Hong Kong’s bruised tourism, travel and hotel businesses are having more than their share of the tribulations that have descended on the city — the months of social upheaval that erupted last year had almost brought the city to its knees, and now the novel coronavirus rubbing salt to the wounds.
Hong Kong-based hospitality group Ovolo — a privately run family operation that has been in business for nearly two decades — is, nevertheless, putting on a brave face. The group, which started off as a service-apartment company and currently owns and manages four boutique-themed hotels on Hong Kong Island, has seen HK$1 million (US$128,900) in bookings wiped off its books since the pathogen reared its head in January.
The prolonged social unrest had already taken a toll on Ovolo’s hotels, with the overall occupancy rate plummeting to 61 percent in the second half of 2019, from 80 percent the previous year, while the average room rate was down 14 percent during the period.
Ovolo recorded a 25 percent fall in room revenue in the second half of last year although half of its hotels in the city are located in the Southern district — far from the scenes of the violent protests.
Business sentiment improved slightly during the Christmas and New Year holidays since the scale and impact of chaos at the time were comparatively smaller. Heartened by this, Ovolo thought that business travelers — its target customer base — were returning to Hong Kong, says Girish Jhunjhnuwala, the group’s founder and chief executive.
It went on the offensive, launching a series of promotion campaigns starting from January, trying to win back customers. The sweeteners included offering those who stay at any Ovolo hotel for two nights a third night for free on any other day. The campaign did pay off as bookings in February began picking up.
Strike by COVID-19
However, the upbeat was fleeting as the virus emerged, and has since spread to almost every nook and cranny of the globe with more than 416,000 confirmed cases worldwide and fatalities approaching the 18,000 mark. Tourist arrivals are down to a trickle for the city, with eerily quiet streets devoid of the big spending travelers from the mainland who have been the chief contributors to their coffers. Besides, hundreds of conferences, trade shows, athletic events and concerts have been scrapped or put on the backburner as social distancing is urged to contain the pandemic.
Tourist arrivals in Hong Kong dropped to less than 3,000 a day on average in February, from about 100,000 in January, which was already less than half the traffic volume from January 2019, according to official data.
Dwindling tourist arrivals, emanating from the closure of all but three of the city’s boundary crossings with the mainland, have led to a drastic drop in hotel bookings. Ovolo said bookings for all hotels in Hong Kong suffered a more than 80 percent decrease in February compared to the same period a year ago.
The group is leaving no stone unturned in cushioning the fallout. To cut costs and cope with the impact brought by the coronavirus, it was forced to bite the bullet, freezing the hiring of staff and combining the shifts of certain jobs, such as housekeeping, and some employees were told to take unpaid leave.
“We hope the situation will improve soon. But, this seems unlikely until, at least, April, as the coronavirus continues to take its toll worldwide,” says Jhunjhnuwala. He expects the food-and-beverage business to be among the first to bounce back after the pandemic.
Although Ovolo has its roots in Hong Kong, its revenue from the local market accounted just 35 percent of the group’s total revenue in 2019.
Soaring property prices is another deterrent to business. Jhunjhnuwala decided to take it further, marching into the Australian market in 2012 with the launch of Ovolo Laneways in Melbourne. Since then, the expansion has been quite bold. For the time being, Ovolo operates and runs a total of 11 properties — four in Hong Kong and seven in Australia.
New markets mean new opportunities for Jhunjhnuwala. The group acquired the Citadines Kuta Beach Bali — a popular island resort in Indonesia — last year. It will build a resort under a new brand there with its opening slated for later this year.
“We’re following on demographics,” says Jhunjhnuwala. “The vast majority of our clients are Australians, so we’re just seeing where they’re going. Bali is a popular destination for them, with thousands of holidaymakers flying to and from the Indonesian island every week.”
It seems the acquisition marks a strategic shift for the group as it looks to expand its footprint in Southeast Asia.
“But, Hong Kong will remain a cornerstone of our business,” says Jhunjhnuwala.
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