Hong Kong’s Restart Prompts Warnings Over Rising Corporate Travel Costs

Travel management companies are warning airfares will continue to surge in the coming weeks following Hong Kong’s decision to relax travel restrictions this week.

Since September 26, international travelers to Hong Kong have not had to undergo mandatory hotel quarantine. Hotel rates also jumped as the financial hub starts competing again for international business travelers against rival Singapore, and could jump by as much as 40 percent in the coming months.

Singapore, which dropped most of its travel restrictions in March, has already seen a strong return of conference business, in part due to Hong Kong’s ongoing closure.

Corporate travel agency CWT said inbound and outbound bookings in Singapore were up around five-fold from the beginning of the year, but now booking levels in Hong Kong were increasing, with transactions currently three times higher than at the beginning of the year.

“Call volumes to our travel counselors in Hong Kong spiked following the announcement, and we expect this could translate to a big jump in bookings in the weeks ahead,” said Akshay Kapoor, head of sales, Asia Pacific, CWT.

“We’re receiving many queries from travelers who were previously planning itineraries with multiple destinations but are now looking to split those up into separate trips since they won’t have to quarantine when they return,” he added.

BCD Travel saw an “immediate” uptick in inquiries too after Hong Kong’s announcement, in particular for bookings that had been pending as travelers waited for further details.

“The increased activity continues this week,” said Jonathan Kao, managing director, Greater China. “Travelers are timing trips to avoid quarantine on their return to Hong Kong.”

He added that most customers were surprised by the new policy, which came into force within three days of the announcement. “The speculation was that it would go live around mid to late October, in preparation for the Hong Kong Sevens and Global Financial Leaders Investment Summit, organized by the Hong Kong Monetary Authority and planned for this November,” he said.

Price Shocks

The message now is that travel managers should prepare.

“It’s important to communicate their projections with their travel agencies and other suppliers like airlines and hotels, so that we are all better prepared to support the return to travel,” Kao said.

According to CWT, hotel rates in hong Kong are forecast to see year-on-year price increases of 40 percent in 2022 and 14 percent in 2023, while Singapore could rise 25 percent and 7 percent next year.

“I do not see demand pressures on pricing abating anytime soon,” said CWT’s Kapoor. “On the contrary, I expect demand will spike sharply once China relaxes its border restrictions and removes quarantine requirements for international travel.”

While airfares deceased in most markets in 2020 and 2021, CWT saw the opposite for these two financial powerhouses. Air ticket prices for Hong Kong increased 13 percent and then 5 percent, and Singapore increased 10 percent in 2020 and a further 25.8 percent in 2021.

Further ahead, airfares in Hong Kong are expected to jump 24 percent this year and a 4 percent next year. For Singapore they are projected to climb 15 percent in 2022 and then 9 percent in 2023.

Singaporean multinational bank DBS said the island’s hospitality industry was also on track for a “spectacular” second half of 2022, with room rates moving quickly to pre-pandemic levels and the average length of stay nearly doubling from 2019.

“Travelers have to compromise on class of travel due to limited inventory, and so for example fly economy instead of business class,” Andrew Yeo, managing director for Singapore and Australia at CWT. “They should also consider alternate airlines and be prepared for last-minute itinerary changes due to current conditions.”

All Roads Lead to China

With limited direct flights into China, business travelers have been using Hong Kong as a major transit point into the country since its shortened the quarantine requirement to seven days back in April.

That corporate traffic could now increase further.

“We’re seeing our first serious amount of bookings to Hong Kong in the past few days,” said Hugh Batley, co-founder of Singapore-based business travel agency TruTrip. Those bookings include many micro-events, such as training and events. “Singapore, Malaysia, China, all those routes will see significant growth,” he added.

For BCD, Hong Kong-China routes have been consistently sold out in the past six months and likely will be through the end of the year, with most flights selling out as soon as the inventory becomes available.

Once China does reopen, experts warn demand will outstrip supply as airlines try to ramp up their reduced capacity. It may also be difficult to obtain seats to a desired destination, while airport staff and ground handling could be another issue.

However, the Asia Pacific region will propably dodge the chaos Europe and US saw after those regions opened back up.

“The policy change in China could be a bit more gradual and the government may take a phased approach to reopening,” Kao noted.

“If you look to the US, they’ve had the boom. In Asia Pacific, they’re that little bit further delayed with reopening, so we’re still in that boom. The boom may not be as big as it would have been due to the recession, and we won’t see it in our sector for a few months, ”added Batley.

There’s also a chance China will be monitoring Hong Kong closely. “I suspect Hong Kong is a little bit of test bed to see what happens, when internationals come into a region,” Batley added.

However, BCD’s Kao said the China government has consistently been planning for reopening.

“Hong Kong certainly plays a role in their strategy. However, while insights and information can be gained from Hong Kong’s reopening, it won’t be the yardstick for China due to the difference
in scale and complexities, ”he said.

Also in the region, Japan plans to lift Covid restrictions, relax border control measures be on par with the US as of October 11, while Taiwan will end quarantine for inbound arrivals from October 13.

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