Vantone Buys Hong Kong Hotel at 30% Discount as Tourist Drought Continues

A hotel in Hong Kong’s Sai Ying Pun district recently changed hands for HK$310 million ($40 million), taking a 30 percent shave off the HK$450 million asking price when it was put on the market in May.

Beijing-based Vantone Holdings, which has been quietly undergoing a transformation since selling a 10 percent stake in its Vantone Real Estate unit to logistics giant GLP in February last year, scooped up the Queen’s Hotel at 199 Queen’s Road West as its first major acquisition in Hong Kong since that deal.

The Shanghai-listed developer is acquiring the 26,779 square foot (2,488 square metre) property for the equivalent of HK$11,576 per square foot as some of Hong Kong’s largest developers have been targeting redevelopment projects in the up and coming district.

Sai Ying Pun Stays Hot

Vantone Holdings has not yet declared its intentions for the 23-storey building, however, brokers familiar with the market said the property is well-placed for conversion into serviced apartments or a co-living facility for rental to university students at the nearby University of Hong Kong.

Formerly an office tower, the property was converted into a hotel by old school Hong Kong investors Cheung Kung-hai and his younger brother Chung Ming-fai after they had purchased it for HK$25 million in 2004.

With Sai Ying Pun having inched closer to Hong Kong’s commercial centre of gravity through the extension of the MTR’s Island Line through the area in 2015, the district once dominated by dried food shops has since evolved into a hipster-friendly habitat.

Vantone’s path to the property on one of western Hong Kong’s principal thoroughfares has it following in the footsteps of developers with more established profiles in the city which have undertaken new residential or serviced apartment investments in Sai Ying Pun during recent months.

In May, Hong Kong billionaire Edwin Leong Siu-hung’s Tai Hung Fai Enterprises snapped up a building on Des Voeux Road West in Sai Ying Pun via compulsory sale after acquiring 91 percent of the space in the building over the past decade. The company is expected to develop the site into residential apartments for sale.

In October of last year, Robert Kuok’s Kerry Properties completed a purchase of a block of flats on Hill Road in the district for HK$514 million ($66 million) with the Hong Kong-listed developer indicating that it intended to redevelop the property.

Vantone Restructures

Vantone, which this week will be rebranded as Vantone Neo Developments, is establishing its Sai Ying Pun foothold as its business appears to be undergoing a broader transformation.

In May of this year, GLP chief executive Ming Z Mei became a non-independent director of Vantone Holdings, with the company on 31 July naming Zhu Sihao, former general manager of Hopson Development’s Beijing and Tianjin operations as a senior vice president.

In recent years Vantone has largely withdrawn from its traditional business of developing condos for sale in mainland China to focus on investment properties. The company’s most recent financial report showed that its income from investment holdings increased by 462 percent in 2019 to total RMB 1.25 billion ($180 million).

An Industry-Wide Decline

As the coronavirus pandemic has ravaged tourism in Hong Kong, Vantone has been able to pick up a hospitality asset at a discount as tourism and business travel have ground to a halt.

Hong Kong’s visitor arrivals in June totalled around 14,600 – a 99.7 percent decline from the same month last year – while total overnight visitors in the first half of 2020 dropped 91.2 percent from the same period last year.

Rooms at the Queen’s Hotel are currently available for US$34 per night on Trip.com, which rates it a 0-star property. Even more established properties in the Sai Ying Pun area, such as the Ibis Central and Western on Des Voeux Road West, have seen room rates decline by at least 50 percent over the last year.

International hotel groups have more dry powder in reserve for times like this but hotels large and small are gutting their coffers to stay above board. The Mandarin Oriental hotel chain reported a net loss in the first half of 2020 of $435 million, which is 61 times higher than the net loss over the same period the year before.

Hospitality assets are the most affected class with occupancy averaging in the single digits, a market insider told Mingtiandi, adding that there is no sign of recovery in the short term.

Overall, revenue per available room in Hong Kong – a common hotel industry performance measure – has declined by 58.8 percent between the second half of 2019 and the first half of this year, according to a Savills’ research report published this month.

Note: This story updates an earlier version which indicated that GLP held a controlling stake in Vantone Holdings. GLP currently holds a 10 percent stake in Vantone Real Estate, and has no known investment in Vantone Holdings. Mingtiandi regrets the misunderstanding.