Hotel occupancies, room rates expected to drop: CBRE Hotels

Additional supply of rooms is likely to result in further softening of market

SINGAPORE'S hotel industry will continue to see a downward trend as an additional supply of rooms is injected into the market.

Going by the Singapore Tourism Board's (STB) forecast of 9-9.5 million visitors this year, hotel occupancies are likely to drop to 71 per cent, while room rates will fall about 12.5-15 per cent, said Robert McIntosh, executive director of CBRE Hotels (Asia-Pacific). As such, revenue per available room (revpar) should decline 23 per cent, he added.

For 2008, the average occupancy rate was 81 per cent while the average room rate was $246. Revpar was $199.

Singapore has close to 10,000 rooms in the four and five-star categories expected to come onstream by the end of 2012, representing a 39 per cent jump in supply. 'With declining occupancy and revpar levels already apparent, the addition of new supply will likely result in a further softening of the market in the short term,' said CBRE Hotels senior consultant Alison Poore.

At the same time, Singapore's 'underlying market fundamentals' such as its infrastructure, steady stream of attractions and destination marketing initiatives are sound, placing it in good stead to respond swiftly when the economy starts to pick up. The launch of the two integrated resorts will also act as a driver.

In comparison, Bangkok will see over 6,000 four and five-star hotel rooms enter the market over the same time period, bringing the total supply of rooms in these categories to over 31,000. Faced with the double whammy of political upheaval and lower tourism demand on the back of the economic environment, hotels in Bangkok are likely to see further declining demand in the short term.

Mr McIntosh also pointed out that the increasing supply of hotel rooms can also lead to greater demand, thanks to factors such as additional marketing by individual hotels, reduced prices and new hotels catering for different segments.

'This has positive implications for employment, demand for airline seats and expenditure in restaurants and other tourism attractions,' he said, adding that extra supply can, however, affect existing hotels negatively as occupancies and room rates tend to fall.

Source: Business Times, 14 April 2009