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 Product having expanded by 4.9 per cent in 2011. As the Singapore economy remains largely unchanged structurally and continues to be open to the global market, it will continue to be exposed to fluctuations in global demand. The outlook for 2012 is uncertain in the current global economic environment. Singapore’s hospitality sector may be weakened this year due to the eurozone crisis.
|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
In 2011, Indonesia (2,591,701 visitors), China (1,577,420 visitors), Malaysia (1,140,677 visitors), Australia (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 tourist markets is limited. The projected demand for meetings, 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 visitor 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 September, with flights from Singapore to New Delhi.
Medical tourism demand is also growing strongly. Singapore 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 between 5 and 10 per cent from 2011 levels. Average room rates islandwide increased 12.9 per cent y-o-y in 2011. According 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 hospitality sector, given the healthy number of arrivals expected. In fact, the increase in rooms will help ease the current tight supply.
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 immune to the effects of the global environment.
The market does face some uncertainty in 2012, reflecting 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 increases.
After China, Singapore has been the most active hotel investment market last year with eleven transactions representing 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, particularly 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
Source: Business Times 23 Feb 2012