Hong Kong’s resurgent tourism market – plus a key piece of legislation supporting the supply of student beds – are expected to boost hospitality capital markets in 2025, according to experts in the sector.
“The latest Policy Address introduced a pilot scheme to incentivise the conversion of hotels into student accommodation by streamlining the application process for planning, lands and building plans,” explains Oscar Chan, head of capital markets at JLL in Hong Kong. “This move is expected to stimulate investment interest, attracting more developers and investors to participate and inject new vitality into the market."
Student power
Growing appetite for higher education in Hong Kong has created significant demand for purpose-built student accommodation (PBSA), with the sector currently offering a limited mix of on-campus university halls of residence, privately supplied PBSA, and shared apartments or private rentals. Knight Frank reports that the university dormitory supply in Hong Kong as of February 2025 is in the region of 42,093 beds. Yet it suggests that the expected number of non-local students in Hong Kong will reach 97,857 by the 2027/28 academic year.
Government-backed development programmes are expected to add a total of 8,000 dormitory beds between June 2024 and June 2027, while grant-funded universities are expected to add another 5,000 keys. Yet this is still unlikely to be sufficient – increasing demand for hotels which can be adapted for student use as well as adjacent sectors like long-stay residences.
In 2024 alone, Colliers’ data reveals that the lion’s share of hospitality deals were for mid-scale hotels seen as ripe for conversion into student accommodation. Buyers included Crystal Group, Hong Kong Metropolitan University, PGIM and Shin Wing Ching. Five notable transactions amounted to nearly HKD 2 billion, although this was 60 percent down from 2023’s total hospitality volumes. Distressed assets drove deals, while student strategies were also in evidence, such as the deal by Hong Kong Metropolitan University for the newly built 255-room Urbanwood Hotel in Hung Hom which will be converted into a dormitory offering 400+ beds to MU students.
Tourist appeal
But the prospect of student conversions isn’t the only factor driving Hong Kong’s hospitality investment market. Tourist arrivals picked up in 2024, with CBRE reporting that Hong Kong achieved some 44.5 million visitors, an improvement of 30.9 percent on 2023. Overall occupancy rates increased from 82 percent to 85 percent, although average daily rates (ADRs) softened slightly, falling by around 4 percent compared with 2023. The research suggests that this is down to the current cost-consciousness of tourists, especially from Mainland China, with the strength of the Hong Kong Dollar against other Asian currencies also contributing to the pressures on expenditure.
Yet 2025 has started promisingly with just under 4.8 million visitors in January 2025, moving closer to pre-pandemic figures. The reintroduced 3 percent tourist tax on hotel accommodation will most likely be passed onto visitors but shouldn’t be a “major deterrent for overall demand”, according to CBRE’s Sherwan Esmailzadeh. Limited hotel supply – with just 1,200 rooms expected to complete between 2025 and 2026 – should also help stabilise rates. One notable new opening will be a Kimpton Hotel destined for the Tsim Sha Tsui district in the latter half of 2025. Occupying the grounds of the historic Mariners’ Club, it will tower over 40 floors and house nearly 500 rooms, making this the Kimpton brand’s largest property worldwide.
Investors are already inking deals in the market. In January, Nanyang Commercial Bank acquired the 598-key Hotel Cozi Harbour View Hotel for HKD 1.87 billion from the estate of late property mogul Tang Shing-bor. The price is reported to be some 37 percent below a previous offer price lodged in March 2022. Yet there are also signs that governmental bodies are still propping up the market somewhat. In February, Hong Kong’s airport authority paid HKD 765 million for the 800-key Winland Hotel in Tsing Yi, with a view to using the structure for its own purposes.
Government intervention
The national government is expected to play an even bigger role when it comes to supporting tourism in Hong Kong over the years to come. Its recently released “Development Blueprint for Hong Kong’s Tourism Industry 2.0” leads with four pillars, including nurturing and developing tourism projects, marketing to overseas visitors, promoting smart tourism, and improving service quality.
Key tourism projects for this year include Kai Tak Sports Park (KTSP), which opened to the public on 1 March. Billed as Hong Kong’s largest ever sports arena, and costing a total of HKD 30 billion to build, the multi-purpose venue has been designed to host sports and recreation, entertainment and more. European football teams including Tottenham Hotspur, Manchester United and FC Barcelona are tipped to play friendlies there this summer, while the Hong Kong Rugby Sevens Tournament and the April leg of Coldplay’s world tour have already taken place. As well as containing three arenas of varying sizes, the complex includes 700,000 square feet of retail and restaurants.
The government is also backing various sustainable initiatives to repurpose land for tourism. One notable example is the ex-Lamma Quarry site which will be developed into an area for resorts by the Development Bureau, including space for facilitating yacht tourism. Attractions like Hong Kong Disneyland, Ocean Park, and Victoria Harbour are earmarked for upgrades. CBRE reports that the government believes that Lantau Island, East Kowloon and the Kai Tak Development can become new tourist hotspots and will back a series of projects there accordingly. Meanwhile, the proposed Smart and Green Mass Transit Systems in East Kowloon and Kai Tak should enhance connectivity and are expected to increase the attractiveness of the area for tourism.
When it comes to individual hotel schemes, the government has signalled it will greenlight high quality builds. Hong Kong’s Henderson Land and its subsidiary, Miramar, are pushing forward on the construction of a new hotel in Hong Kong's Tsim Sha Tsui district, to replace an ailing office block. The 99-key property is being designed to ease pressures on Miramar’s adjacent Mira Hong Kong hotel, which has been struggling to cope with recent demand.