A lack of suitable sites and the relatively high cost of land are frustrating efforts by some of the biggest names in the luxury hotel business to tap the lucrative business travel market in Hong Kong.
"We obviously want to get into Hong Kong island, but unfortunately it has a limited land supply," said Stephen Ho, senior vice-president of acquisitions and development for Asia Pacific at Starwood Hotels and Resorts.
"Hopefully, with the reclamation there, we could bring the Westin and St Regis brands to Hong Kong.
"The Murray Building could be something that we could use for The Luxury Collection brand. I think there are opportunities for a heritage hotel."
Chief Executive Donald Tsang Yam-kuen said in his policy address last week that the Murray Building in Garden Road would be converted into a hotel through open tender as part of the government's efforts to preserve the district's heritage.
Starwood manages the Sheraton Hotel in Tsim Sha Tsui, Le Meridien Cyberport and the 393-room W Hotel above the Airport Express Kowloon station.
Peter Henley, president and chief executive of Amari Hotels and Resorts, said the company also wanted to be in Hong Kong but it was a difficult market to enter and hard to get "the right property at the right location". Amari, Thailand's largest domestic hotel management company with 11 properties, is planning 40 more in Hong Kong and the region by 2018.
"Obviously developers have the land price [issue] to deal with," Henley said. "That's a very fundamental factor so it's a highly competitive environment, certainly for hotel-operating companies like ours."
The government recognises the need to further support hotel owners and operators, designating nine hotel-only sites for sale on its land application list under a pilot scheme last year.
None of the sites garnered high-enough bids. There are two plots at Kowloon Bay, two at North Point and one each in Kwun Tong, Tin Shui Wai, Sai Kung, Hung Hom and Wan Chai, near the Queen Elizabeth Stadium. The Wan Chai site is the smallest, at 717 square metres.
Like many markets, Hong Kong is focusing on attracting more business travellers, who tend to stay longer and spend more than leisure visitors and tour groups.
But the Central business district suffers from a dearth of luxury hotel rooms, as a lack of prime sites and high commercial rents see developers turning their backs on hotels in favour of lucrative office towers.
The business district lost 517 rooms when the Furama Hotel closed in December 2001 after 28 years to make way for AIG Tower. In May 1995, tycoon Li Ka-shing's Hutchison Whampoa eliminated 750 rooms when it replaced the Hilton with the Cheung Kong Center office tower. A further 216 rooms were lost when the Ritz-Carlton closed last year. The site is being redeveloped into an office building, while the Ritz-Carlton will reopen across the harbour near W Hotel next year.
The business district now has about 1,000 luxury hotel rooms, including the refurbished 501-room Mandarin Oriental, down from the original 541 rooms, the 113-room Landmark Mandarin Oriental and the 399-room Four Seasons, which opened in September 2005.
Hong Kong now has 26 luxury hotels offering 14,700 rooms. There are about 60,000 hotel rooms overall.
According to Tourism Board data, the number of confirmed hotel projects as of June 30 indicates the total number of rooms will increase by more than 11,000, to 70,000, by the end of 2012. Of these 11,000 rooms, only 295 will be in Central. A total of 5,687 rooms are planned for Hong Kong Island, while the rest will be in Kowloon, the New Territories and outlying islands.
"It isn't easy. Clearly, it's a developed market," InterContinental Hotels Group chief financial officer and head of commercial development Richard Solomons said.
"We are very careful about what we do and where we do it. Sometimes that takes time."
Still, InterContinental is planning to significantly increase its presence in Hong Kong in the next few years by adding five hotels, or more than 1,000 rooms, to the 2,000 already under its management. The additional rooms will be in Hotel Indigo in Wan Chai, Crowne Plaza hotels in Causeway Bay and Kowloon, and Holiday Inn Express hotels on both sides of the harbour.
The Holiday Inn brand is undergoing a $1US-billion global revamp that is expected to be completed by the end of next year.
Tsim Sha Tsui's Holiday Inn Golden Mile completed its rebranding on Friday.