Four in 10 Hong Kong hotel employees could lose jobs

As if things weren't bad enough for the hotel industry in Hong Kong, the Wuhan virus outbreak may prove to be its final nail in the coffin.
By: | February 10, 2020

The unemployment rate for hotel staff in Hong Kong could reach as high as 40% as the latest Wuhan virus outbreak has hit the already embattled hotel industry.

Hong Kong has endured over eight months of violent pro democratic protests which have deterred visitors with the city hoping to recover this year. But the virus outbreak which started in China might just be the final nail in the coffin for Hong Kong’s hotel industry, which employed 44,500 people as of the end of 2019.

Read: Wuhan Virus: What can HR do?

And Edwin Leong Siu-hung, founder of property developer Tai Hung Fai Enterprises, who counts four hotels in his real estate portfolio, believes that while the bigger hotels can still tide through, smaller hotels might not survive.

“Family-run guest houses and small hotel operators may be forced to close,” said Leong, Forbes magazine’s 23rd richest man in Hong Kong last year, with an estimated net worth of US$4.8 billion. “Large hotel operators will find ways to cut costs.”

“Some hotel room rates have dropped to as low as HK$70 (US$9) or HK$80 per night. That’s not even enough to cover the cost of [hiring a cleaner] to make up the room,” said Leong. “There is no point in lowering room rates as it’s not about the price of hotel rooms anymore. People from the mainland cannot come to Hong Kong, and foreigners are afraid to come.”

William Cheng, the chairman and chief executive of Magnificent Hotel Investments with nine hotels in its portfolio, echoed Leong’s views.

“The outbreak hasn’t [completely] surfaced yet in the hotel industry. But the impact will be reflected in February. A lot of hotels across the city may close,” said Cheng. “Traditionally, February is the worst month of the year for the hotel industry.”

“With all the current problems, hotel occupancy [across Hong Kong] may only be 30 per cent or less. It’s still possible for large hotels to break even, but smaller hotels are less cost effective, and therefore must be suffering.”

Despite the gloom outlook, Cheng believes the industry will pick up after the virus outbreak subsides.

“Being in the business, you expect these ups and downs. It’s been only six months since the industry started suffering in August. Once these things are over, the recovery will be very strong,” he said.