Among the HKD8.2 billion (US$1.05 billion) in hotel property transactions involving about 2,550 rooms so far this year, most involved conversions into student accommodation, with some incorporating a hybrid of hotel and co-living offerings, according to a recent report by property consultant Colliers.
Singapore-based CapitaLand Investment plans to acquire the 550-room Ibis Hong Kong Central & Sheung Wan hotel for about HKD2.3 billion and convert it into student housing, according to Caixin Global.
This marks one of the largest recent investments in the city’s growing purpose-built student accommodation sector, Colliers said.
Other notable deals include Silka Seaview (268 rooms) and 218 Apartment Wan Chai (59 rooms), which have been acquired by JD.com for a total of HKD1.03 billion to develop student housing.
These deals signal a change in the Hong Kong hospitality property market. The city consistently ranked as the world’s most-visited city before 2019, according to consultancy Euromonitor International.
It recorded 29.26 million overnight visitor arrivals in 2018, while the average hotel occupancy rate rose by 2 percentage points to 91% that year, according to the Tourism Commission.
Last year, Hong Kong recorded 23.19 million overnight visitor arrivals, according to official data, still 20% below the 2018 peak. The average hotel room occupancy rate was 87%.
|
A room at Ibis Hong Kong Central & Sheung Wan hotel. Photo via Facebook/ibishkcsw |
But with financing costs rising as a result of higher interest rates, many hotel owners have found the hospitality business challenging.
Recent cases have shown that owners unable to service their debts had to dispose of their assets, either by selling them at huge discounts or having creditors liquidate the assets. Many of the hotels that changed hands were acquired by new owners for conversion into student accommodation, the South China Morning Post reported.
As the government seeks to establish Hong Kong as a global education hub, property consultancy JLL estimated that the city would face a shortage of more than 140,000 student beds by the 2029-2030 school year.
As Hong Kong continues to attract global performers amid growing demand for student accommodation, analysts said the hotel property market could see more conversions as well as investment in existing and new hotels.
Higher-end hotels, in particular, could attract more capital to refresh and upgrade their amenities, while well-priced midscale properties could be suitable for conversion into student accommodation, said Shaman Chellaram, senior director for hotel advisory and valuation and advisory services at Colliers.
“Each segment caters to different demand drivers and end users with very distinct operating and business models,” Chellaram said.
Location could determine whether a hotel was better suited for conversion into student housing or continued use as tourist accommodation, said Cleavon Tan, senior vice-president of hotels and hospitality group at JLL Hong Kong.
“Hotels in established tourism and business districts, with strong demand drivers, can offer a compelling case for continued hotel use and further investment,” Tan said, as quoted by the SCMP.
“For properties outside these core locations, particularly where hotel performance is weaker but access to universities and public transport is good, student accommodation may offer a more attractive use. A location that is less competitive for tourists can still work well for students.”