Hong Kong hotel tax: Proposed fee sparks concern from hospitality industry, but tourists are not worried

“Honestly, the prices in Hong Kong are higher than elsewhere. We spend a lot anyway, so it doesn’t make much difference if there’s a little extra pay,” Chen said. “It would be a different story if it was 10 percent.”

Finance Secretary Paul Chan Mo-po announced in his budget address last month that the 3 percent hotel tax would return from January 1 next year, 17 years after the government scrapped it in 2008.

Chan said the measure would bring in HK$1.1 billion a year for the government. He also pledged to allocate HK$1 billion to improve tourism infrastructure and services to attract more high-spending visitors.

Defending the move, the CFO said many neighboring countries charge visitors a similar tax and the proposed rate would amount to just 1% of a regular visitor’s total spend.

According to the Tourism Board, Singapore levies a total of 19 percent tax on hotel room rates, comprising 9 percent GST and a 10 percent mandatory service charge.

Thailand charges a 17 percent tax on room rates, including value added tax and service charge, while South Korea has a 10 percent tax on hotel room rates. Mainland China charges 3 to 6 percent VAT on room rates.

Visitor arrivals to Hong Kong “will reach 70% of pre-pandemic levels by the end of 2024.”

Most of the visitors the Post spoke to said the tax would not deter them from coming to Hong Kong, but others in the sector are concerned it comes too soon before tourism can return to pre-Covid-19 levels.

Tourism lawmaker Perry Yiu Pak-leung agreed that the hotel tax rate was softer compared to what countries in the region impose, but urged the government to reconsider the timetable for its reintroduction.

“The sector was surprised to learn of its resumption,” Yiu told a recent meeting of the Legislative Council’s Finance Committee, adding that businesses were concerned it would hurt rather than help tourism.

Teddy Chung Wai-tong, founding chairman of the Hong Kong Tourism Association, opposed the levy.

“You get people to come in, but you raise the price,” he said. “Hong Kong does not have the competitiveness and attractiveness that we used to have. We have to catch up quickly.”

Chung said there is still no industry consensus on whether hotels will absorb the fee or charge their guests.

“Competition among hotels is strong and some may not charge travelers the fee, which means hotels will have to shoulder the tax,” he said, adding that shouldering the tax burden would cut into hotels’ slim profit margins.

He believed that if visitors had to pay, there would be fewer people choosing to stay overnight in the city and that would mean less business for Hong Kong as a whole.

“What we lose on that front outweighs what the hotel tax will bring in,” he said.

Spending on overnight stays in Hong Kong falls 37%, expected to return to 2019 levels

Hong Kong welcomed 34 million visitors last year, up 52 percent from its previous peak in 2018.

The mainland remains the biggest source of visitors to Hong Kong, accounting for more than 26.7 million last year, which is followed by Macau, Taiwan and the Philippines.

Hong Kong Hotel Owners Federation executive director Caspar Tsui Ying Wai, a former government minister, said the expected sum of the hotel tax and public investment in tourism was about HK$1 billion. He asked if the tax revenue would go to finance investment in tourism.

“Our attraction has never been the low price, but the quality of service and experience. Imposing this fee shows that the government believes the market has the ability to compete,” Tsui said.

He said that although hotels in Hong Kong will cost tourists more, he hopes there will be continued investment to improve visitor experiences and attract high-spending travelers to the city.

According to figures from the Tourism Board, overnight visitors typically spend three to four nights in Hong Kong and hotel bills account for about a fifth of their spending. Last year, each overnight visitor spent an average of HK$5,800.

The average room rate for five-star hotels is HK$2,350 per night. Tax would add HK$70 to the price.

For a standard guest house room costing about HK$500 a night, the 3 percent fee would mean an extra HK$15.

Hong Kong earmarked HK$1.09 billion for more tourism events

British couple Gary and Freda Harrison, both 64, said they spent HK$130,000 on a tour to Hong Kong, Singapore and Phuket.

The couple said they were not traveling on a budget, but the hotel fee would deter them from visiting Hong Kong.

“Now we don’t travel to America and Greece for this reason,” said the housewife Freda. “If the tax is going to happen here, it needs to be very well advertised so people can budget for it.”

Her husband, a chemist, said: “Some friends of ours went to America and didn’t know about taxes and spent something like an extra $1,200 in taxes.”

Indonesian tour guide Hagar Nurdianto, 30, who has visited Hong Kong several times, said he believed the tax would not stop people from his country from visiting the city.

“It’s not that much,” he said, adding that proximity to attractions is his priority when choosing hotels for his clients.

Scottish visitor Grace Dillett, who was in Hong Kong for five days in early March with her partner Craig Gelt, spent about HK$1,000 a night in two hotels.

Dillett, 27, a dental hygienist, said they thought their hotels were reasonably priced because they came from the UK, where “everything is expensive”.

They said they would not waive the 3 percent hotel tax.

“I was in Rome a few weekends ago and had to pay a tourist tax of about four euros [US$4.40] per night,” she said.

Jult, 27, an engineer, said: “Three percent is not that much.”

Additional reporting by Willa Wu