Budget hotels hard to compete with casino resorts

2013-9-27

From：Macau Business

The relatively high risk of operating budget hotels in Macau means that some potential investors are left out in the cold, according to the President of the Macau Hoteliers & Innkeepers Association, Mr Chan Chi Kit.
In an interview with TDM Radio, Mr Chan said that there are around 28,000 hotel rooms in Macau. 1,500 of them are in two-star economy hotels. However, the occupancy rate of the two  budget hotels is only 60 to 70 percent, which is lower than the 80 to 90 percent of the five-star resort hotels. This contributes to the fact that investors would probably score a better return if they used the land to build residential properties instead of hotels. He recommended that the government provide more policy support to budget hotels.
Chan also advised the government to cooperate with charities and use their land to build budget hotels. “If the government can provide low or no interest (loans to charities), the government will not lose anything. It is only a way to subsidize the charity and to reactivate their land. There are two advantages of this policy. The first is that it can reenergize the older neighborhoods. If more tourists stay at the old neighborhoods, they can improve the economy of the area. Secondly, it can also support the charities by providing them with more income.
However, Mr Chan warned that the hotels in old neighborhoods might have lower occupation rates because of the lack of transportation. The president also observed that many casino resorts don’t put too much emphasis on hotel room revenue, as their rooms are only ways to attract people to stay. During peak season, budget hotels may be able to follow the general trend and increase the room rates. However, off-season, hotels located in casino resorts can still lower their rates to attract guests, a move that the budget hotels lack the profit margin to follow. JPL

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