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HK hotel overcapacity may hurt profits and jobs

Published on Friday, 26 Jul 2013
Henry Tsai
Photo: Gary Mak
Sandra Ng
Photo: Paul Yeung
Paul Hotchan

Few cities offer such a wide choice of hotels, complete with such high-quality service, as Hong Kong. A risk of overcapacity, however, could pose a problem, says a new Polytechnic University (PolyU) research report.

Dr Henry Tsai, of the PolyU School of Hotel and Tourism Management (SHTM) and a co-researcher, cautioned that Hong Kong hotels are facing a serious problem of overcapacity that is likely to become more severe over the coming years. The researchers warn that although there is consistently high demand for hotels in the city, demand forecasts indicate a significant shortfall in possible bookings compared with the rooms available.

It is predicted that Hong Kong will have almost 70,000 hotel rooms by the end of this year, a rise of more than 17 per cent over four years. Occupancy rates have remained relatively steady at around 85 per cent in the past decade.

The researchers say failure to implement strategies to improve the situation could result in a decrease in profitability of Hong Kong’s hotels, and significantly increase their operational risks. For instance, as labour costs remain one of hotel operators’ largest expense items, low occupancy could lead to considerable overstaffing.

If hotel room oversupply should occur, Tsai believes it would be extremely costly for hotels to retain more employees than they need. The report stresses that to avoid such a situation, the hotel industry “needs to plan its capacity carefully, based on demand”.

The 2012 Hong Kong Tourism Board (HKTB) Hotel Supply Situation Report says there will be 53 new hotels completed between 2011 and 2015, which will add nearly 10,000 rooms to the current stock. Based on a staff-to-room ratio of 0.6:1, the HKTB estimates that about 6,000 new hotel jobs will be created during the next five years.

Paul Hotchan, Experis-Manpower Group’s head of executive, says that despite fears of overcapacity, Hong Kong’s hotel industry remains vibrant. “At this stage, overcapacity should not be a major concern for those joining the industry from hotel schools, and those in the mid-stage of their career development,” he says, adding that in most markets, consistent 85 per cent occupancy rates would be considered a fantastic achievement.

With various new properties coming online, Hotchan says there are significant across-the-board career opportunities. He also makes the point that the hotel industry is renowned for its transient workforce. “It is common for employees at all levels to move around within the industry,” he says. “With the large amount of hotel development we see taking place in Macau and the mainland, we can expect to see more of this happening.”

Hotchan expects Hong Kong hotel operators to adopt a more flexible approach to deployment, including part-time labour pools and flexible shifts supplementing core operational teams.

“High labour costs require hotel owners to become a bit more savvy and creative about the way they employ and utilise their human capital,” Hotchan says.

He adds that it is important to recognise the efforts hotel operators invest in training people to the high standards for which Hong Kong is known. “The hotel business is a long-term industry, so cultivating the right human resources is also a long-term strategy and laying people off is the last thing any hotel operator would want to do,” he says.

JW Marriott Hotel Hong Kong director of human resources Sandra Ng says: “There are plenty of opportunities for people to build their careers in Hong Kong’s hotel industry.” She adds that not all graduates from local hotel training programmes join the industry, and that hospitality graduates equipped with communication and services skills are also targeted by the finance and retail sectors.

To attract and retain talent, Ng says JW Marriott offers comprehensive training and career development. “We offer hands-on and online programmes so that our associates are supported and can clearly see how they can move to the next level,” Ng says.

For instance, with six hotels in Hong Kong under the Marriott brand, employees are able to gain experience in different operations. “Performance management and matching our [employees’] career aspirations with their job role has always been a key priority,” Ng says.

At a more senior level, as Marriott opens new hotels in Greater China, Ng says employees can apply for positions in different parts of the region.

With JW Marriott Hotel Hong Kong the first hotel to introduce a five-day week in the city, Ng says providing employees with flexible work schedules is also part of the Marriott culture. “We run a 24-hour operation, so if our associates have a specific work preference, we will always try to accommodate it,” she says.

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