Growth In Hotels Sector Slows As Room Lettings Fall

Source : The Business Times, August 12, 2008

The growth of hotels and restaurants here is slowing as room lettings fall, but hotels are still enjoying double-digit growth in room rates, the Ministry of Trade and Industry (MTI) said yesterday.

The hotels and restaurants sector grew 2.1 per cent year-on-year in the second quarter. Comparatively, it grew 2.9 per cent in Q1 2008 and 4.4 per cent in full-year 2007.

'The slower Q2 growth was largely due to the hotels segment of the sector,' MTI said in its quarterly economic survey review.

The catering index - a proxy for the performance of restaurants - continued to register strong growth. But room lettings by gazetted hotels - a proxy for the real growth of the hotels segment - have been in decline since Q4 2007.

Still, hotels are seeing double-digit growth in revenue per available room (RevPAR) across all segments.

In H1 2008, the average room rate (ARR) rose 30 per cent, which led to RevPAR growing 25 per cent. All types of hotels - luxury, upscale, mid-tier and economy - saw strong RevPAR growth.

As a result, the industry posted 22 per cent growth in first-half revenue to a record $1.1 billion.

But this was due to higher prices. Discounting for price increases would result in a decline in real value-added - consistent with the decline in room lettings.

The average occupancy rate (AOR) of hotels declined 3.4 percentage points in H1 to 83 per cent.

Looking ahead, the outlook for the hotel industry remains positive, according to MTI. According to a business expectations survey for the services sector, a net weighted balance of 37 per cent of hoteliers expect better business in the next six months.

The hotel industry will also benefit from major events such as the Formula One Grand Prix, the opening of the two integrated resorts and the Youth Olympic Games, MTI said.