Source: Hong Kong Government special administrative region – 4
Following is a question by the Hon Alan Chan and a reply by the Secretary for Culture, Sports and Tourism, Miss Rosanna Law, in the Legislative Council today (April 1):
Question:
Data from the Hong Kong Tourism Board show that both the average number of days stayed and the per capita spending of Mainland visitors declined in 2025. Some members of the industry have pointed out that some hotels have consequently undergone transformation and changed their uses. In this connection, will the Government inform this Council:
(1) whether it will, by drawing reference from the practice of introducing the Industrial Building Allowance to encourage investors to construct industrial buildings, introduce a “hotel building allowance”, providing an initial allowance of 20 per cent on capital expenditure incurred on the construction of hotel buildings, so as to alleviate the upfront capital pressure on investors and encourage hotel investment;
(2) whether it will consider increasing the plot ratio for hotel projects by 20 per cent to 25 per cent under specific conditions, in order to enhance investment incentives; and
(3) as some members of the industry have pointed out that there is currently an oversupply of hotel rooms, and the industry is forced to bear the Hotel Accommodation Tax (HAT) expenses itself due to a lack of bargaining power, they propose that the Government freeze HAT until the demand for rooms exceeds supply, i.e. adopting a year-on-year increase of over 3 per cent in the industry’s “Revenue Per Available Room” (which is a level sufficient to offset the tax cost) as a reference condition for resuming the tax collection, whether the Government will study the relevant proposal?
Reply:
Thank you, President.
President, the tourism industry in Hong Kong performed strongly in 2025. Annual visitor arrivals reached nearly 50 million, representing an increase of 12 per cent over 2024, with non-Mainland visitors increasing by 15 per cent. The tourism industry has continued to perform well this year, with visitor arrivals exceeding 14.31 million in the first three months, an increase of 17 per cent year-on-year. It is projected that total visitor arrivals for 2026 will reach about 53.8 million, an increase of approximately 8 per cent over last year.
Tourism is one of the major economic pillars of Hong Kong, driving growth in retail, food and beverage, hotels, and related sectors. In 2024, the value added attributable to tourism was $86.4 billion, accounting for 2.8 per cent of Gross Domestic Product, compared with 2.6 per cent in 2023.
As at the end of February 2026, Hong Kong had 333 hotels offering a total of 93 481 guest rooms, and the number of rooms has been increasing year on year. In 2025 as a whole, the average hotel room occupancy rate was about 87 per cent. During the Chinese New Year Golden Week of the Mainland in February, the occupancy rate of our hotels reached 90 per cent in general.
The Government has been proactively seizing opportunities to promote deeper integration of culture, sports and tourism, with the aim of offering visitors a more diverse and vibrant travel experience and enhancing Hong Kong’s overall attractiveness, thereby supporting the sustained development of the tourism and hotel sectors.
In consultation with the Development Bureau (DEVB) and the Financial Services and the Treasury Bureau, our reply to Hon Alan Chan’s question is as follows:
(1) Pursuant to the Inland Revenue Ordinance (Cap. 112), a hotel operator who constructs a commercial building or structure for use as a hotel may claim an annual allowance equal to 4 per cent of the capital expenditure incurred on the relevant construction works, until such capital expenditure has been fully claimed.
If a hotel operator purchases a commercial building or structure to operate a hotel, it may claim an annual allowance of 4 per cent on the residual expenditure after the purchase, until such residual expenditure has been fully claimed.
Unlike the allowance on industrial buildings or structures, the allowance on commercial buildings or structures does not include an initial allowance of 20 per cent. It is because industrial buildings are purpose-built and normally have a high degree of wear and tear once they are occupied and are thus subject to a high initial depreciation, whereas the case for commercial buildings is different.
In addition, as for the deduction for building refurbishment expenditure, if a hotel operator renovates or refurbishes a hotel, the capital expenditure incurred on such renovation or refurbishment may also be deducted in equal instalments over a period of five years.
(2) Under the current development control regime, the Government has put in place various measures to facilitate hotel development. In terms of the building regime, hotels are regarded as non-domestic buildings. As compared with domestic buildings in general, the permissible plot ratio for non-domestic buildings is significantly higher. In addition, supporting facilities required for the daily operation of hotels and vehicular setting down and picking up areas are exempted from the calculation of gross floor area (GFA).
DEVB has also relaxed controls under the planning regime. For instance, the Planning Department amended the Mong Kok Outline Zoning Plan (OZP) and the Yau Ma Tei OZP in 2022 and 2023 respectively, doing away with the maximum plot ratio restriction of 12 for “Commercial” zones along both sides of Nathan Road in the districts and to follow the maximum permissible plot ratio under the Building (Planning) Regulations instead. In any case, even for commercial sites in general, project proponents may, through the established town planning procedures, submit a simple planning application to the Town Planning Board to seek minor relaxation of the plot ratio restriction.
For redevelopment through lease modification and land exchange on land zoned for commercial use, the “Pay for What You Build” Pilot Scheme (the “Pilot Scheme”) will also be applicable, i.e. the land premium payable will be assessed based on the full market value of the “preferred use” of the land proposed by the lot owner. That means if the lot owner’s preferred use is hotel use, the land premium will be assessed on the basis of hotel use, rather than the use of highest market value as determined by the Lands Department for the commercial site, which may be a commercial use other than hotel use. The Pilot Scheme will also allow lot owners to proceed with phased development, with the GFA under the initial phase of the development accounting to at least 60 per cent of the total permissible maximum GFA for the whole development, thereby reducing the initial capital outlay and alleviating cash-flow pressure for developers.
In terms of land supply, DEVB will continue to assist the Culture, Sports and Tourism Bureau in achieving its policy objectives and, where necessary, identify land for hotel development in large-scale town planning development projects.
(3) To tie in with the fiscal consolidation programme and to increase Government revenue, the Government resumed the collection of hotel accommodation tax (HAT) at a rate of 3 per cent of the accommodation charge with effect from January 2025. The Government fully took into account the impact of the tax on visitors and the industry when it decided to resume the collection of HAT. The average hotel occupancy rate and the number of overnight visitors for 2025 increased by around 2 per cent and 6 per cent respectively when compared to 2024, indicating that HAT has had little impact on visitors’ willingness to travel to Hong Kong. In addition, the Government has been maintaining close contact with the industry on the collection of HAT. We understand that the industry operates generally smoothly in terms of compliance and tax payment.
The HAT provides a stable source of Government revenue without affecting the general public. In 2025-26, the estimated revenue from HAT is $770 million. The estimated revenue for 2026-27 is $800 million. The Government currently has no plan to freeze the HAT or adjust the rate of HAT.