The sector is set to offer exciting products and experiences over the next few years, write CHEE HOK YEAN and DOREEN GOH
SINGAPORE’S tourism and hotel industry turned in a stellar performance in 2007, with record levels in visitor arrivals and trading performance. Total international arrivals crossed the 10-million mark in 2007, rising 5.4 per cent year on year to 10.3 million visitors. In tandem with the record visitor volume, hotels reported higher revenue per available room (RevPAR). In the wake of limited supply, this RevPAR growth was driven almost entirely by the growth in average daily rates (ADR).
Luxurious stay: A room at The St. Regis Singapore (above), a luxury hotel that soft-opened in December 2007, and the Crowne Plaza Changi Airport hotel (next), which will open in May
According to Jones Lang LaSalle Hotels Research, Singapore’s five-star hotel market ended the year with a high average occupancy of 81.4 per cent and ADR of $276. This translates into a gain of around two percentage points in average occupancy and a significant 16.5 per cent growth in ADR from 2006. Consequently, RevPAR rose by around 19 per cent to $224 over the same period.The fundamentals are strong. Singapore boosted its airport capacity and status as an important regional air hub with the opening of a third passenger terminal in early 2008. A line-up of prominent events and new attractions can also be expected over the next few years - after the recently held Singapore Airshow and the recent opening of Singapore Flyer, as well as the Formula One Grand Prix to be held later this year. Singapore will see the opening of the Marina Bay Sands integrated resort (IR) in 2009. Come 2010, the republic will also have its own Universal Studios theme park within the Resorts World Sentosa IR and a new passenger cruise terminal at Marina South. More recently, the republic won the bid to host the inaugural Youth Olympic Games 2010.
In the light of these tourism developments and the anticipated corresponding growth in visitor numbers, the hotel sector should see healthy demand. The continued release of hotel development sites by the government to address a potential shortfall in room supply will provide opportunities for aspiring hotel owners and investors to join the bandwagon, while existing players could strengthen their foothold.
The introduction of new brands and new product concepts in new locations will also add variety to the Singapore hotel industry. Catering to different market segments and travellers’ needs, these new developments will help to rejuvenate the existing stock of hotels in Singapore. Examples include the 299-key St. Regis, a luxury hotel which soft opened in December 2007.
In May, Singapore’s new Crowne Plaza Changi Airport hotel will open at Terminal 3. A new Singapore farm hotel will also be operational in Lim Chu Kang by September, while the Singapore Recreation Club has plans to add about 35 guest rooms on its third-floor terraces in 2009. Proposed plans to add a hotel at the Laguna National Golf & Country Club and Jurong Country Club are also underway.
Expected competition
Stiffer competition is expected with the opening of new hotels over the next few years. While we believe this supply can be absorbed, greater product differentiation in terms of branding and targeted markets will be required.
Increasing sophistication among travellers seeking a stay experience rather than just a roof over their heads means that hotels need to constantly innovate and improve their physical product and service offerings. Older hotels that have not undergone any refurbishments recently will therefore feel more pressure to do so when this new supply comes on stream.
The supply influx over the next few years will also create challenges in staffing and manpower needs. Talent retention and management should be accorded greater priority as the mobility of the workforce increases with the availability of new employment opportunities both within Singapore and elsewhere in the region.
It is also important to note that while sentiment is currently looking up in the hotel industry, it is always prudent to be prepared for less favourable trading conditions as markets move in cycles. This is important as the highly volatile nature of the tourism and hotel industry means that often, the pain inflicted by any external shocks (for example 9/11, Sars, tsunami, a political unrest) are felt almost instantaneously. This will be reflected in falling visitor numbers and occupancy levels. As the occurrence of these external shocks is usually unpredictable, business contingency plans should be in place to ride out these challenging times.
Continuing investments
Overall, prospects for the Singapore hotel industry remain upbeat over the next few years, barring any external shocks.
The Singapore government will continue to invest heavily in tourism infrastructure, focusing on the meetings and conventions market and medical and cruise tourism to attain its target of 17 million visitors by 2015. Strong growth in Asia, coupled with Singapore’s standing as a key regional financial and business hub, as well as the introduction of new tourism generators such as the development of the two IRs will drive visitor arrivals to new highs over the next few years. This will form a demand base for the nearly 20,000 rooms in the supply pipeline, including potential rooms that could be generated from the sale of sites under the Government Land Sales programme.
The upcoming supply will also help to rejuvenate the Singapore hotel market, providing travellers with a more diverse and interesting array of accommodation options and stay experiences.
In the medium to longer term, the Singapore market could also witness the potential entry of other accommodation concepts such as condotels or condo hotels, which involves the purchase of a right of ownership of the unit, that is, strata sub-division. While condotels or condo hotels are established in the United States, this concept is relatively new in Asia and yet to establish a presence in Singapore. Given its strata-title nature, however, its feasibility will hinge on the regulatory framework.
All in all, the transformation of the Singapore tourism and hotel industry is on track and visitors can look forward to more exciting products and experiences over the next few years.
Chee Hok Yean is executive vice-president and head of corporate advisory, Asia, Jones Lang LaSalle Hotels, and Doreen Goh is associate, Jones Lang LaSalle Hotels
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