Commercial & Industrial Property News Update

Singapore - Hospitality Sector Gives Hoteliers Plenty To Cheer

September 7, 2012

The hotel sector in trade-dependant Singapore isn't worried about the global economic slowdown.

Of the 40 wealthiest Singaporeans in Forbes rich list this year, 10 were hoteliers or property tycoons with a growing stake in hospitality. On the list were two newcomers, owner of Hotel 81 budget chain Choo Chong Ngen with a net worth of SGD 690 million, and Michael Kum, whose M&L Hospitality Trust features a large number of hotel properties in its portfolio.

Choo's and Kum's entry into the list points to the robustness of the nation's hotel industry.

Singapore's hospitality sector is having a strong 2012, with total revenue hitting SGD 1.1 billion in the first five months of the year, said the Singapore Tourism Board (STB). This represents a 6.6% increase year-on-year.

The strong showing is driven by a growing number of visitors who continue to come to Singapore for business and leisure. The island-state has also been active in creating ever more reasons to visit, positioning itself as an exciting tourism destination. Besides the inauguration of the annual Formula 1 Night Race in 2008 and the opening of its first casino in 2010, Singapore is also building up a reputation as a medical, educational and tourism hub.

"Singapore's unique proposition is that it has a good mix of demand drivers like medical, convention and education tourism that insulate it from the vagaries of leisure tourism. There is no one reason that draws visitors here," said Robert McIntosh, Executive Director of CBRE Hotels, advisors to the hospitality industry.

The formula seems to be working. From January to May this year, more than six million people visited Singapore, an increase of 12.3% year-on-year, said STB. As a result, hotel daily room rates and occupancy rates increased.

According to CBRE Hotels, in Q1 2012, average daily room (ADR) rates hit SGD 206, a rise of more than 11% year-on-year. Meanwhile, revenue per available room (RevPAR) grew 14.7% to SGD 178.

First-quarter occupancy was recorded at 87% - on par with the same period last year - but full-year occupancy rates are expected to exceed that.

"The historic high RevPar is an indication that the hospitality industry is performing very well. This reverses our earlier assessment that global events may cast a shadow on hotel performance in Singapore," said McIntosh.

In comparison to nearby markets, Singapore has done well. In June, average daily room rents at Singapore hotels were SGD 230, compared to SGD 185 in Seoul. In H1 2012, daily room tariffs fell 0.1% and 3.2% in Kuala Lumpur and Shanghai respectively.

There are doubts about the sector's ability to sustain its strong performance in the face of worsening global economic conditions, but analysts said that H2 is traditionally the peak period for Singapore tourism.

Derek Tan, Hotel Industry Analyst at DBS Vicker Research said, "With a pick-up in conference activity and events, we believe the overall industry has room to catch up with industry leaders like Marina Bay Sands and Resort World Sentosa commanding occupancy above 90% despite the average ADR touching a high of SGD 320 a night."

Meanwhile, STB is raising its visitor arrivals target for the year - the Board is aiming for between 13.5 million and 14.5 million visitors for 2012. It said that Singapore can continue to attract more visitors by continuing to expand its list of attractions.

CBRE Hotels added that the expected increase in arrivals will see a 26% increase in the number of hotel rooms in the country by 2016.

Asok Hiranandani, Proprietor of the real estate firm Royal Group Holdings which has forayed into hotels noted, "For another five years, at least, I see the hotel boom continuing. Asia is poised to be the engine of growth and this will keep hotels in robust health."

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