Hong Kong's hotel market is continuing its recovery, supported by resilient leisure demand, stronger visitor spending and limited new supply, although the sector is still being held back by weaker business travel, according to Knight Frank's Hotel Report 2026.
High Tariff A hotels achieved a record revenue per available room (RevPAR) of HK$1,883 in the first half of 2026, exceeding 2018 levels, the report said. The recovery remains uneven across visitor source markets, with overnight arrivals from Japan and Korea still about 39% below 2018 levels, while stronger spending by Chinese mainland visitors has provided important support.
Total hotel spending is forecast to reach HK$37.5 billion in 2026, equivalent to about 90% of the 2018 peak, according to Knight Frank. Hotel expenditure per capita declined in 2025 across most source markets, with Chinese mainland and North American visitors the exceptions. Despite the broader decline in per-capita spending, aggregate hotel expenditure continued to increase as visitor volumes rose and Chinese mainland visitors accounted for a larger share of spending.
Business travel remains a key gap in the recovery. Knight Frank said business visitor arrivals in the first half of 2026 were 43% below 2018 levels, leaving scope for further improvement as corporate travel gradually normalises.
Performance has varied considerably between hotel segments. High Tariff A hotels posted a record RevPAR of HK$1,883 in the first half of 2026, surpassing their 2018 level. Medium Tariff hotels recorded an improvement in occupancy, but this was not enough to offset weaker room rates, resulting in the largest RevPAR decline among the hotel segments, the agency said.
Knight Frank Head of Capital Markets, Greater China Antonio Wu said leisure demand had remained resilient despite the incomplete recovery in business travel. "Although business travel has yet to fully recover, with hotel revenue showing gradual improvement, leisure demand has proven remarkably resilient and continues to support the market," Wu said.
He added that rising demand from non-local students was creating opportunities for hotel owners to convert selected properties into co-living or student accommodation. According to Wu, High Tariff B and Medium Tariff hotels with smaller units, lower room counts and sufficient communal facilities are particularly suited to such conversions. Hotels offering passing yields of 4.5% or above, or with potential for alternative uses, continue to attract strong investor interest, he said.
Student accommodation has become a significant investment theme, with several hotel transactions in 2026 earmarked for conversion. Knight Frank highlighted the acquisition of Regal Oriental Hotel, which is expected to provide more than 1,500 student beds and become Hong Kong's largest hotel-to-student accommodation conversion project to date.
Looking ahead, Knight Frank expects the hotel market's recovery to continue, supported by limited new supply and rising visitor arrivals. The agency expects these factors to support higher occupancy and room rates, while demand from expatriates, non-local students and migrant families could create further opportunities for hotel conversion and alternative accommodation uses.
