No vacancy: High hotel rates dim Hong Kong's convention appeal
HONG KONG (Reuters) - Hong Kong is losing its appeal as a convention destination as crowded hotels triple room rates during big events.
During a jewelry convention last month, rates were so expensive that one company said it arranged for employees to stay with friends.
"The rates are crazy," said Rungrawi Prompa Hanapakdee, company secretary at Pak Import Export Co, a jewelry maker from Thailand, which had six workers stay at friends' homes during the Hong Kong International Jewellery Manufacturers show. "It cannot be increased like this every time we come here."
A shortage of hotels helped push up room rates nearly 12 percent in the first nine months of this year and some industry players expect Hong Kong will overtake Singapore as the world's busiest hotel market in 2013.
The average room rate was $190 for the first half of 2012, not far from Singapore's $210 and nearly double Shanghai's $100, according to tourism boards in the three cities.
During a jewelry exhibition in September, some three-star hotels tripled rates, while some four-star hotels doubled prices, data from local travel agency Million Tour Ltd showed.
"It's quite drastic," said George Kakuda, president of Kakuda Pearl Co, who attended two recent jewelry exhibitions. "They have doubled or tripled the price. We don't like it. If it keeps going up, I need to think of something else."
Allen Ha, chief executive of convention center AsiaWorld-Expo, said convention planners turned off by high-cost Hong Kong had mentioned Shanghai and Singapore as potential alternatives.
The combination of scarce land, low interest rates and piles of speculative cash has made Hong Kong the world's most expensive residential and retail property market.
Buoyed by an influx of international business travelers and mainland Chinese tourists, Hong Kong had an 89 percent hotel occupancy rate in 2011, according to the Hong Kong Tourism Board, ranking it among the world's top hotel markets.
The former British colony saw a 23.7 percent rise in the number of conventions held in the city in 2011, despite a weak global economy, while the number of overnight business visitors rose 9.3 percent over the same period.
The number of hotel rooms, however, grew just 4 percent over that time, data from the tourism board showed.
"It's a bottleneck issue that really stifles growth," AsiaWorld-Expo's Ha said.
Hong Kong has pledged to increase the number of hotel rooms by 10 percent by 2015, and some 50 projects are in the pipeline, but in the meantime convention planners may look elsewhere.
The Federation of Hong Kong Hotel Owners said people would be willing to come no matter how expensive hotels were as the city offered good business opportunities, although some exhibitors are already having second thoughts.
"By the time the government finally builds all the hotels, business travelers might already be used to holding meetings somewhere else," said Jolland Chung, e-commerce manager at Million Tour Ltd.
"Will they ever come back to Hong Kong? That's the problem everyone is worried about."
(Additional reporting by Farah Master; Editing by Anne Marie Roantree and Emily Kaiser)
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