Hong Kong hospitality: Momentum and the new lifestyle era

Key imperatives are to optimise assets, maximise brand integration, and aligning with major infrastructure.

The city's hotel market enters the second half (H2) of 2026 backed by record visitor volumes and a shrinking transient supply, a compelling story for investors and operators who can read the structural signals.

Inbound tourism rebounded to 50 million visitor arrivals in 2025, followed by 23 million logged in the first five months of 2026 alone. Yet beneath the headline volumes, structural shifts are reshaping the investment and operational landscape in ways that demand a more sophisticated playbook.

Structural supply dynamics – conversions and the shrinking effective inventoryAs of the first quarter (Q1) 2026, Hong Kong's hospitality market comprises 333 licensed hotels providing approximately 93,500 operational room keys. These figures suggest structural stability with highly limited new development in the pipeline — but the more important story lies beneath: With highly limited new development in the pipeline, the effective supply available to transient travellers is compressing significantly.

Cyclical renovations are further restricting active inventory near-term. Mandarin Oriental The Landmark completed a multi-month overhaul and reopened in June 2026. The flagship Mandarin Oriental Hong Kong is undergoing phased renovation, and The Peninsula Hong Kong is preparing for structural enhancement ahead of its 100th anniversary in 2028, temporarily removing further room stock from the transient market.

In tandem with the limited supply growth, the effective supply available to transient short-stay travellers indicate even further compression in recent years, as asset owners and operators shift existing keys into hybrid models, including long-term stays, serviced apartments, co-living, student housing, and youth hostels. CBRE interprets roughly 18% of the total licensed hotel base now are dedicated for these other hybrid uses.

This operational shift provides distinct advantages. Hybrid operation allows properties to tap into secular local student and professional residential leasing demand whilst retaining hotel licences to maintain daily operational flexibility. Hotel operation enables remaining traditional hotels to capture fluid overnight tourist demand with significantly reduced competition. This indirect impact has been and will continue to help topline ADR/occupancy performance boost.

Tourism demand changes – currency, geopolitics and infrastructureMarket sentiment improved substantially since H2 2025. The Iran conflict driving global oil prices and commercial airfares upward has introduced headwinds entering Q2 2026. Growth is expected to moderate through Q3 before a recovery toward year-end, provided geopolitical tensions ease.

Currency valuation had been a key driver altering Hong Kong’s inbound tourism demographics.

Comparing 2018 to 2025, Hong Kong dollar (HKD) appreciated significantly against major regional currencies, with Japanese yen (JPY) and HKD and South Korean won (KRW)/HKD exchange rates rising by 36% and 29%, respectively.

This directly correlates with a sharp contraction of 42% and 32% in visitor arrivals from two markets, a more severe drop than 15% decline in all inbound arrivals excluding Mainland China during the same period. Nonetheless, in 2025, visitor arrivals from Japan and South Korea rebounded 32% and 13% year-on-year (YoY), respectively, when exchange rate was relatively flattening.

Looking at clear recovery in baseline tourism demands despite lingering exchange rate drag in recent two years, macroeconomic factors would play a broader role than currency impact on improving recovery sentiment, despite the strong HKD in the near term.

On the logistical side, Hong Kong’s long-term inbound capacity is receiving substantial structural support. The full operation of the Three-Runway System (3RS) since 2024 has increased hourly flight capacities up to 120 million passengers annually. And Terminal 2 (T2) recently opened for departures operation, which helps ease overall airport congestion.

When T2 arrivals function commence in 2027, the full hospitality dividend of these infrastructure developments will become more visible next year.

Event economy and lifestyle hotel brands providing authentic experiences Data from H1 2026 confirms Hong Kong's push toward an event-driven economy is successfully capturing high-value visitor volumes.

The Hong Kong Sevens at Kai Tak Stadium brought in 113,000 attendees (including 40,000 overseas visitors), supported by LIV Golf’s 14,000 international spectators. Art Basel drew 91,500 global visitors to the city and Blackpink's three-day concert series generated room compression at par with the New Years holidays.

Whilst high-profile events serve as the primary catalysts drawing large volumes of mass travellers to Hong Kong, their on-the-ground behaviour reflects a distinct shift toward experience-driven itineraries. To maximise asset yields under this paradigm, forward-thinking hotels are introducing targeted experiential packages tied to major city events, collaborating on local tour curation, and creating social-media-friendly space activations.

This resonates with the expansion of Hong Kong’s lifestyle hospitality sector and highlights a structural shift in how asset value is generated. Modern travellers — particularly younger cohorts — prioritise localised authenticity, distinct design, and digital connectivity over conventional luxury amenities. Lifestyle brands optimise revenue efficiency by converting underutilised public spaces into high-margin social hubs, insulating properties from raw room-rate competition and capturing a higher share of non-room ancillary spend.

This trend is reshaping Hong Kong's hospitality landscape through tactical asset repositioning and premium brand introductions. Hilton chose Hong Kong for the Asia-Pacific test bed of its Motto brand and plans to build on this momentum by adding its Curio Collection to the local inventory. This follows the recent launch of IHG’s Kimpton Tsim Sha Tsui, which serves as a global flagship for the brand.

By delivering robust brand differentiation, Hong Kong’s lifestyle segment is well-positioned to achieve superior pricing power and faster Revenue per Available Room (RevPAR) growth compared to traditional midscale and select-service properties.

Strategic outlook and investment implicationsNavigating Hong Kong's hospitality paradigm shift requires developers and investors to update their strategic playbooks, moving away from conventional underwriting toward highly sophisticated asset management. The market rewards those who can balance a compressed transient supply floor (supported by the 18% inventory shift into hybrid models) against a demand baseline that is increasingly experience-driven.

Key imperatives: Optimise soft assets, maximise Total Revenue per Available Room (TRevPAR) through lifestyle brand integration, and strategically time asset positioning with major infrastructure milestones, particularly the 2027 T2 arrivals opening.

Geopolitical risk will temper near-term performance through Q3 2026, but the structural case for Hong Kong hospitality remains compelling.