Hong Kong hotel tax sparks concerns from sector but tourists unfazed

“Frankly, prices in Hong Kong are higher than in other places. We’re spending quite a bit anyway, so it does not make that much difference if there’s a little extra charge,” Chen said. “It would be a different story if it was 10 per cent.”

Hong Kong plans to allocate HK$1 billion to improve tourism infrastructure and services to attract more high‑spending visitors. Photo: Jelly Tse

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

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

Defending the move, the finance chief said many neighbouring countries charged visitors a similar tax, and the proposed rate would amount to only 1 per cent of a regular visitor’s total spending.

According to the Tourism Board, Singapore charges a total of 19 per cent tax on hotel room rates, comprising a 9 per cent goods and service tax and a 10 per cent mandatory service charge.

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

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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 were concerned that it was coming too soon, before tourism could bounce back to pre-Covid-19 levels.

Tourism sector lawmaker Perry Yiu Pak-leung agreed the hotel tax rate was milder compared with what countries in the region charged, but urged the government to rethink the timeline for its reintroduction.

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

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

“You’re getting people to come, but you’re raising the price,” he said. “Hong Kong does not have the competitiveness and attractiveness that we used to have. We need to catch up quickly.”

Chung said there was no consensus yet within the industry as to whether hotels would absorb the levy or charge their guests.

“Competition among hotels is keen and some might not charge travellers the levy, meaning hotels will have to bear the tax,” he said, adding that shouldering the tax burden would eat into the hotels’ thin profit margins.

He felt if visitors had to pay, there would be fewer choosing to stay overnight in the city and that would mean less business for Hong Kong overall.

“What we are losing out on this front outweighs what the hotel levy will bring in,” he said.

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Last year, Hong Kong welcomed 34 million visitors, hitting 52 per cent of its previous peak in 2018.

The mainland remained the largest source of visitors for Hong Kong, accounting for more than 26.7 million last year, which was followed by Macau, Taiwan and the Philippines.

Federation of Hong Kong Hotel Owners executive director Caspar Tsui Ying-wai, a former government minister, said the amount expected from the hotel tax and public investment in tourism were both about HK$1 billion. He asked if the tax revenue would go into funding the tourism investment.

“Our attraction has never been low prices, but service quality and experience. Levying this charge shows that the government thinks that the market has the ability to compete,” Tsui said.

He said while Hong Kong hotels would cost tourists more, he hoped there would be ongoing investment to improve visitors’ experiences and help attract high-spending travellers to the city.

According to Tourism Board data, overnight visitors typically spent three to four nights in Hong Kong and hotel bills accounted for about a fifth of their spending. Last year, each overnight visitor spent on average HK$5,800.

The average room rate for five-star hotels was HK$2,350 per night. The tax would add HK$70 to the cost.

For a guest-house standard room going at about HK$500 per night, the 3 per cent levy would mean an extra HK$15.

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

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

“We don’t travel to America and Greece now for that reason,” housewife Freda said. “If the tax does happen here, it should be very well advertised so people could budget for it.”

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

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

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

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

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

They said they would not be put off by a 3 per cent hotel tax.

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

Geult, 27, an engineer, said: “Three per cent is not that much.”

Additional reporting by Willa Wu

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