Hotel room rates may dip further this year: CBRE

With more visitors expected, more hotels are set to compete for guests

THE number of visitors to Singapore is likely to grow this year, but so will the number of hotels vying for a share of the pie, says CBRE Hotels.

The consultancy expects the hospitality industry to continue facing a challenging 2010, and room rates and room revenues could dip by up to 4 per cent on an annualised basis.

Occupancy rates of 74-78 per cent are achievable, CBRE Hotels reckons. But to fill 76 per cent of rooms, hotels might not be able to raise average daily rates (ADRs) further. In fact, ADRs might fall to $187-$196, and revenue per available room (RevPAR) might drop to an average of $141-$149.

Based on the agency’s figures for 2009 up to November, the ADR was $193.40 and the RevPAR was $146.40. The occupancy rate stood at 75.7 per cent.

‘Whilst it is extremely difficult to forecast hotel performance beyond 2010, it is likely that performance may continue to soften in 2011 and stage a recovery from 2012 onwards,’ says CBRE Hotels Asia-Pacific executive director Robert McIntosh. ‘It is highly unlikely that hotel performance in Singapore will return to the market highs of 2008 for a number of years.’

The large number of hotels coming onstream was a key factor determining CBRE Hotels’ outlook. It estimates that some 29 hotels with over 10,700 rooms could enter the market by end-2012, and more than half of the rooms could be ready this year.

Just on Tuesday, Resorts World at Sentosa said that four of its hotels would open later this month, providing 1,350 rooms.

Including projects that have been announced but are still under planning, there could be as many as 42 new hotels with over 15,000 rooms by 2015.

‘Many market participants have serious concerns as to whether the anticipated demand will be sufficient to absorb the additional supply,’ says CBRE Hotels senior consultant Alison Poore.

But she adds that the opening of the integrated resorts and improving business and consumer sentiments will ‘help to soften the impact of such a dramatic increase in supply over time’.

CBRE Hotels also notes that most rooms scheduled for 2010 will be ready only towards the end of the year. This will give existing hotels time to attract new business and strengthen client relationships.

Cushman &Wakefield Singapore managing director Donald Han points out that a significant portion of the upcoming supply will comprise five-star hotels. As a result, room rates at three to four-star hotels could stay relatively resilient and display ‘potential upside’.

The bright spark for the hospitality industry would be the projected increase in tourist numbers. CBRE Hotels expects visitor arrivals to grow an annualised 5-10 per cent this year. This means that there could be some 10.1-10.7 million visitors.

‘Consumer confidence is certainly strengthening and corporate travellers are slowly but surely re-entering the market,’ says Ms Poore.

Source: Business Times, 7 Jan 2010