redevelopment of existing hotels are clear indication that commercial office development provides a significantly higher returns than hotel development. As stated in the Visitor and Tourism Study14, it is because:
1. Developer of a commercial site is faced with a permissible plot ratio of at most 10 for the hotel room portion. The hotel concession on plot ratio may raise the total plot ratio for the development in many cases closer to 15. However, an office on the same site has a permissible plot ratio of 15.
2. A hotel is a single, massive form of and relatively long term investment. They are profitable businesses but expensive to run. An office can be sold or leased to a wide variety of occupiers of different size units. The office, once developed, is comparatively management free.
10. Research Department, Hong Kong Tourist Association (1994), A Statistical Review of Tourism 1993, Hong Kong, p.43.
11. Research Department, Hong Kong Tourist Association (1995), Hotel Supply Situation, No. 1, Hong Kong, p.1.
12. Ibid., pp.6-7.
13. Nisha Gopalan, Hotels find no firend in Government, Eastern Express, 10th April, 1995.
14. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, pp.20-22.
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Figure 3.1: Changes in number of rooms in 1993 - 1994
Year Hotel Number of Gain/Loss
Rooms (+/-) Year End
1993 Silvermine Beach Hotel +135
Regal Hong Kong Hotel +423
Ritz Carlton Hotel +216
Gold Coast Hotel +443
BP International House +495
Lee Gardens Hotel -660
China Harbour View Hotel -310
Other Adjustment -232 +510
1994 BP International House (Extension) +41
South China Hotel +204
Peninsula Hotel (Extension) +145
Pearl Seaview Hotel +253
YMCA International House (Extension) +145
Other Adjustment +59
China Merchants Hotel -285
Ambassador Hotel -313
Harbour Hotel -156
Hotel Fortuna -187
Emerald Hotel -315 -409
Source: Research Department, Hong Kong Tourist Association
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3. The unit construction costs of a business-class hotel may well be higher than those for a Grade A office. There would be significant outfitting and marketing costs before the hotel room became operational and occupied. Office building would usually be simpler, quicker and cheaper to construct.
With all these reasons listed above, it is clear that a hotel is more expensive and less viable than office in a comparable location. Existing hotels in prime location may interprets as an under-performing investment, once opportunity arise, owner may than redevelop them as offices, typical example is redevelopment of the Lee Gardens Hotel in Causeway Bay and another example in the pipeline is the Hilton Hotel in Central.
Chapter 4 Land Use Planning & Land and Building Controls on Hotel Development
4.1 Introduction
Looking at the existing Building and Planning Ordinances, there are two major issue related to hotel development. "One relates to the intensity of development permitted on a particular site for hotels compared to other forms of land use. The second relates to the zoning system and the zoning designations which enable the development of hotels. Under the existing legal framework, hotels are treated as 'Domestic' under the Building (Planning) Regulations but as 'Commercial' under the planning system"15.
4.2 Building Administration
A hotel is regarded as a composite building under the Building (Planning) Regulations. The hotel room portion has been treated as domestic rather than commercial use by the Building Authority. Hotels and serviced apartments were viewed as places where people sleep, hence, be designed as domestic premises to safeguard the health and safety of the inhabitants. There was also a fear that if hotels were permitted to develop at the same intensity as commercial development, they could be converted into sub-standard residential premises. For these reasons, domestic (8-10) rather than non-domestic (15) plot ratios were applied to hotels.
In view of the drawbacks suffered by hotel development, the Building Authority offers specific concessions for hotel development. This is to give appropriate incentive to offset the lower domestic plot ratio allowed for the hotel portion of the hotel development. The most important plot ratio concession available is the exclusion of basement areas which have often been used for retails as well as back of the house services and hotel offices.
4.3 Land Use Planning
Under the current planning system, there is no specific zoning for hotels. There are allowed "as of right" in "Commercial" zones. Developer may apply to the Town Planning Board (TPB)
15. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.24.
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for hotel development on Residential (A) {plot ratio 8} and (B) {plot ratio 5}. Other possible locations for hotel development will be within Comprehensive Development Area (CDA). According to the Visitor and Tourism Study for Hong Kong, "the majority of existing hotels are in Commercial zones and the majority of the committed new hotel projects are in CDA"16.
This illustrated are two very significant indications on land use planning, on one hand, a considerable proportion of the existing hotels could be vulnerable to redevelopment for offices. On the other hand, most of the committed hotel projects are coming from a special zoning system through CDA.
Due to the nature of the markets for offices and for hotels is so different, within any given zone, it is evident that hotels development cannot compete with office development as the different in returns is so great. Having said that, it is worth to note that both the Lands Department and the Financial Services Branch are keen to adhere to the concept that market forces should continue to prevail. Hence, hotels, offices and other type of land uses allowed in Commercial zone should compete for land resources. In this way, economic forces will govern the allocation of land resource to different uses and not urban planning.
4.4 Land Administration
During a working session with the relevant government departments on the hotel situation in Hong Kong, the Lands Department pointed out that there would be a significant loss of land premium if specific zoning for hotels were adopted. However, it is worth to note that for a 600-room hotel, it may produce a minimum contribution to the economy of approximately HK$301 million per annum17. As remarked in the Visitor and Tourism Study for Hong Kong, "the practice of open commercial zoning might satisfy the objective of maximising revenue to government on land sales/premiums...., it does not, satisfy the objective of the Town Planning Ordinance to provide the full range of uses needed for the welfare of the community and does not take into account the opportunity cost of the longer term economic contribution of the hotel"18.
Chapter 5 Proposed Land Use Measures
5.1 Short Term Measures
Everyone in the tourism industry, particular those involved in hotel business are aware that it will take at least three to four years for a hotel to be operational even with a site and all the necessary building approvals. However, in view of the current hotel supply situation, there will be a sharp shortage of new hotel rooms from 1995 to 1998, hence, some short term measures are worth considering to bring on line some additional rooms.
16. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.26.
17. The calculation of the economic contribution of a 600-room hotel is as follow: {600 rooms x 365 days / 3.9 nights (average length of stay)} x 80% average annual occupancy x HK$6,699 per capita spending of visitor.
18. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, pp.29-30.
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There are some possible short team feasible measures19 that could be adopted to possibly meet the short term need, these are:
1. Floating Hotels - they may need special berthing facilities and connection with shore. However, this is the quickest way to bring immediate addition of hotel rooms in substantial quantity. It is highly feasible and viable, example could be found in major events, such as World Exposition, Olympic Games, where hosting city would bring in these facilities to meet the short term accommodation requirements.
2. Apartments - encourage the greater use of serviced apartments in conversion of domestic premises under regulated conditions. It may be necessary to amend the Guest House Ordinance.
3. Hotel Extensions - Encourage existing hotel to build extensions through an increase in permissible plot ratio. The more likely result will be additional floors on top of the existing building.
5.2 Medium & Long Term Measures
Other short term measures20 are essential for producing more capacity in the medium and long term. They may involve changes in policies and administrative procedures, they are:
1. Specific Zoning
Designate a number of suitable sites, particularly on the new reclamations, along the airport link, and accessible areas in new territories, as OU21 (Hotel) or CDA (with requirements on hotel component specified).
2. Plot Ratio
Change the Building (Planning) Regulations with immediate effect so that the plot ratio allowed for a hotel development is the same as non-domestic buildings.
3. Control
The change in plot ratio may encourage existing hotel to redevelop in order to maximize the permissible floor space. Section 16 applications are required for development in this connection.
4. G/IC Buildings
Multi-storey car park in inner urban areas, such as the Rumsey Street car park, Murray Road car park, Middle Road car park, Hung Hom KCR Station car park, with changes on the zoning can be converted into hotel cum multi-storey car park. A good example of this composite uses is the Kornhill Plaza.
19. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.31.
20. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong : Land for Hotel Development, Hong Kong, p.32.
21. OU is a term used in government zoing plans and it stands for other uses.
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Chapter 6 Conclusions
6. Conclusions
Important policy decisions are urgently needed to enable and encourage hotel development to progress in a quicker pace. To enable the tourism industry to grow in a steady and healthy manner, it would be ideal if all the above suggested measures could be introduced as a comprehensive package of measures. Although hotel development depends very much on investment from the private sector, the government still got a major and significant role to play, that is, to build and to maintain a favourable and fair environment where hotel developers could battle against other development.
If no action is being taken to rectify the current situation, the tourism industry can look forward to insufficient new hotels being built and more hotels being redevelopment for offices; reduced in growth in visitor arrivals due to high room rate; substantial loss of tourism receipts as contribution to the economy; and most important of all, a loss of reputation of Hong Kong as the best travel destination in Asia.
oo0oo
References:
1. Hong Kong Government (1992), Hotel and Guest House Accommodation Ordinance (Cap.349), Hong Kong.
2. Hong Kong Government (1994), Town Planning Ordinance (Cap. 131), Hong Kong.
3. Hong Kong Government (1994), Hong Kong Planning Standards and Guidelines: Residential Densities, Hong Kong.
4. Hong Kong Government (1994), Hong Kong Planning Standards and Guidelines: Internal Transport Facilities, Hong Kong.
5. Hong Kong Government (1995), Hong Kong 1994 - A Review of 1993, Hong Kong.
6. Hong Kong Hotel Associations (1995), Hong Kong Hotel Industry 1994, Hong Kong.
7. Hong Kong Tourist Association (1995), Visitor and Tourism Study for Hong Kong: Land for Hotel Development, Hong Kong
8. Hong Kong Tourist Association (1994), A Statistical Review of Tourism 1993, Hong Kong.
9. Hong Kong Tourist Association (1995), Visitor Profile Report 1994, Hong Kong.
10. Planning Department (1993), Territorial Development Strategy Review - Development Options, Hong Kong.
11. Planning, Environment and Lands Branch (1991), Comprehensive Review of the Town Planning Ordinance - Consultative Document, Hong Kong.
