Table of Content
1. Project Introduction (Executive Summary) ............................................... 1
2. Site and Location Evaluation ...................................................................... 2
2.1 Description of the Land ......................................................................................................... 2
2.2 Accessibility and Visibility ..................................................................................................... 2
2.3 Surroundings ......................................................................................................................... 4
2.4 Utilities .................................................................................................................................. 4
2.5 Local Utility Companies ........................................................................................................ 4
2.6 Site Suitability ....................................................................................................................... 4
3. Area and Neighborhood Analyses ............................................................... 5
3.1 Market Area Analysis ............................................................................................................ 5
3.1.1 Boundary Definition ................................................................................................. 5
3.1.2 Economic and Demographic Data ............................................................................ 5
3.2 Neighborhood Analysis ......................................................................................................... 8
3.2.1 Character of Surrounding Area ................................................................................ 8
3.2.2 Development of Neighborhood ............................................................................... 8
3.2.3 Commercial Neighborhood ...................................................................................... 9
4. Hotel Market Analysis - Competition, Supply and Demand ................. 10
4.1 Competition Analysis .......................................................................................................... 10
4.2 Supply Analysis.................................................................................................................... 12
4.2.1 Supply within the Competitive Set ......................................................................... 12
4.2.2 Possible Future Supply ........................................................................................... 12
4.3 Demand Analysis ................................................................................................................. 13
4.3.1 Estimated Occupancy of Competitive Hotels ......................................................... 13
4.3.2 Competitors' Market Mix ....................................................................................... 13
4.3.3 Estimated Market Mix and Occupancy .................................................................. 14
4.3.4 Current Accommodated Demand per Segment .................................................... 15
4.3.5 Un-accommodated and Induced Demand ............................................................. 17
4.3.6 Demand Projection ................................................................................................ 17
5 Recommended Facilities and Services ...................................................... 18
5.1 Guest Room ........................................................................................................................ 18
5.2 Food and Beverage Outlet .................................................................................................. 19
5.3 Function Room & Business Centre ..................................................................................... 21
5.4 Health Club ......................................................................................................................... 22
5.5 Executive Club ..................................................................................................................... 23
5.6 Retail Stores ........................................................................................................................ 23
5.7 Other Amenities .................................................................................................................. 24
6 Market Share, ADR and Occupancy Projection ........................................ 24
6.1 Market Share ...................................................................................................................... 24
6.1.1 Fair Market Share ................................................................................................... 24
6.2 ADR Projection .................................................................................................................... 24
6.2.1 ADR Growth Rate Projection .................................................................................. 25
6.3 Occupancy Projection ................................................................................ 25
6.3.1 Market Mix Projection ........................................................................................... 25
6.3.2 Penetration Rate Projection ................................................................................... 26
6.3.3 Occupancy Projection ............................................................................................ 27
7. Financial Performance Projection .............................................................. 28
7.1 Departmental Revenue Percentage Projection .................................................................. 28
7.2 Departmental Expense Percentage Projection ................................................................... 29
7.3 Management Fee Projection .............................................................................................. 30
7.4 Financial Statement ............................................................................................................ 30
8. Conclusion ................................................................................................... 30
9. Reference ..................................................................................................... 31
10. Appendix ...................................................................................................... 36
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1. Project Introduction (Executive Summary)
It is proposed to build an 18-storey, 500-room, luxury and full service hotel with a total gross
floor area of 35,028 square meters on the site at North Point Estate Lane and Shu Kuk Street,
opening in 2016. The North Point district can be accessed within 20 minutes from and to the
Central Business District (Central and Wan Chai), commercial districts (Causeway Bay) and
nearby demand generators.
Economic indicators for the North Point District project a positive outlook for economic
development in the region. For the High Tariff B hotels in the market area, it is witnessed to
have growing demand, occupancy and average daily rate over the past 9 years (2004-2012)
though the supply from the three competing hotels has been stable.
Aiming at building a luxury High Tariff B hotel, the development cost per room is about
HKD$ 1,920,000. To determine the feasibility of the project, one of the main factors is the
land cost. Four assumptions of the land cost have been made: they are 0%, 30%, 100% and
300% of the total development cost. By using the cost and benefit analysis, the cost of
building the hotel, including total development cost and land cost of the hotel, will be
compared with the total value of the hotel in the first five years in order to judge the
feasibility of the project.
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2. Site and Location Evaluation
2.1 Description of the Land
There is a piece of vacant land in North Point desirable for the development of the subject
hotel. It is about 5,369 square meters located at the North Point Estate Lane and Shu Kuk
Street (Appendix 1). Since the total site coverage of any building to be erected on the lot shall
not exceed 60% of the area (Development Bureau, 2013), the usable site area is hence 3221.4
square meters for building a hotel. In addition, the minimum total gross floor area and the
maximum total gross floor area are 21,600 square meters and 36,000 square meters
respectively. The site is rectangular and the height restriction is 80 meters. It is expected that
the size of the subject land is well-suited for hotel development with a total of 500 rooms
providing various facilities, amenities and sufficient public space.
2.2 Accessibility and Visibility
The proposed hotel is located in the Eastern District of Hong Kong, which is easily accessible
and well connected to other parts of Hong Kong by a comprehensive transportation network.
The proposed location is adjacent to North Point MTR station and the North Point Ferry Pier
which connects North Point to Hung Hom and North Point to Kowloon City. Furthermore, it
is close to North Point Bus Pier Terminal and is served by a number of buses and minibuses
which have 14 routes in total. Thus, it is an ideal location that links to different corners of
Hong Kong via a highly efficient transport network.
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For the location in relation to demand generator, most travelers are willing to travel as long as
twenty minutes between a demand generator and their logging facilities (Rushmore, 2002).
The MTR transportation system offers easy access to the rest of Hong Kong and the proposed
location is just one-minute walking distance to MTR North Point Station (Exit A1), nineteen
minutes away from the primary commercial transient and group demand generators - Hong
Kong Exhibition Centre, twelve minutes away from one of the shopping and commercial
districts - Causeway Bay, and eighteen minutes away from the Central Business District -
Central. All the demand generators can be reached within twenty-minute driving (Appendix
2).
The subject location is easily accessible and the proposed hotel would take the advantage of
the transportation networks on Hong Kong Island. The well-developed transportation system
significantly facilitates the capture of both travelers and local residents for food and beverage
sales of the proposed hotel.
The proposed hotel enjoys a high visibility as it is next to the harbour front (Appendix 3).
With its frontage onto the Victoria Harbour, many areas of the proposed hotel can enjoy a
spectacular harbour view and it becomes one of the unique features of the subject hotel. In
addition, there is one highway - Island Eastern Corridor which is also serving North Point and
areas nearby. Consequently, it becomes a highly visible location that the drivers can readily
see while driving along the Island Eastern Corridor. The high accessibility and visibility adds
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possibility for the hotel project.
2.3 Surroundings
The land use in the surrounding area is mainly residential zone and mixed commercial and
residential zone. Many mixed commercial and residential buildings have around 20 to 35
floors though they have finished the maintenance and renovation of the outer wall in recent
years that improves the building appearance and structure. The building closest to the
proposed hotel is the Java Road Municipal Service Building with 5 floors and would
probably be blocked if the proposed hotel were built.
2.4 Utilities
The proposed location is currently served by electricity, gas, water, and telephone utilities.
The supply of utilities is very stable in the area since there are many companies provide the
utilities services.
2.5 Local Utility Companies
Utility Company Providing Service Water Water Supplies Department (HKSAR) Electricity The Hong Kong Electric Company Gas The Hong Kong and China Gas Company Limited (Towngas) Telephone Pacific Century Cyber Works (PCCW) Sewer Drainage Service Department (HKSAR) Refuse removal Food and Environmental Hygiene Department (HKSAR) Storm drainage Drainage Service Department (HKSAR)
2.6 Site Suitability
After the basic evaluation, the piece of land has a number of advantages for hotel
construction including: large site for full-service hotel development; highly accessible and
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well-connected to other places of Hong Kong via a well-developed transport network;
excellent visibility from the Island Eastern Corridor; and stable utility supply. However, there
are also some disadvantages including: height restriction limiting hotel construction and
future expansion, restricted visibility from other areas in North Point; lack of tourist
attractions in the proposed site; low accessibility relative to Wan Chai and Central Districts.
After all, the site provides many desirable location attributes, from the site and location
evaluation, it is concluded that the subject land is well suitable for the hotel development.
3. Area and Neighborhood Analyses
3.1 Market Area Analysis
3.1.1 Boundary Definition
As North Point is located in Hong Kong Island where the Central Business District (Central
and Wan Chai) and commercial districts (i.e. Causeway Bay) locate (Lam, 2011), it has a
more compact market area. Thus, the defined market area includes Braemar Hill, Fortress
Hill, City Garden, Provident Fort Street, Kam Ping, Tanner and Healthy Village (Appendix
4).
3.1.2 Economic and Demographic Data
Population Growth and Population Age Distribution
Eastern District is the most densely populated district in Hong Kong Island with a population
of 589,300 (46.1%). The population growth rate of Eastern District (0.058%) is relatively
stable over the past seven years (2006-2012) (Appendix 5).
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Similar to the Eastern District, the population in North Point District experienced a growth
rate of 0.06% from 2006 to 2011. North Point has a population of 115,610 by 2011, which
takes up 19.6% of population in Eastern District. For the age distribution, 48-50% of the
population in the North Point District is within 25- to 54-year-old age group (Appendix 6).
Since 25- to 34-year-old age group is likely to create increasing wedding banquets, lounge
and entertainment patronage while the 35- to 49-year-old age group generally has the largest
disposable income, it is expected that there will be a great potential for banquets and
restaurant-related food and beverage business to the lodging facility (Rushmore, 2002).
Retail Sales
The median monthly household income of population in North Point District (HKD 42,990)
is higher than that of Eastern District (HKD 25,400) (Appendix 7). It reflects a higher ability
of the area residents to spend money on the goods and services offered by the proposed
lodging facilities than other parts of Eastern Island (Rushmore, 2002).
Work Force Characteristics
The characteristics of an area's work force provide an indication of the type and amount of
transient visitation likely to be generated by local businesses (Rushmore, 2002). Among the
major occupations, associate professionals (23.2%), and managers and administrators (19.5%)
are noteworthy (Appendix 8).The presence of professional occupations in North Point
indicates a higher potential for dining out, entertainment and health services.
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Import/export, wholesale and retail trades (22.3%), real estate, professional (15%) and
business services and miscellaneous and personal services (17.7%) are the major industries
that the working population engages in (Appendix 9). Sectors such as finance, insurance, and
real estate (FIRE), wholesale trade, and service generally produce a high level of visitation,
which is typically not rate sensitive (Rushmore, 2002). In addition, North Point has a labor
force higher participation rate (60.2%) than Eastern District as a whole (59.2%)(Appendix
10). A higher than average rate implies a healthier and more vital local economy.
Office Space
Office space demand mainly focused on decentralized districts in 2012. Statistics showed that
tenants remain cost conscious with demand shifting to lower cost office space in
decentralized areas in Hong Kong Island and smaller floor areas. Thus, it is expected that
demand will keep solid outside the CBD, particularly in North Point and Hong Kong East
(Hong Kong Office Market View, 2013).
Office vacancy percentage is also tight in the decentralized areas in Hong Kong Island of
around 1.3% (Appendix 11&12). Secondary space will also be scarce throughout 2013, with
only 86,000 square feet expected to be vacated. North Point and Eastern Hong Kong has the
lowest office vacancy rate (1.6% and 1.2% respectively) (Appendix 13), implying a growing
business demand in decentralized areas. An increase in the amount of occupied space
generally has a proportional impact on commercial lodging demand and a less direct effect on
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transient meeting demand (Rushmore, 2002).
3.2 Neighborhood Analysis
3.2.1 Character of Surrounding Area
The neighborhood of the proposed site is characterized by an urban mixture of residential and
commercial land uses. The site is linked by the secondary street on its east and west, Shu Kuk
Street and Tong Shui Street, to the main street, Java Road and King's Road in its south. In
terms of commercial land use, there are mainly local restaurants and furniture retail shops
along the Java Road while more chained restaurants, international banks and office buildings
are located along the King's Road. In terms of residential land use, there is middle income
private sector housing, like the Provident Garden and Marble Garden Block. Added, it is the
decentralized area in Hong Kong Island compared to Central and Causeway Bay and the
eastern fringe of the Hong Kong Eastern District.
3.2.2 Development of Neighborhood
The proposed site's neighborhood was reclaimed in 1930s, which is on the west of Tin Chiu
Street, under the reclamation scheme (Heritage impact assessment, 2011). More specifically,
the proposed site used to be part of North Point Estate built on the reclaimed land (Appendix
14). The Housing Authority announced the redevelopment of the North Point Estate on 2 nd
March, 2000 and the government designates the land for hotel development (Redevelopment
of North Point Estate, 2002).
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In the future, it is expected to have a number of development projects and new business entry
in North Point. The Town Planning Board had approved the draft North Point Outline Zoning
Plan. The project will covers 277 hectares in Hong Kong Island's northern section stretching
from Hing Fat Street, Gloucester Road/Wun Sha Street to the west, and Mansion Street/Java
Road/Hoi Yu Street to the east, where the proposed site's neighborhood is included. In the
plan, there is 17.25% residential, 0.15% Industrial, 7% Commercial/Residential, 1.66%
Commercial, 10% Government, Institution or Community, 12.4% Open Space, 31.7% Green
Belt and 2.27% "Comprehensive Development Area" ("CDA") (Draft North Point Outline
Zoning Plan approved, 2010).
Under the CDA, right next to the subject property, there will be a comprehensive residential,
commercial (eating place, shop and services) , public open space, government and institution
or community (G/ IC) uses (Broad Development Parameters of the Applied Use
/Development, 2013). In addition, a 30,000 square-meter Sail Hotel with approximately 800
guestrooms is also approved for construction at Oil Street. The provision of the green open
space, ArtSpace next to historic building, waterfront promenade and the establishment of
more hotels will revitalize and strengthen the area as another new tourist attraction in the
future (Task Force on Harbourfront Developments on Hong Kong Island, 2012a).
3.2.3 Commercial Neighborhood
The neighborhood has a number of commercial properties indicating the commercial
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development in North Point. For office buildings located in King's Road, there is Fortress
Tower and Two Chinachem Exchange Square (Introduction of North Point and North Point
Hill, 2012).The AIA Tower is also situated in Electric Road. These buildings are A Grade
office buildings hosting busy commercial activities and meetings (AIA Tower, 2013). Thus, a
lodging facility nearby can house travelers or attendees to the meetings in the office buildings
or even in the hotel. These financial activities are more likely to create overnight visitation
(Rushmore, 2002).
A 4-storey department store - Metropole is located at the King's Road. It is one of the largest
shopping mall in the North Point District opened in 1979. Well-known brands like Esprit,
Jusco and Sinomax are all tenants in the Metropole. The wide variety of shops in the
department stall complements the lodging facilities as a local attraction and shopping places
to the hotel guests (Welcome to Metropole, 2013).
In addition, Chun Yeung Street is also close to the property site. It is one of the famous
traditional wet markets in Hong Kong for its long history in North Point. This is a hustle and
bustle area where tourists can experience the scene of old market business in Hong Kong and
is a hot spot promoted by Tourism Board (Chun Yeung Street, 2013).
4. Hotel Market Analysis - Competition, Supply and Demand
4.1 Competition Analysis
There are nine hotels and lodging establishments in the defined market area. However, based
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on their locations, quality of facilities, brand affiliations, rate structures, and market
segmentation, it is believed that three hotels in the area would compete with the proposed hotel.
The three hotels, comprised of 2,110 rooms, including Harbour Grand Hong Kong Hotel, City
Garden Hotel Hong Kong, Harbour Plaza North Point Hotel were in the competitive set due to
comparable market position. They are all full-service and High Tariff B hotels with over 500
rooms.
As the proposed hotel is positioned as a luxury and full-service hotel, Harbour Grand Hong
Kong Hotel is the primary competitor as well as the benchmark hotel. It is located
approximately one kilometer from the proposed site. It is affiliated with the Harbour Plaza
Hotel and Resorts Group which has six hotel properties in Hong Kong. This 828-room Harbour
Grand Hong Kong Hotel is located at 23 Oil Street, North Point. Since opened in 2009, the
forty-one-story lodging facility offers 122 luxury hotel suites and guestrooms as well as 202
Harbour Club rooms. The hotel is managed by Harbour Plaza Hotel Management while owned
by Hutchison Whampoa and Cheung Kong Holdings, which are parts of the Hutchison
Property division. The hotel does not have published rates. Its ADR ranges from HKD 1,182.6
to HKD 2,086.4, which is the highest in the competitive market. Its function space (1178.5m 2
)
is close to that of the proposed hotel (2,080 m 2
) than the secondary competitors. Its facilities,
including business center, swimming pool, fitness center, spa and shuttle bus service are same
as the proposed hotel with high quality.
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For secondary competitors, City Garden Hotel Hong Kong and Harbour Plaza North Point
Hotel are upscale High Tariff B hotels and their ARD are close, ranging from HKD 695.25 to
756. Their function space (541.7-945m 2
) is smaller than Harbour Grand HK Hotel and the
proposed hotel. They have the same facilities as the primary competitor and the proposed
hotel but the quality of their facilities are lower (Appendix 15 & 16).
4.2 Supply Analysis
4.2.1 Supply within the Competitive Set
Based on the competitive set defined, the total room supply per day is 2,110 (Table 1).
Room No. Room No. in a year
Harbour Grand Hong Kong Hotel 828 302,220
City Garden Hotel Hong Kong 613 223,745
Harbour Plaza North Point Hotel 669 244,185
Total Existing Supply 2,110 770,150
Table 1 - Competitive Hotels' Supply in 2012
4.2.2 Possible Future Supply
In 2016, the total room supply per day will be 2,610 including the 500 rooms of the proposed
hotel (Table 2). Although four hotels will complete construction during 2013-2016, none of
them will be in our competitive set (Appendix 17) since these hotels do not meet the
competitive criteria of at least 500 rooms, full service and amenities comparable to the
proposed hotel. However, in 2017, the 840-room "Sail" Hotel at Oil Street will complete its
construction (Hotel Supply Situation - as at Dec 2012, 2013). It will be in our competitive set.
Future supply in 2017 will therefore increase and the fair market share of the proposed hotel
will be lower.
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Rooms No. Supply in a year
Total existing supply 2,110 770,150
# of rooms of the proposed hotel 500 182,500
# of rooms of the most likely new hotels 0 0
Projected Future Supply in 2016 2,610 952,650
Table 2 - Competitive Hotel Supply in 2016
4.3 Demand Analysis
4.3.1 Estimated Occupancy of Competitive Hotels
In 2012, High Tariff A hotels had occupancy of 85% while High Tariff B hotels had 91%. It
can be found that the higher the tariff of the hotels, the lower the occupancy. The occupancy
for hotels in Eastern and Southern Hong Kong was 89% in 2012 (Appendix 18). Therefore, it
can be concluded that the occupancy range for the competitive set (all High Tariff B hotels)
will range from 86% to 91%.
For Harbour Grand Hong Kong Hotel, it is the best High Tariff B hotel among the three
competitors. Therefore, its occupancy is estimated to be the lowest, i.e. 87% but higher than
High Tariff A hotels. For City Garden Hotel and Harbour Plaza North Point Hotel, they are
up-scale High Tariff B hotels and having a relatively higher position among all High Tariff B
hotels. Thus, their occupancy is estimated to be 89%.
4.3.2 Competitors' Market Mix
It is estimated based on the room number, function space, number of restaurants and business
center of each competitor. All competitors have plenty of function space and 24 hour business
center (Table 3). Added, as North Point lacks tourist attractions, it is assumed that business
segment will be higher than leisure segment.
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For group/meeting segment, Harbour Grand Hong Kong Hotel has the largest function space
and thus group/meeting segment will be the largest, followed by Harbour Plaza North Point
Hotel and lastly, City Garden Hotel Hong Kong. For tour group segment, it will be
determined by number of rooms and restaurants. As Harbour Grand Hong Kong Hotel
focuses more on group/meeting, its tour group segment will be lower than Harbor Plaza
North Point Hotel which has the average number of restaurants and room number. As City
Garden Hotel has the least restaurants and rooms, its tour group segment will be the smallest.
For commercial and leisure segment, as City Garden has the least desirable facilities to cater
group/meeting and tour group, it will have a higher commercial and leisure demand.
Rooms
Function
Space m 2
No. of
restaurants
24 Hour
Business Center
Group/
Meeting Commercial
Tour
Group Leisure
P ri
m a
ry
Harbour
Grand Hong
Kong
828 1178.5 5 Yes 40% 20% 25% 15%
S ec
o n
d a
ry City Garden
Hotel Hong
Kong
613 541.7 3 Yes 30% 30% 20% 20%
Harbour
Plaza North
Point Hotel
669 945 4 Yes 35% 20% 30% 15%
Table 3 -Competitive Hotels' Market Mix
4.3.3 Estimated Market Mix and Occupancy
Through dividing the room-night demand of each segment of each hotel by the total number
of accommodated demand, the market mix of the competitive set can be estimated (Table 4).
Business segment accounts for 58.4% with 35.5% for groups/meeting and 22.9% for
commercial; leisure segment will account for 41.6% with 25.1% for tour group and 16.5% for
leisure FIT. The occupancy percentage is estimated to be 88.22% in the competitive market.
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Harbour Grand Hong Kong Hotel (828 rooms; Occ. 87%)
City Garden Hotel Hong Kong (613 rooms; Occ. 89%)
Harbour Plaza North Point Hotel (669 rooms; Occ. 89%)
Segment Room- Nights
% of Total Demand
Room- Nights
% of Total Demand
Room- Nights
% of Total Demand
Total Room- Nights
% of Total Demand
Group/Meeting 105,173 40% 59,740 30% 76,064 35% 240,976 35.5% Tour Group 65,733 25% 39,827 20% 65,197 30% 170,757 25.1% Commercial 52,586 20% 59,740 30% 43,465 20% 155,791 22.9% Leisure 39,440 15% 39,827 20% 32,599 15% 111,865 16.5% Total 262,931 100% 199,133 100% 217,325 100% 679,389 100% Occ. Rate of the Competitive Market :
Total Room-Nights / Total Supply = 88.22%
679,389 / 770,150
Table 4 - Estimated Relationship of Market Demand and Supply and Occupancy in 2012
4.3.4 Current Accommodated Demand per Segment
Group/Meeting Demand
Group demand is composed of small corporate groups, training groups, social groups, and
sports teams. In North Point area, the busy commercials generate significant demand for
meeting and function rooms in the hotels nearby. The Hong Kong Stadium contributes to
group demand in the area. Sports events like the Ruby Seven, Lunar New Year soccer
tournaments and religious events account for significant group demand which is
accommodated by the hotel in the area. Furthermore, it is expected that group/meeting
demand in the area will undergo a gradual increase with the rise in demand for office spaces
in North Point, which implies an indirect effect on meeting demand (Rushmore, 2002).
Tour Group Demand
Tour group consists of leisure travelling group who are more price sensitive than other
segments. Compared to the hotels in CBD, hotels in North Point offers a more attractive
room rate to group travelers and accommodation proximate to the tourist attractions. With
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coaches being their means of transportation, it only takes 7 -10 minutes for the tourists to
travel from North Point to Time Square and City Plaza, which are renowned shopping malls
in Hong Kong. Hotels in North Point are thus desirable to tour group. As the completion of
Comprehensive Development Area will introduce more tourist attractions, it is believed that
the demand for tour group will have a steady rise.
Leisure Demand
Leisure demand was a small segment due to the limited tourist/visitor sites in the area.
Overall, the leisure segment is not optimal as the demand driver for full-service properties,
due to its rate sensitivity and its limited use of hotel facilities. The hotel market captures
overflow demand from visitors to shopping areas and restaurants in Causeway Bay. Growth
in this market segment is expected with the Comprehensive Development Area which will
introduce more leisure facilities and tourist attractions in North Point.
Commercial Demand
Commercial demand includes business-related and government-related demand. The
commercial surroundings in the area, like Fortress Tower, and AIA Tower are A Grade office
buildings hosting busy commercial activities and meetings. Yet, as compared with Wan Chai
District and Central Business District, its commercial demand is relatively small due to its
location. Added, HKCEC is a demand generator for commercial as it can be reached within 20
minutes. This segment is expected to grow with the Comprehensive Development Area scheme
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through commercial development.
4.3.5 Un-accommodated and Induced Demand
Un-accommodated Demand
It is made up of transient travelers who seek accommodations within a market area but must
either defer their stay or settle for less desirable accommodations because the facilities where
they want to stay have no vacancies (Rushmore, 2002). As the estimated occupancy for the
competitive market is 88.22%, un-accommodated demand is expected in peak seasons. The
estimated un-accommodated demand percentage is set 2% for occupancy rate over 85% and
4% for occupancy rate over 88%.
Induced Demand
It refers to the additional room nights generated due to specific attractions in the area
(Rushmore, 2002). North Point is a decentralized district mainly composed of middle
residential land use and small to mid-scale commercial properties. Thus, it is estimated to have
no induced demand in North Point.
4.3.6 Demand Projection
2012 is the base year for projection (Table 5). The growth rate for accommodated demand is
calculated based on the compound annual growth rate of accommodated demand in all High
Tariff B hotels, which is 6.11% (Appendix 19). The total projected future demand for 2016 is
900,333 room-nights (Table 6).
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Year Total Demand
Un-accommodated Demand
Un-accommodated Demand %
Accommodated Demand
Total Supply Market Occupancy
2012 710,195 30,806 4% 679,389 770,150 88.22%
Table 5 - 2012 Estimated Demand
Segment Percent of Total Demand
2012 Accommodated Demand
2012 Un-accommodat ed Demand
2012 Total Demand
Growth Rate* Projected 2016 Total Demand
Group/Meeting 35.5% 241,183 10,936 252,119 6.11% 319,618
Tour Group 25.1% 170,527 7,732 178,259 6.11% 225,983
Commercial 22.9% 155,580 7,055 162,635 6.11% 206,176
Leisure 16.5% 112,099 5,083 117,182 6.11% 148,555
Total 100% 679,389 30,806 710,195 900,333
* Compound Annual Growth Rate of High Tariff B hotels in HK
Table 6 - Demand Projection for 2016
5 Recommended Facilities and Services
5.1 Guest Room
The proposed hotel will have 500 rooms in total (Table 7). As a hotel targeting mainly on
group customers, the hotel will have more standard rooms than other types of rooms to cater
the needs of groups. Besides, suites of different types will also be provided to meet the
demand of other segments.
For the standard rooms, a total number of 430 rooms will be dedicated to this type, and each
room will be of 34 square meters. Furthermore, based on the view, design and facilities of
these rooms, these standard rooms are divided into sub-types, including superior harbour
view rooms, deluxe harbour view rooms, grand deluxe harbour view rooms and premier
harbour view rooms to meet the needs of different groups.
As for suites, three types of suites with different room sizes will be projected to satisfy the
needs of different customers. The executive harbour view suites, targeting on medium
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wealthy business travelers and leisure travelers, will have a total room size of 60 square
meters. And the premier harbour view suites and harbour club presidential suites, with room
sizes of 90 square meters and 166 square meters respectively, will mainly target on highly
wealthy business travelers for long stay.
A summary of room types is provided below.
Room Types Room Sizes (sq.m) Room Number Standard Rooms 34 430 Executive Harbour View Suites 60 50 Premier Harbour View Suites 90 15 Harbour Club Presidential Suites 166 5 Total King Bed: 60% Twin Bed: 40%
500
Table 7 - Proposed Guestroom Summary
Hotel rooms represent between 50% and 85% of the total build area of a hotel (Lawson,
1995). The total room size of the proposed hotel will be 19,800 square meters
(34*430+60*50+90*15+166*5), and the total build area of the hotel is 35,028 square meters,
which results in a proportion of 56.5% of the total building area is dedicated to hotel rooms.
For the bed types, since the hotel mainly target group and business travelers than leisure
travelers, there would be 40% of rooms having twin bed and 60% of rooms having king bed.
5.2 Food and Beverage Outlet
Based on the area and neighborhood analysis, in the North Point District, about 48% of the
population is in the age groups of 35 to 59, and these age groups generally have the largest
disposable income and represent potentially the most significant restaurant-related food and
beverage business (Rushmore, 2002).Besides, the presence of professional occupation in the
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district also indicates a higher potential for dining out. As a consequence for the proposed
hotel, it will have four F&B outlets (except the banquet) to cater different dining needs of
both in-house customers and local residents. The four proposed restaurants are YueHeen,
Harbour One Café, The White. House Restaurant and The Lounge Bar 18.
YueHeen is a Chinese fine dining restaurant which is located on the 1 st floor and is open for
lunch and dinner. The restaurant offers a total space of 470square meters to accommodate 150
customers. This is a signature Cantonese restaurant serves exquisite local and regional
specialties.
Harbour One Café has a total space of 780 square meters with 300 seats that can cater for
group dining. Located on the 3 nd
floor and beautifully designed with relaxing and friendly
ambience, it offers casual all-day dining with both a la carte and buffet options, serving an
elaborate selection of International dishes.
The Lounge Bar is 400square meters with 130 seats and is located on ground floor to
provide all-day dining with a la carte menu. The restaurant's sophisticated and casual chic
ambiance is enhanced by the stunning view of Victoria Harbour. The restaurant's lively open
kitchen serves a range of modern and classic European cuisines.
The White House Restaurant is located on the top floor with a total area of 380 square
meters that can sits 120 guests. With a fabulous location on the 18 th
floor, the restaurant offers
a stunning harbour view to experience the dazzling firework displays. The restaurant serves a
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selection of classic cocktails, wines and champagnes and prime cuts of the finest meat.
5.3 Function Room & Business Centre
On 2 nd
floor, there will be a function space of 2080 square meters, which is doubled that of
Harbour Grand Hong Kong, that cater to both local demand for banquets and meetings.
Extensive function venue space is proposed as approximately 60% of the market mix is
dedicated to business market. To cater to functions or events in different sizes, it will have a
ballroom that can accommodate 1,000 people as well as 15 function rooms for corporate
meetings or conventions that can seat from 30 to 750 attendees. All venues will be well
equipped with full range of facilities and audio-visual equipment. There will be two main
types of conference and meeting rooms in the subject hotel. For small to mid-scale events,
they can be held in the ten 90-square-meter and five 36-square-meter rooms. In the
90-square-meter room, it is suitable for 75 guests for cocktail; 72 guests for dinner; 100
guests for theatre and 50 guests for classroom whereas the 36-square-meter rooms can
accommodate 30 guests for cocktail; 24 guests for dinner; 40 guests for theatre and 20 guests
for classroom. Both types of venues are 2.4 meters in height and all are flexible to be
partitioned or connected for multifunctional use.
Great proportion of young generation in North Point is likely to create wedding banquets,
lounge and entertainment patronage. As a result, the proposed hotel provides a relatively
larger ballroom to satisfy the needs of this group. The ballroom section consists of two main
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sections - a 200 square meters pre-function area and an 800 square meters ballroom with 4
meters in ceiling height. For the pre-function area, it can be designed to function as a
reception space, registration or refreshment break area that provides a grand entrance to the
guests. Then, the ballroom meets the needs of extensive banquets, conferences or parties
accommodating 1,000 guests for cocktail style setting and 700 guests for dinner setting. The
venue is also pillar-less and has a contemporary look that serves functions needs.
The business center is 250 square meters located on the 1 st floor of the subject property to
cater to the needs of the busy executives and CEOs. The area is a cozy, quiet and comfortable
environment for reading and getting work done with free WiFi and broadband internet access.
In terms of hardware facilities, there are 10 personal computers, laser printers, scanners,
photocopiers and fax machines. In addition, the business center is connected to a business
library which is a relaxing space with great collections of newspapers, magazines and books.
5.4 Health Club
As nearly 40% of business travelers will spend time at gym and spa (Starwood Hotels &
Resorts Worldwide, Inc., 2013) and with the presence of professional occupations in North
Point, there is a higher potential for health services.
Our Angsana Spa is an award-winning Asian spa brand founded by the renowned Banyan
Tree Spa with the belief that the reputation of Banyan Tree Spa can bring additional revenue
to the hotel and matches the image of a luxury hotel. This Angsana Spa will be the third
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Angsana Spa in Hong Kong. Measuring 400 square meters, Angsana Spa is equipped with six
spa treatment rooms and two of the treatment rooms with shower facilities. Dedicated
relaxation areas, Jacuzzi and steam bath facilities are available for all spa guests.
The proposed hotel will offer a 30-metre outdoor temperature-controlled swimming pool
located on the 5 th
floor of the hotel. Located on the 5 th
floor of the hotel, the pool commands
spectacular view of the Victoria Harbour. Guests also enjoy access to the 24-hour fully
equipped gymnasium, as well as a Yoga studio, and fitness and personal training sessions.
5.5 Executive Club
The Executive Club is on the top floor (18 th
floor); it includes Guest Relation Office, one
boardroom and a lounge. For the Guest Relation Office, the size of it is 11.2 square meters.
There are telephones, printers and fax machines. For boardroom, the size is 26.8 square
meters. The maximum number of guests is 8. The boardroom provides computers, projectors,
screens and televisions. For the lounge, the size is 22.3 square meters. Guests who arrive
early or leave late can take a rest here and enjoy complimentary coffee, tea and snacks.
5.6 Retail Stores
All retail shops are in the ground floor near the lobby and lounge. Retail shops are proposed
to provide convenience to guests as North Point is not a tourist destination. There are five
retail shops which are selling some cake, chocolate, souvenirs, clothes, flowers and
accessories. Bakery and chocolate shop (16.7 square meters), gift shop (17.8 square meters),
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flowers shop (5.2 square meters), and clothing and accessories (20.1 square meters).
5.7 Other Amenities
As North Point is less accessible as compared with Wan Chai and Central, the proposed hotel
will provide free shuttle bus services to increase the accessibility of the hotel. There will be
two routes, one is the East Hong Kong route and the other is Causeway Bay-Central route.
6 Market Share, ADR and Occupancy Projection
6.1 Market Share
6.1.1 Fair Market Share
By 2016, four hotels, including the proposed hotel, are within the competitive market. Thus,
it generates a fair market share of 19% for the proposed hotel (Appendix 20). Nevertheless, in
2017, there will be a new hotel opened in the competitive market which contributes to a slight
decrease of the fair market share of the projected hotel to 14% (Appendix 21).
6.2 ADR Projection
Based on the average daily rate (ADR) achieved by competitors (Appendix 22), the ADR
analysis for the subject hotel is conducted. The anticipated market mix is considered as well.
With newer facilities, projected ADR in 2016 is $1,404. It is slightly higher than the primary
competitor, since the subject hotel has more and better business facilities for the target market,
namely corporate group and business customers, than competitors. In terms of location and
view, the subject hotel and the primary competitor are similar. Therefore, the difference is
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small.
6.2.1 ADR Growth Rate Projection
The ADR growth rate is based on the market compound annual growth rate which is 7.26%
(Appendix 23). With regard to the annual growth rate of the ADR, Hong Kong economic
situation and the composite consumer price index (CPI) in Hong Kong, it is believed that the
ADR growth rate will be lower. According to the Composite CPI, overall consumer prices
rose by 3.6% in March 2013 over the same month a year earlier. The average inflation rate in
Hong Kong from 1981 until 2013 is 4.59%. Thus, we believe that the ADR growth rate
cannot achieve 7.26% forever. Base on the prudence concept, the estimated ADR growth rate
is adjusted to 4% with the projected ADR from 2016 - 2020 as follow:
Table 8 - ADR Projection for 2016-2020
6.3 Occupancy Projection
6.3.1 Market Mix Projection
To determine the market mix of the proposed hotel, adjustments are made according to the
facilities and location of the proposed hotel, the competitors' market mix analysis and the
estimated market mix. For leisure segment, it is believed that the inconvenient location of the
proposed hotel to shopping centers and lack of tourist attraction in North Point will result in a
relatively small demand from in the leisure segment. As a result, the percentage of leisure
segment is set to be 14.7% accordingly. On the other hand, since the proposed hotel has a
Year (2016-2020) 1 2 3 4 5 Projected ADR (HKD) 1404 1,488 1,577 1,672 1,773
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large number of standard rooms, F&B facilities, function rooms and other recreation facilities,
which can cater group's needs, it is estimated that the percentage of group/meeting will
increase accordingly. The proposed hotel also provides sufficient numbers of twin bed room
(40% of the total number of hotel room) and reasonable room rate for tour group. As a result,
the percentages of group/meeting and tour group are set to be 36.8% and 24.8% respectively.
For commercial segment, due to the relatively large room size and specially designed
facilities, the percentage of commercial segment is set at 23.7%, which is slightly higher than
the average of the competitive set. (Appendix 24)
6.3.2 Penetration Rate Projection
MICE groups' reservations are often made two to three years in advance, especially for large
scale organizations. As a result, in the first two years of operation, the penetration rates for
group/meeting segment are set significantly lower than the third year. While, in the third year
of operation, with the relationship developed and reputation of the proposed hotel built in the
previous years, it is believed that the proposed hotel can achieve a higher penetration rate in
group/meeting segment.
For tour group, by working closely with travel agencies, building business network and
providing certain numbers of twin-bed guestrooms with reasonable room rate, it is believed
that the penetration rate for this segment will increase over the years. However, since the
proposed hotel does not possess any unique selling point in attracting tour groups, it is
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estimated that the proposed hotel will enjoy the fair share of tour group segment from the
second year onwards.
As the facilities of the proposed hotel are specially designed to attract business travelers and
the proposed hotel will be a brand new hotel in 2016, it is believed that hotel can enjoy
competitive advantages in attracting commercial segment compared with our primary and
secondary competitors. Thus, the penetration rate for this segment will increase gradually
from the first year of operations and will achieve a penetration rate of 1.05 in the third year.
According to Chu and Choi (2000), the top three important hotel attributes in hotel choice
decision are usually "price and quality", "security" and "convenient location". Leisure
travelers seem to be more concerned with room rates and value in their initial hotel selection
(Lewis, 1985). However, due to unattractive room rates, the proposed hotel has a
disadvantage in attracting leisure travelers. Thus, the penetration rate for the leisure segment
is set lower than 1 for the first three years of the operation.
Year 1 Year 2 Year 3 Group/ Meeting 0.8 0.8 1.05
Tour Group 0.9 1 1 Commercial 0.95 1 1.05
Leisure 0.8 0.9 0.9
Table 9 - Projected penetration rate in first 3 years
6.3.3 Occupancy Projection
Considering the projected market demand, projected market mix, penetration rate and the fair
market share, the occupancy rate of the first three years are projected (Methods to project
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occupancy, please refer to Appendix 25). It is assumed that the occupancy rates of the
following years will remain unchanged due to the stabilization effect. The first year
occupancy rate is 81.23% while there is a decrease in the second year; it is mainly due to the
opening of the "Sail Hotel". With higher penetration rate in the third year, the occupancy rate
will eventually increase. The following is the projected occupancy in the first three years:
Year (2016-2018) 1 2 3 Occupancy Rate 81.23% 66.87% 81.52%
Table 10 - Occupancy Projection for 2016-2018
7. Financial Performance Projection
7.1 Departmental Revenue Percentage Projection
Aiming at providing food and beverage to in-house guests and local residents, the proposed
hotel will have four F&B outlets and a function room with a total size of 2,080 square meters.
With a large capacity, the proposed hotel is expected to enjoy higher F&B annual
departmental revenue per available room. As a consequence, the F&B revenue per available
room is predicted to be 40% of room revenue. And the telephone revenue is set to be the
same as the industry average since no additional feature of telephone is applied in the
proposed hotel. In terms of the Spa/Health Club in the proposed hotel, as Angsana Spa is an
award-winning Asian spa brand founded by the renowned Banyan Tree Spa and our Angsana
Spa is the third Angsana Spa in Hong Kong, it is believed that the spa facilities can generate
higher revenue than the industry's average due to its high reputation. Thus, the Spa revenue
per available room is predicted to be 2% of room revenue. For the minor-operated revenue, it
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is set to be 2% of the room revenue. With five retail shops located in the proposed hotel, the
proposed hotel is expecting to have relatively higher revenue from rentals. The rental and
other income are then predicted to be 3.5% of the room revenue (Appendix 6).
7.2 Departmental Expense Percentage Projection
A large hotel with more guestrooms can enjoy a lower cost per room because of the
economies of scale. The larger the number of rooms, the lower the cost per room of supplies
(The Economist, 1998). Thus, the projected cost percentage for proposed hotel is lower than
the market average (19.6%) since it has 500 guestrooms. The food and beverage expense
percentage of the market average is 75.5%. For a restaurant in a hotel, the food and beverage
expense percentage is 76.7% (Strate & Rappole, 1997). Based on the research, food and
beverage expense percentage is set as 75%.
The departmental expense percentage of Spa/Health Club for the proposed hotel is set to be
95%, which is slightly lower than the market average. Health Club facilities such as
swimming pool and gym are cost centers which will not provide any revenue to the hotel.
However, according to the manager of Angsana Spa of Hotel -ICON, revenue of the spa is
more than enough to cover the expenses incurred. Since the proposed hotel will possess the
third Angsana Spa in Hong Kong, it is believed that the projected cost percentage of spa will
not be greater than 100%. Concerning both health club and spa, the departmental expense
percentage for the proposed hotel is set to be 95%. The other departmental expense
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percentage and undistributed operation expense percentages are set according to the market
average (Appendix 7 & 28).
7.3 Management Fee Projection
Based on research, the market average for management fee is around 3.1%, the management
fee by chain is around 3.2% to 5.1% (Sangree & Hathaway, 1996) (
Appendix 9) and the international management fee for a five stars hotel in China is 3.5% (Yu
& Huimin,2005). Therefore, it is expected that the proposed hotel will be managed by a hotel
management company with 3.5% being set as the management fee.
7.4 Financial Statement
After the projection of occupancy rate, ADR and all the relevant percentage of departments,
the net operating income can be found. In Hong Kong, the capitalized rate is 5%, thus, the
hotel value can then be calculated (Appendix 30).
8. Conclusion
With a development cost of HKD$ 1,920,000 per room, the total development cost of the
proposed 500-room hotel will be HKD$ 960,000,000. By calculation, if the land cost does not
exceed 161% of the development cost, the project will be feasible for all years under all
assumptions. For example, the land cost is 300% of the development cost, the total cost
($3.84 billion) will be greater than and the total hotel value ($3.41 billion) in year 5. So the
project is not profitable and thus, it is not feasible (Appendix 31).
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http://www.discoverhongkong.com/uk/shop/where-to-shop/street-markets-and-shopping
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Development Bureau (2013).Press Release: Government to sell two sites by public tender.
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Draft North Point Outline Zoning Plan approved [Press Release]. (2010).
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_four_points_by_sheraton_survey_reveals_the_social_habits_of_business_travelers
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restaurants. Cornell Hotel and Restaurant Administration Quarterly, 38(3), 50-61.
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HTM 4006 - Hotel Planning and Development Group Project - Feasibility Study (North Point)
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10. Appendix
Appendix 1 - Map of the Location
Appendix 2 - Demand Generators
Demand Generators Public Transport Drive
Hong Kong Convention and Exhibition Center 19 mins 7 mins
Causeway Bay (Shopping & Commercial District) 12 mins 9mins
Hong Kong Stadium 21 mins 10mins
Central (Central Business District) 18 mins 15mins
Shue Yan University 18 mins 9 mins
Appendix 3 - Photo of the Proposed Location
Public Open Space
Not less than 30% of the area of
the lot shall be planted with
trees, shrubs or other plants
Proposed Hotel
Island Eastern Corridor
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Appendix 4 - 2011 Census Constituency in North Point
Appendix 5 - Mid-Year Population by District Council district (Population and
household statistics analyzed by district council district, 2013)
Mid-year population by District Council district District Council district 2006 2007 2008 2009 2010 2011 2012
Central and Western 249.7 254.8 262.8 258.1 259.6 251.5 253.9 Wan Chai 154.9 157.4 161.7 160.7 159.9 152.6 154.4 Eastern 587 593.1 597.2 591.4 590.7 588.1 589.3 Southern 274.9 280.8 280.1 277.7 277.9 278.7 279.7 Sub-total 1266.5 1286.1 1301.8 1287.9 1288.1 1270.9 1277.3
Eastern District Population Growth Rate
1.039% 0.691% -0.971% -0.118% -0.440% 0.204%
Average Growth Rate 0.058%
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Appendix 6 - Population Census Fact Sheet for North Point Age Group in 2006 and 2011
(2006 Population Census, 2007; 2011 Population Census, 2012)
Population Census Fact Sheet for North Point 2006 2011 Age Group Total % Total % 0 - 4 4 126 3.163% 4850 3.718% 5 - 9 4 915 3.768% 3933 3.015% 10 - 14 6 604 5.063% 5074 3.890% 15 - 19 6 126 4.697% 6256 4.796% 20 - 24 7 143 5.476% 6565 5.033% 25 - 29 9 968 7.642% 9181 7.039% 30 - 34 10455 8.015% 10832 8.304% 35 - 39 10 929 8.379% 10600 8.127% 40 - 44 11 731 8.994% 10828 8.301% 45 - 49 11 804 9.050% 11110 8.518% 50 - 54 11 183 8.573% 10656 8.169% 55 - 59 10 851 8.319% 9868 7.565% 60 - 64 5 527 4.237% 9791 7.506% 65 - 69 6 069 4.653% 5017 3.846% 70 - 74 4 684 3.591% 5598 4.292% 75+ 8 322 6.380% 10 355 7.935% Total 130 437 100% 130514 100% % Change in 2006 & 2011 0.06%
Appendix 7 - 2011 Monthly Domestic Household Income for North Point and Eastern
HK (2006 Population Census, 2007; 2011 Population Census, 2012)
Monthly Domestic North Point Eastern HK
Household Income (HK$) Total Total
< 2,000 2156 8106
2,000 - 3,999 1471 8712
4,000 - 5,999 1160 6184
6,000 - 7,999 1047 7310
8,000 - 9,999 1289 8337
10,000 - 14,999 3465 20868
15,000 - 19,999 3222 18405
20,000 - 24,999 3181 16844
25,000 - 29,999 2656 14401
30,000 - 39,999 4762 22777
40,000 - 59,999 7231 27370
60,000 - 79,999 3662 13392
80,000 - 99,999 2392 7690
⧠100,000 4793 13853
Total 42487 194249
Median monthly domestic household income (HK$) 42990 25400
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Appendix 8 - 2011 Population Census Fact Sheet for North Point Occupation (2006
Population Census, 2007; 2011 Population Census, 2012)
2011 Population Census Fact Sheet for North Point
Occupation Total %
Managers and administrators 11678 19.53%
Professionals 6415 10.73%
Associate professionals 13852 23.17%
Clerical support workers 7274 12.17%
Service and sales workers 5624 9.41%
Craft and related workers 1732 2.90%
Plant and machine operators and assemblers 897 1.50%
Elementary occupations 12318 20.60%
Total 59790 100.00%
Appendix 9 - 2011 Population Census Fact Sheet for North Point Industry (2006
Population Census, 2007; 2011 Population Census, 2012)
2011 Population Census Fact Sheet for North Point
Industry Total %
Manufacturing 1842 3.08%
Construction 2457 4.11%
Import/export, wholesale and retail trades 13338 22.31%
Transportation, storage, postal and courier services 2368 3.96%
Accommodation and food services 3038 5.08%
Information and communications 2852 4.77%
Financing and insurance 6957 11.64%
Real estate, professional and business services 8992 15.04%
Public administration, education, human 7032 11.76%
Health and social work activities
Miscellaneous social and personal services 10608 17.74%
Others 306 0.51%
Total 59790 100.00%
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Appendix 10 - 2011 Population Census of Economic Activity Status in North Point and
Eastern Hong Kong (2006 Population Census, 2007; 2011 Population Census, 2012)
2011 Population Census
Economic Activity Status North Point Eastern HK
Working population
Employees 50907 263 747
Employers 4825 15 663
Self-employed 3798 18 353
Unpaid family workers 260 1 224
Persons not in working population
Home-makers 7935 40 752
Students 17137 89 587
Retired persons 20722 103 684
Others 10026 55 084
Total 115610 588 094
Labour force 61978 311 345
Labour force participation rate (%) 60.2 59.2
Appendix 11 - Chart of the Quarter Upcoming vacancy in 2013
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Appendix 12 - Hong Kong Island Vacancy Rate (Hong Kong Office Market View, 2013)
Appendix 13 - Sub-market key stats (Hong Kong Office Market View, 2013)
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Appendix 14 - Reclaimed Land in 1930s reclamation scheme
Appendix 15 - Competitive set defined in North Point District
Class & Type
Positio n
Est. ADR*
No. of Rooms
No. of Restaurant s
Functio n Space
Other facilities & Service
Proposed Hotel
High Tariff B Full Service
Luxury 1,200 500 4 2,080m 2
ï 24 -hour business center
ï Swimming pool ï Fitness Center ï Spa (Except City
Garden Hotel) ï Shuttle bus
services
P ri
m a
ry
Harbour Grand Hong Kong Hotel
1,182.6 828 5 1,178.5m2
S ec
o n
d a
ry
City Garden Hotel
Upscale 756 613 3 541.7m 2
Harbour Plaza North Point Hotel
695.3 669 4 945m 2
* Est. based on the lowest rate on Agoda/ Booking.com and less 10% commission
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Appendix 16 - Detailed Information of Competitors
Primary Competitor
Harbour Grand Hong Kong Hotel
Date of Opening 2009
Location MTR Fortress Hill Station Exit A, 23 Oil Street, North Point, Hong Kong ~1km away from the proposed hotel
Physical Condition No renovation yet
Access or Visibility Transportation services (limousine hire, airport transfer); Complimentary shuttle bus service to and from major local destinations; MTR Fortress Hill Station Exit A
Identification of franchise and management company
Under the Harbour Plaza Hotel and Resorts Group Managed by Harbour Plaza Hotel Management
Room count Total: 828 (122 luxury hotel suites and guestrooms; 202 Harbour Club rooms) Room size range from 31 to 175 sq.m. 6 room types plus 6 club room types; long stay serviced suites
Amenities Food & Beverage Le 188Ë Restaurant & Lounge-Modern European Cuisine; 41/F Kwan CheukHeen-Cantonese cuisine, 5/F Harbour Grand Café-International buffets; 256 seats; 3/F Lobby Lounge; G/F NAGOMI-Japanese; G/F Facilities Health Club (gym & 27m outdoor swimming pool) Business Center Harbour Club Lounge Spa & Message Center (no spa brand affiliated) Meeting & Banquet: 2 grand ballrooms; 7 functions rooms; 12,685 ft
2/ 1178.5m
2
Room rates -Published (Less 10% commission)
Agoda (2013) Lowest $1182.6 (May) Highest $2086.4 (Nov & Dec)
Secondary Competitor
City Garden Hotel
Location 9 City Garden Road, Hong Kong East, Hong Kong
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Date of Opening 1988
Physical Condition Renovation in 2009
Access or Visibility Complimentary shuttle bus services to nearby shopping and business hubs such as Taikoo Place and City Plaza, MTR station at Fortress Hill
Identification of franchise and management company
Sino Groups of Hotels
Room count Total: 613 rooms (including 15 suites) Room size from 30 sq. m. to 60 sq. m. 5 room types
Food & Beverage Yue-Cantonese cuisine; 1/F Garden Café-International buffet; 1/F A Bar-Lounge; Basement Facilities 24 hour Business Center Outdoor Swimming Pool and Jacuzzi Fitness center 2 Meeting Rooms; 541.7 sq. m
Room rates -Published (Less 10% commission)
Booking.com (2013) Lowest: $756 (Sep) Highest: $1417.5 (Nov)
Secondary Competitor
Harbour Plaza North Point Hotel
Location 665 King's Road North Point Hong Kong
Date of Opening 2000
Physical Condition Renovation in 2006
Access or Visibility Free shuttle bus to Taikoo Place, City Plaza, Causeway Bay and Airport Express Hong Kong Station; MTR station Quarry Bay, exit C.
Identification of franchise and management company
Under the Harbour Plaza Hotel and Resorts Group Managed by Harbour Plaza Hotel Management
Room count Total: 669 rooms (including Room size from 28.03 sq. m. to 89.78 sq. m. 5 room types and 1 serviced suite
Amenities Food & Beverage Greens Café-International buffets; 2/F Hoi YatHeen Chinese Restaurant-Chinese cuisines; 3/F
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Java Mama Deli Corner-cafe; 1/F The Point Lobby Lounge; 2/F Facilities 24-hour Business Centre Habour Club Floor Meeting & Banquet: 12 multi-purpose function rooms including Hoi YatHeen; Java Room and Harbour Plaza Room; 945 sq. m. Fitness Center Outdoor swimming Pool Sauna & Spa
Room rates -Published (Less 10% commission)
Agoda(2013) Lowest: $685.3 (Sep) Highest: $1539.5 (Nov)
Appendix 17 -Hotels Completing Construction during 2103 - 2016 (Hotel Supply
Situation - as at Dec 2012, 2013)
Year of Completion
Location Room No.
2013 118-120 Electric Road, North Point 92 2013 14-16 Tsing Fung, Street, North Point 68 2014 Regal iClub; Standard type; 14-20 Merlin Street, North
Point 351
2014 Wing Hing Street, North Point 36
Appendix 18 - Occupancy Figures from HKTB
High Tariff A Hotels
2008 2009 2010 2011 2012 2013
Jan 83 71 79 82 78 84
Feb 74 68 71 79 82 79
Mar 80 72 84 89 84
Apr 82 71 79 83 82
May 77 63 77 83 81
Jun 78 60 76 81 84
Jul 81 67 81 88 87
Aug 77 74 81 86 90
Sep 78 73 78 79 78
Oct 81 79 87 86 86
Nov 81 83 91 91 92
Dec 81 83 89 90 90
Jan-Dec 79 72 81 85 85 82
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High Tariff B Hotels
2008 2009 2010 2011 2012 2013
Jan 90 83 89 89 88 88
Feb 84 80 82 87 90 85
Mar 89 84 89 92 90
Apr 86 82 87 89 91
May 83 68 85 89 87
Jun 84 67 85 89 90
Jul 91 76 91 94 95
Aug 86 86 91 93 95
Sep 80 78 85 86 85
Oct 87 85 89 91 88
Nov 89 90 94 95 95
Dec 93 92 94 94 93
Jan-Dec 87 81 88 91 91 87
Hotels in Eastern and Southern Hong Kong
2008 2009 2010 2011 2012 2013
Jan 87 77 84 85 83 85
Feb 83 77 72 84 87 83
Mar 87 85 83 90 89
Apr 85 76 83 86 90
May 79 58 79 86 83
Jun 78 57 78 84 87
Jul 91 68 87 94 93
Aug 86 82 87 93 94
Sep 75 73 79 82 82
Oct 84 83 87 88 86
Nov 89 90 93 95 95
Dec 91 89 91 81 92
Jan-Dec 84 76 84 88 89 84
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Appendix 19 - Compound Annual Growth Rate of Accommodated Demand (All High
Tariff B Hotels)
Year Accommodated Demand Supply Occ. 2004 5221314.05 5866645.00 89.00%
2005 5843562.40 6794840.00 86.00%
2006 5935133.60 6744470.00 88.00%
2007 6087061.20 6917115.00 88.00%
2008 5864513.40 6740820.00 87.00%
2009 6397274.70 7897870.00 81.00%
2010 6883958.40 7822680.00 88.00%
2011 8076227.25 8874975.00 91.00%
2012 8,389,445 9219170.00 91.00%
CAGR* 6.11% 5.81% 0.28%
* Compound annual growth rate Based on the occupancy and supply figures from HKTB on High Tariff B hotels in HK
Appendix 20 - Fair Market Share in 2016
Hotel Number of rooms Fair Market Share
Habour Grand Hong Kong Hotel 828 24%
City Garden Hotel Hong Kong 613 18%
Harbour Plaza North Point Hotel 669 19%
Proposed Hotel 500 19%
Total 2610 100%
Appendix 21 - Fair Market Share in 2017
Appendix 22 - Market ADR
Hotel ADR (HKD$)
Harbour Grand Hong Kong Hotel(Primary) 1182.6
Harbour Plaza North Point Hotel(Secondary) 695.3
City Garden Hotel (Secondary) 756
Market Average (2012) 1228
Hotel Number of rooms Fair Market Share
Habour Grand Hong Kong Hotel 828 24%
City Garden Hotel Hong Kong 613 18%
Harbour Plaza North Point Hotel 669 19%
New Hotels in 2017 840 24%
Proposed Hotel 500 14%
Total 3450 100%
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Appendix 23 - Market ADR Compound Annual Growth Rate (CAGR)
Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 CAGR
ADR 701 815 999 1057 1007 785 848 1129 1228 7.26%
Appendix 24 - Table of the market mix of the proposed hotel
Group/ Meeting
Commercial Tour
Group Leisure Total
Market Mix of the Proposed Hotel
36.8% 23.7% 24.8% 14.7% 100.0%
Appendix 25 - Occupancy Projection
Appendix 26 - Projected Department Revenue Percentage
Departments F&B Telephone Spa/Health
Club Minor-Operated
Rental & Other
% of Rooms Revenue
40% 0.69% 2% 2% 3.5%
2016
Market Segment Market Demand
per day
Fair Market
Share
no. of occupied
roomd per day
(base on fair
maket share)
Projected
penetration
rate (Y1)
Project no. of
occupied
roomd per day
Projected
Occupancy
Corporate Group 875.67 19% 167.75 0.8 134.20 26.84%
Tour 619.13 19% 118.61 0.9 106.75 21.35%
Leisure 407.00 19% 77.97 0.8 62.38 12.48%
Commercial 564.87 19% 108.21 0.95 102.80 20.56%
Total 2466.67 472.54 86% 406.13 81.23%
2017
Market Segment Market Demand
per day
Fair Market
Share
no. of occupied
roomd per day
(base on fair
maket share)
Projected
penetration
rate (Y1)
Project no. of
occupied
roomd per day
Projected
Occupancy
Corporate Group 929.17 14% 130.08 0.8 104.07 20.81%
Tour 656.96 14% 91.97 1 91.97 18.39%
Leisure 431.87 14% 60.46 0.9 54.42 10.88%
Commercial 599.38 14% 83.91 1 83.91 16.78%
Total 2617.38 366.43 93% 334.37 66.87%
2018
Market Segment Market Demand
per day
Fair Market
Share
no. of occupied
roomd per day
(base on fair
maket share)
Projected
penetration
rate (Y1)
Project no. of
occupied
roomd per day
Projected
Occupancy
Corporate Group 985.94 14% 142.89 1.05 150.03 30.01%
Tour 697.10 14% 101.03 1 101.03 20.21%
Leisure 458.25 14% 66.41 0.9 59.77 11.95%
Commercial 636.00 14% 92.17 1.05 96.78 19.36%
Total 2777.30 402.51 100% 407.62 81.52%
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Appendix 27 - Projected Departmental Expense Percentage
Departments Rooms F&B Telephone Spa/Health
Club Minor-Operated
Rental &
Other Departmental
Expense % 18% 75% 106% 95% 48.7% 43.4%
Appendix 28 - Projected Undistributed Operating Expenses
Category Administrative &
General Marketing
Property Operation &Maintenance
Utility
Departmental Expense %
5.5% 4% 3.5% 4%
Appendix 29 - Management Fees by Chain
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Appendix 30 - Projected Financial Statement for first 5 years
HOTEL OPERATING PERFORMANCE PROJECTIONS
YEAR 1 RATIO YEAR 2 YEAR 3 YEAR 4 YEAR 5
PROJECTED OCCUPANCY RATE 81.2% 66.9% 81.5% 81.5% 81.5%
PROJECTED ADR 1,404 1,488 1,578 1,672 1,773
ADR GROWTH RATE (IF ANY) 4.0%
INFLATION RATE 2.0%
DEPARTMENTAL REVENUES (PER AVAIL. RM)
Rooms 416,271 363,243 469,392 497,556 527,409
F&B 166,509 40.0% 145,297 187,757 199,022 210,964
Telephone 2,872 0.7% 2,506 3,239 3,433 3,639
Spa / Health Club 8,325 2.0% 7,265 9,388 9,951 10,548
Minor - Operated 8,325 2.0% 7,265 9,388 9,951 10,548
Rentals & Other Income 14,569 3.5% 12,714 16,429 17,414 18,459
TOTAL DEPARTMENTAL REVENUES (PER RM) 616,872 538,290 695,592 737,328 781,568
DEPARTMENTAL EXPENSES (PER AVAIL. RM)
Rooms 74,929 18.0% 65,384 84,491 89,560 94,934
F&B 124,881 75.0% 108,973 140,818 149,267 158,223
Telephone 3,045 106.0% 2,657 3,433 3,639 3,857
Spa / Health Club 7,909 95.0% 6,902 8,918 9,454 10,021
Minor - Operated 4,054 48.7% 3,538 4,572 4,846 5,137
Rentals & Other Income 6,323 43.4% 5,518 7,130 7,558 8,011
TOTAL DEPARTMENTAL EXPENSES (PER AVAIL. RM) 221,142 192,971 249,362 264,324 280,183
TOTAL DEPARTMENTAL PROFIT (PER AVAIL. RM) 395,731 345,319 446,231 473,004 501,385
UNDISTRIBUTED OPERATING EXPENSES (PER AVAIL. RM)
Administration & General 33,928 5.5% 29,606 38,258 40,553 42,986
Marketing 24,675 4.0% 21,532 27,824 29,493 31,263
Property Operation & Maintenance 21,591 3.5% 18,840 24,346 25,806 27,355
Utility Costs 24,675 4.0% 21,532 27,824 29,493 31,263
TOTAL UNDISTRIBUTED OPERATING EXPENSES (PER AVAIL. RM) 104,868 91,509 118,251 125,346 132,866
GROSS OPERATING PROFIT (INCOME BEFORE MGMT FEE) (PER AVAIL. RM) 290,862 253,810 327,980 347,659 368,518
Management Fees (base & incentive) 21,591 3.5% 18840 24346 25806 27355
INCOME BEFORE FIXED CHARGES (PER AVAIL. RM) 269,272 234,970 303,634 321,852 341,163
FIXED CHARGES 18,506 3.0% 16,149 20,868 22,120 23,447
NET OPERATING INCOME (INCOME BEFORE TAXES) (PER AVAIL. RM) 250,766 218,821 282,766 299,732 317,716
Number of Rooms 500
NET OPERATING INCOME (INCOME BEFORE TAXES (HOTEL) 125,382,880 117,484,839 151,817,047 160,926,069 170,581,634
CAP RATE 5.0%
HOTEL VALUE 2,507,657,604 2,349,696,776.82 3,036,340,931.97 3,218,521,387.89 3,411,632,671.16
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Appendix 31 - Feasibility Study
Year 1 Year 2 Year 3 Year 4 Year 5
Land Cost Total Cost 2,507,657,604.00 2,349,696,777 3,036,340,932 3,218,521,388 3,411,632,671
0% 960,000,000 F F F F F
30% 1,248,000,000 F F F F F
100% 1,920,000,000 F F F F F
300% 3,840,000,000 N N N N N
Hotel Value