Hong Kong's hospitality industry is bracing for a challenging year ahead as a confluence of economic and geopolitical factors threatens to diminish its appeal as a tourist destination.

A newly imposed lodging tax and ongoing geopolitical tensions involving the United States and China are particularly concerning, analysts have noted.

From January 1st, the Hong Kong government will introduce a 3% tax on hotel guests, coinciding with the inauguration of Donald Trump as the President of the United States.

This political change may herald another turbulent phase for US-China trade relations, potentially impacting tourism flows.

Hong Kong has traditionally relied heavily on Chinese visitors, but recent years have seen a decline in both visitor numbers and their economic contribution.

Mainland tourists have exhibited decreased spending and shorter stays, a trend exacerbated by a weakening Chinese currency and a strong Hong Kong dollar.

William Cheng, chairman of Shun Ho Group, which manages seven hotels in Hong Kong, underlined these concerns, stating, 'External factors are definitely worrying, such as the weakening Chinese currency, the strong Hong Kong dollar, the Trump trade wars and tariff threats.

Operating costs are equally worrying and will make the hotel industry suffer.'

The city’s allure seems to have faded, as evidenced by its drop in the Euromonitor International's ranking of the top 100 destinations to 21st place, whereas competitors like Singapore, Tokyo, and Bangkok have outpaced it.

Vishnu Vardhan, research manager at Euromonitor, indicated that the decline in tourism performance metrics significantly affected Hong Kong's overall standing in the index.

Despite receiving 36.7 million visitors between January and October, a 37% increase from the previous year, this figure remains only 70% of the 2018 levels, according to data provided by property consultancy Colliers.

Most arrivals were from mainland China, although their spending has noticeably decreased, compounded by economic challenges back home.

The average per capita spending for Chinese overnight visitors has plummeted to HK$5,100, a notable drop from both 2023 and 2018 levels, further straining the sector.

Conversely, while the long-haul market saw an expansion, its volume remains insufficient to counterbalance the downturn.

Shaman Chellaram from Colliers noted that even with an average hotel occupancy rate of 84% for the year-to-date, room rates were weaker compared to the previous year.

The ongoing challenges include labor shortages and reduced non-room revenue, complicating efforts to draw in higher-spending international visitors.

Amidst these difficulties, the Shun Ho Group reported maintaining a high occupancy rate of 95%, although rising operating costs have offset revenue gains.

New entries in the market, such as the Hopewell Hotel, set to open in December, are poised to intensify competition.

The future landscape for Hong Kong's hotel industry remains contingent on both its ability to navigate these economic adversities and adapt to evolving market conditions.

The introduction of new hotels, providing varied experiences, might offer some mitigation against these current trends.