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23/02/12 Author:YSPOH

Date:21/02/12

Time:17:39)

32 PROPERTY 2012

The Business Times, Thursday, February 23, 2012

Outlook for Singapore hotel sector

Revenue per available room is expected to rise this year despite economic uncertainty, says ROBERT MCINTOSH

THE Singapore economy is now expected to move on to a more stable growth path, with real Gross Domestic Prod- uct having expanded by 4.9 per cent in 2011. As the Singa- pore economy remains largely unchanged structurally and continues to be open to the global market, it will con- tinue to be exposed to fluctuations in global demand. The outlook for 2012 is uncertain in the current global eco- nomic environment. Singapore’s hospitality sector may be weakened this year due to the eurozone crisis. In 2011, Indonesia (2,591,701 visitors), China (1,577,420 visitors), Malaysia (1,140,677 visitors), Aus- tralia (956,007 visitors) and India (868,963 visitors) were Singapore’s top five visitor-generating markets. These markets accounted for over 54.2 per cent of total visitor arrivals. More than 75 per cent of the visitor arrivals were from the Asia-Pacific region. Singapore clearly remains an attraction for travellers in the region, given that the Republic’s economic growth remains positive and its exposure to the US/Europe tour- ist markets is limited. The projected demand for meet- ings, incentive travel, conventions and exhibitions (MICE) and conferences in the island for this year is positive, largely driven by the two integrated resorts. Major new attractions will support this growth in visi- tor arrivals. These include Gardens by the Bay, West Zone (Equarius Water Park and Marine Life Park) and the new International Cruise Terminal. Against this backdrop, CBRE Hotels expects 13.5 million to 14.5 million visitors in 2012. Arrivals to Singapore continue to grow and some 46.5 million passengers passed through Changi Airport in 2011. This was an increase of 10.7 per cent over 2010. The entry of more budget airlines into Changi Airport, such as IndiGo, should further increase passenger traffic. IndiGo started operating from Changi Airport last Septem- ber, with flights from Singapore to New Delhi. Medical tourism demand is also growing strongly. Sin- gapore is continually investing in resources and skills, to differentiate itself from low-cost medical destinations, in order to position itself as a leading medical hub in Asia. Patient flows in medical tourism tend to follow low cost airline routes and shorter flight times. CBRE Hotels expects average room rates to increase be- tween 5 and 10 per cent from 2011 levels. Average room rates islandwide increased 12.9 per cent y-o-y in 2011. Ac- cording to data from STB, average room rates for upscale hotels made the greatest improvement with a 16.9 per cent increase in rates from $238 in 2010 to $278, largely due to the two IRs’ performances. CBRE Hotels anticipates islandwide occupancy levels to stay above 80 per cent and hover between 83 and 86 per cent in 2012 despite the increase in net hotel room supply. Room supply is expected to increase by 1,600 or 4.2 per cent this year. The projected average occupancy rate for 2012 underpins a very active year for the hospital- ity sector, given the healthy number of arrivals expected. In fact, the increase in rooms will help ease the current tight supply.

increase in rooms will help ease the current tight supply. New hotel developments in Singapore will

New hotel developments in Singapore will be mostly mid-tier (46 per cent) and economy (28 per cent) hotels over the next few years. The mid-tier hotels will cater to the business and leisure travellers who might choose to downgrade in light of lower accommodation budgets. Islandwide revenue per available room (RevPAR) grew 14.7 per cent last year to $212 and is expected to increase between 5 and 8 per cent this year. RevPAR for upscale hotels – a category which includes the hotels in the two IRs – increased 18 per cent to $244 from $206 a year ago. RevPAR should not fall to 2009 levels as Singapore has re-structured its tourism industry and is now more im- mune to the effects of the global environment. The market does face some uncertainty in 2012, reflect- ing the outlook for the global economies. The occupancy levels certainly support rises in room rates but the lower confidence levels amongst hoteliers will temper these in- creases.

FILE PHOTO

After China, Singapore has been the most active hotel investment market last year with eleven transactions rep- resenting US$1.25 billion, accounting for 20 per cent of the total investment volumes in Asia. China accounted for 24 per cent. Although investment sales in Asia were impacted slightly due to the events in Japan in the first quarter of 2011, investment levels have risen sharply elsewhere, par- ticularly in China and Singapore. Market fundamentals in the region remain positive and investors are still bullish on the major Asian cities Major hotel sales in Singapore in 2011 included Raffles Hotel and its retail space ($340 million), Crowne Plaza, Changi Airport ($250 million), Park Regis ($184 million), Studio M ($154 million) and Ibis Novena ($118 million).

The writer is executive director, CBRE Hotels, Asia Pacific

Marina Bay Sands: Islandwide revenue per available room (RevPAR) grew 14.7% last year to $212 and is expected to increase between 5 and 8% this year; RevPAR for upscale hotels – a category which includes the hotels in the two IRs – increased 18% to $244 from $206 a year ago

Uptick

Singapore annual hotel performance

$ OCCUPANCY (%) 300 90 250 85 200 80 150 75 100 70 50 65
$
OCCUPANCY (%)
300
90
250
85
200
80
150
75
100
70
50
65
0
60
‘98 ‘99
‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06
‘07 ‘08 ‘09 ‘10 ‘11
Average daily rate
Occupancy
Revenue Per Available Room

Singapore hotel transactions

$m NO OF TRANSACTIONS 3,000 18 16 2,500 14 2,000 12 10 1,500 8 1,000
$m
NO OF TRANSACTIONS
3,000
18
16
2,500
14
2,000
12
10
1,500
8
1,000
6
4
500
2
0
0
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11
Transactions volume
No of transactions

Inventory of Singapore hotel rooms

NO OF ROOMS

40,000 35,000 30,000 25,000 20,000 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07
40,000
35,000
30,000
25,000
20,000
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
‘09
‘10
‘11

Source: STB, CBRE, Hotels

‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 Source: STB, CBRE,