Nascent recovery in tourism sector as arrivals, spending rise

SINGAPORE — The Republic’s tourism sector showed signs of recovery in the second quarter of the year despite a weak global economy, with spending going up 20 per cent year-on-year to reach S$6.1 billion during the quarter. This brings spending in the first half of the year to S$11.6 billion, while visitor arrivals hit 8.2 million, reported the Singapore Tourism Board (STB) on Tuesday (Nov 8).

But industry players are not breaking out the champagne yet, noting that the year on the whole remains a challenging one, hit by events such as August’s Zika outbreak and the lingering global economic malaise.

The growth in the first half of the year represents a 13 per cent year-on-year growth in tourist arrivals, and a 12 per cent hike in spending.

Chinese and Indonesian visitors led the charge, spending 43 per cent and 15 per cent more respectively between January and June this year, compared to the same period last year. An increase in spending on shopping, accommodation and food and beverage helped offset a fall in expenditure in sightseeing, entertainment and gaming, the STB said.

The improvement in the sector comes after a poor showing last year, when tourism spending fell for the first time in six years by 6.8 per cent to S$22 billion.

The STB has set a goal of increasing tourism receipts by 2 per cent this year to reach S$22.4 billion, and arrivals by 3 per cent to 15.7 million visitors.

Travel agencies running inbound services said they do not expect a strong performance for the remainder of the year.

Star Holiday Mart told TODAY that there was a 50 per cent drop in business year-on-year in October, due to concerns arising from the Zika outbreak. The company lost about 300 room nights, in the form of cancelled bookings, from the Indonesian market.

“Our Government has been very transparent over Zika, and whatever updates they provided affected business even after the (worst is) over, as people continue to think that we are in a bad state and don’t want to take risks,” said Star Holiday Mart’s spokesperson Dominic Ong.

Coupled with the fall in bookings during the Singapore Grand Prix in September, a period where tourists from India, the agency’s primary market, tend to avoid Singapore due to the F1-related accommodation surcharges, “the third quarter is a little bad for me”, said Mr Ong.

Over at Chan Brothers Travel, the Zika outbreak was also partly to be blamed for a 20 per cent dip in bookings for its inbound business in October, compared to the month before, said spokesperson Jane Chang.

Based on the second-quarter figures, the STB said the Republic is seeing “a shift in visitor profile” for some of its top source markets.

For example, more visitors from India, Australia and Indonesia are spending more on fashion accessories, wellness products, souvenirs, gifts and confectionery.

More visitors are also choosing to stay in mid-tier hotels, mainly those located in prime commercial zones or immediate outlying areas.

On the other hand, there is a drop in the number of long-stayers typically hosted by their friends and relatives.

Visitors from these markets contributed to an estimated S$1.6 billion for gazetted hotel room revenue in the first half of this year, a 3.2 per cent year-on-year growth.

Average hotel room rates, however, continued to be under pressure, dropping 3.8 per cent to S$230 in the second quarter year-on-year.

It remains to be seen how the industry will fare for the full year, as the STB had forecast in February that the tourism sector could see between zero and 3 per cent growth for visitor arrivals, and between zero and 2 per cent for tourist spending, if the global economy remains weak.

However, economist Song Seng Wun expects the big jump in Chinese visitors to lift overall visitor arrivals to a record 16.4 million this year, or an 8 per cent growth from last year.

He noted that the overall share of Chinese visitors rose to an all-time high of 19 per cent in the first half of the year, versus 14.3 per cent for the same period last year.

Still, Mr Song, who is CIMB Private Banking’s director, noted that “overall growth in tourist receipts may continue to lag visitor growth due to consistent cutbacks in spending from businesses and in the Mice segment due to the subdued business sentiment”.