Hotel to raise rates on Cepa promise
Nicole Kwok
Harbour Plaza Metropolis Hotel plans to increase its rates for monthly serviced suites by 6 per
cent to 10 per cent from January in anticipation of an increase in business travellers due to the
Closer Economic Partnership Arrangement (Cepa).
Harbour Plaza Hotels deputy general manager Stephen Chu expressed optimism about the
monthly leasing business in the first two months of next year which he expected to be spurred
by Cepa. The hotel, located next to the Kowloon-Canton Railway's station in Hung Hom, has
received about 100 phone and email inquiries regarding renting serviced suites early next year.
About 50 per cent of the inquiries have been put on the waiting list and are expected to move
in January and February.
``About half of the hotel's 609 rooms are currently on a monthly lease and occupancy is
around 92 per cent,'' Chu said. Because of the high demand, he said the ratio of monthly
serviced suites could be increased to 70 per cent next year. Monthly rates of the hotel's
serviced suites range from HK$8,000 to HK$33,000.
Chu noted that further price rises after January would depend on the market. The mix of
tenants was about 42 per cent local, 33 per cent Japanese business travellers, and 25 per cent
other expatriates.
The hotel's serviced suites are expected to reach full occupancy by the end of this year
following the recent launch of an incentive programme, Chu said.
According to the hotel's latest survey on serviced suite market trends, 60 per cent of serviced
suite guests worked for foreign firms and most received housing allowances of between
HK$10,000 and HK$15,000 a month.
26 November 2003 / 02:32 AM
Source: The Standard
Date: 26 November,2003 / 2:32 AM
Economics Assignment
News Report
Plaisir Cheung (4)
Vivien Lam (17) F.4C
News description
As the Closer Economic Partnership Arrangement (CEPA) was implemented,
there will be more business travellers coming to Hong Kong for trade. The
Harbour Plaza Metropolis Hotel plans to raise the hotel room rate for
6-10%. Since the hotel is located near the Kowloon Canton railway station,
it has a convenient transportation network. There are also many big malls
nearby.
In these few months, the hotel has received quite a number of inquiries
regarding on the hotel renting service in early next year. They expected
that there will be an increase in demand for hotel rooms early next year.
Analysis
The implementation of CEPA increases the number of businessmen who
travel to Hong Kong. Also, since there is a Lunar New Year holiday in early
next year, the businessmen would also bring along their relatives and have
a vacation in Hong Kong.
Firstly, the demand for hotel rooms will increase while the number of hotel
rooms provided is fixed. Therefore, in this case, hotel rooms are economic
goods because it is not sufficient to satisfy people’s wants, people prefer
more hotel rooms and they have a positive production cost. The hotel room
is also a capital good because it is used for production of hotel service.
1
Secondly, because of the increase in demand, the hotel plans to increase
the room rates. The effect can be shown in the following graph:
S1
The quantity of hotel rooms is
fixed. As more tourists come to
Hong Kong, the demand for
P2
hotel
rooms
will
increase
(D1D2). Therefore, the price
P1
increases (P1P2). Since the
supply is fixed, there will not be
D2
any effect on the quantity
transacted (Q1).
D1
Q1,Q2
Hotel Rooms
Besides affecting the hotel rooms, there will also be the same effect on
the airline tickets, because the number of airline tickets is fixed, and the
tourists have to travel to Hong Kong by aeroplane. The demand for airline
tickets increased while the number of tickets provided is fixed.
Furthermore, when more tourists visit Hong Kong, apart from
transportations and hotel rooms, there will be an increase in demand for
food, retail products (including clothes, electronic appliances, jewelleries,
cosmetics, accessories, etc.) and local tour. As a result, the quantity
demanded will be greater than the quantity supplied. To cope with the
excess demand, the supplier of food, retail products and local tour would
increase their supply or raise the price.
2
The following graph could explain this:
D1
D2
When there is an excess demand for
the goods, the price of it will increase.
However, the suppliers would like to
P1,
P2
earn
more
money;
they
tend
to
increase the supply of those goods.
Therefore, at last, the increase in
S2
demand will be equal to the increase in
supply.
The
equilibrium
transacted
increases but the price will remains at
S1
the equilibrium price.
Q1
Q2
Food, retail products, local tour
Since Hong Kong is a free market economy, most productive resources are
privately owned and people are free to make most of the production and
consumption decisions. All of these cases can be explained by the price
mechanism in a market economy. The market prices serve as signals. When
the price of a good increase, that means there is an increase in demand for
that good. This can guide suppliers on what goods and what quantities to
produce.
To conclude with, we can say that the hotel, restaurants and shops
perform the role as a firm. As they are responsible for making production
decisions, they sell goods and services to the household for consumption
and they employ factor services to carry out productions; on the other
hand, the travellers perform the roles as a household. As they are
responsible for making consumption decisions, they buy goods and services
from the firms to obtain satisfaction.
3