According to a research, the problem of overcapacity caused by influx in supply of hotel rooms is becoming a serious management issue faced by hotels in Hong Kong. (Tsai & Gu, 2012) From 2013 to 2014, total room supply increased significantly by 2693 rooms from 2013 to 2014, and by August 2014, Hong Kong had 236 hotels with 71887 rooms which is a very large number for a small city. (Information Services Department, 2014) However, occupancy rate has remained almost the same. In addition to hotels, the lodging industry is facing pressure added by hotels and serviced apartments. The discrepancy between the number of available rooms and the optimal number of rooms will cause faltering pricing power and overall performance downfall.

Hong Kong’s hotels are known for providing high-quality services to both business travellers and tourists in Asia. However, it currently faces a number of challenges including the rapid growth of hospitality industries in Macau and Guangdong Province. For example, the number of star-rated hotels in Guangdong has increased at a rate of 15.2% per year over the past decade, placing great pressure for Hong Kong. (National Tourism Administration of the People’ s Republic of China, 1992–1999, 2000–2008). During the 1980s in the United States, two thirds of hotels in the United States went bankrupt due to over-construction. (Romeo, 1997) Thus, hotels need to pay great attention to the problem of overcapacity as it will bring detrimental effects.

It is crucial for the hotels to industry to plan future hotel developments and marketing strategies based on accurate information about future demand. Blindly building more hotels will worsen the problem and result in capacity waste and financial burdens. For example, low occupancy rate will cause over staffing and it is costly for hotels to retain more employees than they need. It is estimated the the waste from each unoccupied hotel room above the optimal capacity to be HK$722 a night amounting to an overall loss of HK$5.28 billion in 2012. (Tsai & Gu, 2012)

As the problem of overcapacity can not be reversed at the moment, relief measures such as increasing future demand are crucial. For instance, co-operating with the government to attract more mainland Chinese visitors and exploring new markets. Hotels may also boost sales and try to maximise the revenue available per room by providing competitive packages and supplementary services. Some hotels in Hong Kong also transformed their guest rooms into serviced apartments which attracted many businessmen and short-term visitors. This increases room occupancy rate and provide a steady revenue source. At the same time, policies such as Introduction of the Individual Visitor Scheme for mainland Chinese tourists in 2003 and the anticipated completion of the Hong Kong-Zhuhai-Macau Bridge in 2015-16 are believed to increase the number of visitor from mainland China. This will help hotels to ease the difficulties brought by overcapacity.

References

Information Services Department, Hong Kong Special Administrative Region Government. (2014). Hong Kong: The Facts. Retrieved from http://www.gov.hk/en/about/abouthk/factsheets/docs/tourism.pdf.

National Tourism Administration of the People’s Republic of China. (1993–1999). Statistics on operation and list- ing of tourist-catering hotels in China (1993–1999). Beijing, China: Author.

National Tourism Administration of the People’s Republic of China. (2000–2008). The yearbook of China tourism statistics (2000–2008). Beijing, China: Author.

Romeo, P. (1997). Strange time upon us. Restaurant
Business, 96(14), 6.

Tsai, H., & Gu, Z. (2012). Optimizing room capacity and profitability for Hong Kong hotels. Journal of Travel & Tourism Marketing, 29(1), 57-68.