Flexibility in zoning and land use for homeowners could solve the imbalance between bringing tourists to our city with new infrastructure and the lack of places for them to rest their heads.
The rise of budget airlines has led to an explosion in the tourism industry around the globe in the past ten years. Hong Kong, has always been one of the most popular travel destinations, but with the relaxation of the Hong Kong – China travel visa requirements, the number of overall visitors in Hong Kong had increased by 124% in the past ten years and the number of overnight visitors had also increased by more than 65%; the number of Mainland China tourists to Hong Kong had also increased by 392% in the past ten years.
They’re coming but where will they sleep?
While Hong Kong’s government is making significant investments in infrastructure to meet the growing demand for tourist transportation needs (for example, the HK-Macao-Zhuhai bridge, the high-speed railway and the third-runway) there is a lack of investment in the accommodation needs for tourists.
Being the freest economy in the world, Hong Kong’s business sector does enjoy a certain level of flexibility to accommodate the need of inbound tourists. Nevertheless, Hong Kong still has a shortage of hotel rooms, especially in the peak season, due to the excessive bureaucratic procedures faced when applying to build a new hotel. Compared with the soaring increase of tourist number, Hong Kong has only increased its hotel & guesthouse supply by 42.5% in the past ten years. Accommodation, however, is one of first things travellers look at when making travel plans. With the coming completion of major transportation infrastructure projects, Hong Kong needs to look at different solutions for better accomodation to match the ever-increasing number of tourists.
Short term homestay part of the solution
Solutions going forward should encompass both further capital investments to expand capacity and initiatives to increase the efficiency of existing infrastructure. Three characteristics of the short-term homestay lodging model contribute to its potential as a cost-efficient part of the overall response to the growing demand for tourists accommodation in Hong Kong.
Firstly, it provides a quick fix to address immediate demand. The number of overnight visitors often surpass the total supply of hotel room, especially during the peak seasons. While It is logical to increase the total hotel supply in Hong Kong, the traditional way of building a new hotel or expanding the current hotel entails a series of bureaucratic procedures, not to mention the time needed for construction. Short-term homestay lodging on the other hand provides a more rapid and cost-effective solution to insufficient hotel supply that we are facing now.
Second, it provides an efficient, adaptive pricing model. Hotels and guest houses are usually located at the premises occupying specially zoned lands, which implies certain supply rigidity, resulting in price fluctuation and economic inefficiency as the demand changes cyclically and seasonally. However, the very nature of tourism is cyclical. Short-term homestay lodging allows higher price flexibility for both the renter and the rentee, thus, making the tourist accommodation sector more efficient.
Third, it optimises the allocation of a scarce land supply. It is widely accepted that land is one of the most scarce resources in Hong Kong and the government is responsible for ensuring the optimal allocation of land supply for different uses. Lands designated for hotels imply tradeoffs for other possible uses. As it is both time and resource consuming to change the land use once construction started or a building is in place, the allocation process tends to focus on the most pressing needs of society in the moment. Short-term homestay lodging therefore injects flexibility in town planning and land use.
While we believe a mature short-term homestay lodging market would contribute to a thriving tourism environment in Hong Kong, we also believe that it is crucial for the government to establish a well-rounded regulatory framework for the short-term homestay lodging business model.
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The Sharing Economy Alliance will be publishing a policy white paper on managing short-term homestay activities in Hong Kong on 9 May. For more, please email louis.lo@sharingecon.org
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