Hong Kong’s hotel stays just got pricier. In July 2024, Hong Kong’s Legislative Council moved to reinstate the hotel accommodation tax (HAT) under its HAT Ordinance as part of the 2024/25 budget. The 3% tax, effective from 1 January 2025, has sparked debate about its impact on the city’s tourism recovery.
“It will take some time for guests, travel planners, and hotel operators to adjust, especially for bookings made before the policy details were released last October,” said Balwin Yeung, vice president of sales & marketing at Regal Hotels International. “However, HAT is a common practice worldwide, and I expect adjustments within a month.”
Hong Kong’s HAT, suspended since 2008, applies to most hotel and guesthouse accommodations. Financial secretary Paul Chan Mo-po relaunched the tax as part of a fiscal consolidation programme to address a deficit from years of high Covid-related spending. It’s expected to generate up to HK$1.1 billion (US$140 million) annually.
Timothy Chui of the Hong Kong Tourism Association emphasised the need for a clear and straightforward collection process, particularly for bookings through online platforms.
Visitor arrivals have been rising steadily since 2023, with 40.2 million visitors by November, though hotel occupancy averaged 84% in the first 10 months of 2024, below the pre-pandemic level of 91%. As of July 2024, premium hotel nightly rates averaged HK$4,400 (US$565.40), adding HK$129 per night under the tax. While luxury travellers are unlikely to be deterred, budget-conscious tourists may adjust their plans.
“For mid-range and budget travellers, especially from price-sensitive markets like Southeast Asia or Mainland China, the tax might lead to shorter stays or shifts to more affordable accommodations,” said Lierence Li, managing director at Market Hubs.
Despite concerns, Hong Kong’s 3% tax is among the lowest in the region. Comparable destinations like Singapore (19%), Thailand (17%), and South Korea (10%) impose significantly higher hotel taxes. Ann Foo, director of sales & marketing at Grand Hyatt Hong Kong, noted that Hong Kong’s competitive tax rate minimises its impact. “We don’t anticipate substantial effects on the hotel business,” she said.
Looking ahead, questions remain about whether the tax will deter visitors in an already expensive city. Foo suggested that room rates will adjust based on market demand rather than the tax itself. Yeung agreed, emphasising Hong Kong’s enduring appeal, driven by its cultural fusion, landmarks, and shopping.
In addition to the hotel tax, visitors will face an increased airport fee, rising from HK$55 to HK$65, to fund security system upgrades. Both changes took effect on January 1.
“While addressing the deficit is necessary, alternative measures like reinvesting in tourism campaigns and enhancing the visitor experience could have a longer-term impact,” said Li. Such efforts would ensure Hong Kong remains an attractive destination for travellers.