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Hotel room supply outpaces surge in tourists to Singapore

SINGAPORE — Despite the surge in tourist arrivals in the first half of this year, hotel room rates in the Republic remain under pressure as the industry braces itself for the largest supply influx of new rooms since the completion of the two integrated resorts, Marina Bay Sands (MBS) in 2010 and Resorts World Sentosa (RWS) in 2011.

Tourists at Merlion Park. The current growth in visitor arrivals is unlikely to offset the increase in room supply within the short to medium term. Photo: Reuters

Tourists at Merlion Park. The current growth in visitor arrivals is unlikely to offset the increase in room supply within the short to medium term. Photo: Reuters

SINGAPORE — Despite the surge in tourist arrivals in the first half of this year, hotel room rates in the Republic remain under pressure as the industry braces itself for the largest supply influx of new rooms since the completion of the two integrated resorts, Marina Bay Sands (MBS) in 2010 and Resorts World Sentosa (RWS) in 2011.

Industry-wide, the average daily room rate (ADR) contracted 2.3 per cent year-on-year to S$237.38 during the January-to-May period this year, while the revenue per available room (RevPAR) fell 0.7 per cent to S$200.37, the latest available data from the Singapore Tourism Board (STB) showed.

Hotels that have not cut room rates directly have stepped up promotions through value-added offerings such as complimentary breakfasts and upgrades to woo guests, knowing that the current level of visitor arrivals is unlikely to offset the increase in room supply within the short to medium term.

The industry expects the number of hotel rooms to grow from 61,947 last year to 64,347 this year and 68,587 next year, followed by a further increase to 69,735 rooms in 2018, according to property consultancy CBRE.

“The increase in visitor arrivals is not sufficient to counteract the increase in supply,” said Mr Patrick Fiat, general manager at Royal Plaza on Scotts.

“In addition to the stronger Singapore dollar against the other currencies in the region, corporates are also cutting back on costs, which adds to the lower demand.”

In Millennium & Copthorne’s latest earnings report, chairman Kwek Leng Beng said: “We are disappointed by our hotel operating performance during the first half of 2016, particularly in New York and Singapore.”

Hit by continued weak demand in the corporate travel segment and the rise in room inventory, the group’s RevPAR from its Singapore properties slumped 10.2 per cent in the first half of this year from the same period last year, even as the RevPAR in the rest of Asia grew by 3.1 per cent.

Some of the recent new hotel openings in Singapore include ibis Styles Singapore on Macpherson with 298 rooms, Oasia Downtown with 314 rooms, and Holiday Inn Express Katong with 451 rooms, among others. From the second half of this year to 2018, there will be about 7,300 new rooms entering the market, with 2017 having the largest increase in pipeline supply.

The new supply is expected to weigh on the industry even after the surge in tourist arrivals helped hotels achieve an occupancy rate of 84 per cent in the first five months of this year.

“There has been strong growth in tourist arrivals, which has resulted in increased occupancy levels for the first half of this year,” said Mr Robert McIntosh, executive director at CBRE Hotels Asia Pacific. “This has been partly achieved by reducing room rates. The revenue per room was trending downwards, but has slowed to a stop recently.

“The growth in inventory will create downward pressure on the hotels’ performance in terms of occupancy levels. However, the spike in visitor arrivals year-to-date will help reduce the adverse impact of the additional supply … assuming the new strong tourism numbers are maintained,” Mr McIntosh added.

Propelled by arrivals from China, Singapore welcomed about 6.89 million international visitors in the first five months — a 13.3 per cent jump compared with the same period last year. Mainland Chinese tourist arrivals during the January-to-May period grew 55.1 per cent year-on-year to 1.25 million, surpassing arrivals from Indonesia, Singapore’s hitherto largest visitor market. For the same period, arrivals from Indonesia grew 9.2 per cent to 1.18 million.

The surge in Chinese travellers, according to Mr McIntosh, was largely due to the many strategic partnership deals that the STB concluded with Chinese online travel services, such as Alitrip, to increase its presence in the mainland. Should this pace of growth be sustained, industry watchers expect visitor arrivals in Singapore to surpass the STB’s forecast of 15.2 to 15.7 million arrivals this year.

“A key driver of growth is Singapore’s geographic location, which provides excellent connectivity with other gateway cities in Asia,” said Ms Leanne Harwood, vice-president, operations (South-east Asia & Korea) at InterContinental Hotels Group. “This puts the country in a great position to be a major air hub for the region and a key transit point for regional and global travellers.”

Adding a ray of hope, she said that the year-long calendar of international events and festivals such as the Singapore Grand Prix and Singapore International Festival of Arts will continue to attract tourists, and provide opportunities for the hospitality industry.

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