In 2020, COVID-19 broke out after the Lunar New Year in Taiwan, and tourist hotels became the “first row of the tsunami” of the epidemic. Under the impact of the outbreak on the domestic demand market, the operating conditions of the restaurant & hotel industry are pretty severe, and some old hotels still face the problem of old buildings and lack of competitiveness. Therefore, under the tide of promoting the “reconstruction of urban unsafe and old buildings,” the government provides new opportunities for developing old hotels, and the operators also rethink how to make the assets “revitalize” effectively.
Table of Contents
The outbreak of the epidemic is like “natural selection,” and a knockout competition has been launched for hotels with poor physical fitness. When the market conditions are not good, it is a “sensible move” for the restaurant & hotel industry to apply for endangerment. Instead of waiting to relax border controls, it is better to burn bridges to transform and reborn. It is speculated that a business hotel with an age of more than 30 years has a high possibility of applying for the reconstruction of the dilapidated hotel.
Table 1 shows the opening time of the listed restaurant & hotel industry. The Ambassador Hotel, Leofoo Development Co, and Green World Hotel Co (Flora Annex), whose hotel age is more than 30 years, have all passed the application.
【Table 1: Hotel opening time of in listed companies】
From 2020 to the present, Taiwan’s restaurant & hotel industry has been struggling, especially in Taipei City, where international tourists dominate. Under strict border control, many old hotels have taken advantage of the epidemic to apply for the reconstruction of urban unsafe and old buildings. After the epidemic, domestic tourism ushered in an outbreak. Still, almost all tourists are concentrated in other counties and cities, which is of little help to the old hotels in Taipei. The trend of rebuilding old hotels in Taipei City began to sprout in 2019. Since 2020, the epidemic has played a vital catalyst and will reach its peak in 2021.
【Table 2. Statistics on unsafe and old building in Taipei City】
The epidemic has severely hit the tourism industry. Many old hotels have taken advantage of this wave of outbreaks to reconstruct the elderly, focusing on building bulk ratio bonuses and low-interest incentives. The following briefly describes the regulations for urban unsafe and old buildings.
The regulations for urban unsafe and old buildings are only in force for ten years and are sunset clauses. Building bulk ratio bonuses, tax relief, broad building coverage ratio & height are the three significant incentives offered by regulations for urban unsafe and old buildings. Building bulk ratio bonuses and tax relief also have schedule incentives to accelerate reconstruction. Among them, the most incentive should be those who apply for reconstruction within three years (May 9, 2020) will be rewarded with an additional 10% of the benchmark building bulk ratio bonuses up to 1.4 times the benchmark.
Table 3 summarizes the three major awards: building bulk ratio bonuses, tax relief, broad building coverage ratio & height. Building bulk ratio bonuses and tax relief are paired with time-course incentives to speed up reconstruction. Applications within three years of implementation will receive additional building bulk ratio bonuses. And applications within five years of performance will be entitled to tax relief, and applications for the regulations for urban unsafe and old buildings must be submitted before May 31, 2027. In other words, the law’s third year (2020) and the fifth year (2022) will stimulate the number of household applications.
【Table 3. Incentive measures for unsafe and old buildings】
In short, the land and house are owned by the owner, the building is within the urban planning land, and it is not a historic building with preservation significance. Also, houses meet the danger definition and require compulsory demolition. Or the house is more than 30 years old, the earthquake resistance assessment does not meet the standard, there is no elevator, or there is an elevator. Still, the structure improvement after the detailed evaluation is not beneficial. If the houses meet the descriptions above, they are eligible for old-age reconstruction.
The reconstruction of the old hotel has three significant advantages. In addition to “improving building safety,” it can also “capture the benefits of high building bulk ratio bonuses.” Due to the substantial increase in floor area after reconstruction, “the asset value will jump significantly.” At present, the border has not yet been fully opened. Even during the slowdown of the epidemic, domestic retaliatory travel is only a drop in the bucket for the recovery of business-oriented hotels. Due to the unbearable losses, most old domestic hotels are renovated to survive. Looking forward to the future, coexistence with the virus will become a trend. Because old hotels opened earlier and most are located in the urban elite area, there is not much supply of new residential buildings in the surrounding areas. They will take advantage of the empty window period during the severe epidemic to rebuild and achieve construction completion. The epidemic may have slowed, and occupancy rates have also increased. Whether it is strengthening the industry’s competitiveness or renting out the whole building for resale, it is the best solution to attack and defend.