Operators see room rates rising 25-40% on host of demand and supply factors
A bumper 2008 awaits hotels in Singapore as the Formula One (F1) Grand Prix race comes to town and tourist numbers rise to new highs.
Hotel operators are already on a roll after a good year that saw a record number of tourists checking in, raising room rates by 15-25 per cent in 2007. They expect rates to shoot up another 25-40 per cent as the supply of rooms remain tight.
Last year's growth was largely spurred by the positive economic climate, hotels said.
'The hotel industry did very well in 2007, with tremendous growth and increase in tourism arrival,' said Aiden McAuley, general manager of Swissotel The Stamford. 'For 2008, we expect an even better year for the tourism industry in Singapore, with big events such as the Singapore Air Show in February and F1 in September.'
Swissotel sees room rates increasing 30-35 per cent this year, while Marina Mandarin Singapore is targeting to up its rates by 25-40 per cent.
Hoteliers are banking on both demand-side and supply-side factors as they hike room rates. Demand will climb with increased corporate and meetings, incentives, conventions & exhibitions (MICE) travellers as well as more tourists drawn here by events such as the F1 race.
'The trend of growth in corporate meetings, especially, continues to be significant and will be sustained in 2008,' said Cheryl Ng, Pan Pacific's public relations manager.
Hotels expect the MICE and corporate traveller segment to account for a big chunk of their takings this year as several major events roll into town.
What is likely to generate the greatest buzz this year is the F1 race. Trackside hotels are expecting a full house during race week, with room rates likely to be at least twice the regular rates, according to industry sources.
'Comparative to the general rates quoted in the industry, our room rates will increase relatively by about 2-3 times the usual rate during the week of the race,' said a spokeswoman for Marina Mandarin Singapore.
A sample survey done by DBS Vickers Securities last November showed that room rates could be expected to increase by about 114 per cent year-on-year in 2008 during the race period. For trackside hotels during peak race weekdays, the rates hike will be even greater - up to 311 per cent - the survey showed.
Rates will also be raised by supply-side factors. On the back of surging tourist arrivals, the average occupancy rate has climbed from 74 per cent in 2002 to over 80 per cent in 2006 and 2007. For 2008, it is expected to be close to 90 per cent. This is because growth in room stock has been relatively flat, while the demand for rooms has increased.
The situation, said DBS Vickers, has been exacerbated by significant underinvestment from 2002 to 2006. Room stock as of end-2006 stood at 30,476, relatively unchanged from 30,468 rooms at end-2002.
'On the basis that Singapore is on track to meet its target of 17 million visitors by 2015 . . . the demand-supply imbalance for hotel rooms is expected to worsen in the next few years, leading to further upside in room rates which bodes well for hotel operators,' said the research firm in a recent note.
The bulk of future supply is tipped to come on-stream between 2009 and 2010. Upon completion in 2009, the Marina Bay Sands is projected to add around 2,600 rooms to supply, while about 1,800 rooms are expected from the Resorts World at Sentosa when it opens in 2010.
In the near term, however, the industry does face one big challenge - labour shortage.
'For our industry, we usually have to look overseas to hire some of the staff as well as hiring foreign talents for some of the departments,' said Swissotel's Mr McAuley.
Said Marina Mandarin: 'In the next few years, we will start to face a shortage of manpower in the hospitality industry, fuelled by the integrated resorts coming on stream.'
With other hotels reporting the same problems, high up on hoteliers' wish-list for 2008 is government action to allow more foreign workers to be hired in the service sector - such as extending the Work Permit scheme to non-traditional sources including China and Indonesia.
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