Strong Singdollar pushes up demand for cheaper hotels

The strong Singapore dollar boosted demand for cheaper hotels in the first half of the year as cost-conscious tourists became more price-sensitive, according to CBRE yesterday.

Occupancy rates for hotels in the mid-scale sector rose 2.8 percentage points year on year to 83.8 per cent in May, while those in the economy sector increased 1.2 percentage points to 82 per cent.

In contrast, occupancy at luxury hotels fell 5.2 percentage points year on year to 80.6 per cent in May, according to research by the property consultancy.

Overall average daily rates and revenue per available room (RevPar) were down, but Mr Robert McIntosh, executive director of CBRE Hotels Asia Pacific, said Singapore's fundamentals are sound. "The reported weaknesses are the service levels and, with some notable exceptions, the physical quality of the hotel offerings. Owners and operators should look seriously at ensuring that their hotels present really well," he added.

This includes refurbishment and upgrading, and improving service by innovative staff training.

Overall average daily rate (ADR) fell 3.4 per cent year on year to $251.48, a trend evident across all tiers. ADR for the luxury sector fell 3.3 per cent to $444.90 in May.

For economy hotels, ADR was 3.8 per cent lower at $102.80 in the same month.

Overall RevPar fell 4.6 per cent to $213.29. The luxury tier fared the worst with a 9.2 per cent decrease in RevPar to $358.59.

Despite poorer ADR, RevPar for mid-scale hotels still grew about 1.8 per cent, while that for economy hotels was down about 1.2 per cent. RevPar averaged $145.63 in the six months for mid-scale hotels and $79.34 at economy outlets. A substantial supply of mid-scale hotels - including Hotel@Victoria Street, Ibis Singapore on Stevens and Ibis Styles @Macpherson - is expected to enter the market next year, the report noted.

About 15 hotels are to open next year in all - working out to about 3,800 rooms. "The large inventory may put pressure on the hotels' occupancy rate, especially for the mid-scale and economy markets," said Mr McIntosh.

But operational headwinds and competition should ease gradually in 2017 and 2018 as additional supply starts to taper off, he added.

CBRE expects visitor arrivals to rise to 15.1 million to 15.3 million this year, thanks to the Golden Jubilee celebrations and the recent recognition of the Botanic Gardens as a Unesco World Heritage Site.

A version of this article appeared in the print edition of The Straits Times on August 13, 2015, with the headline 'Strong Singdollar pushes up demand for cheaper hotels'. Print Edition | Subscribe