More hostels sprouting up in Chinatown, Little India

New hostels are opening up in areas such as Lavender (top left), Little India and Chinatown (above). As of July, there were 56 licensed hostels, compared with 46 last year, says the STB. They also offer attractive services, such as bike rentals, to m
New hostels are opening up in areas such as Lavender (top left), Little India and Chinatown (above). As of July, there were 56 licensed hostels, compared with 46 last year, says the STB. They also offer attractive services, such as bike rentals, to meet guests' needs.ST PHOTOS: LAU FOOK KONG, RACHEL TAN
New hostels are opening up in areas such as Lavender (top left), Little India and Chinatown (above). As of July, there were 56 licensed hostels, compared with 46 last year, says the STB. They also offer attractive services, such as bike rentals, to m
New hostels are opening up in areas such as Lavender (top left), Little India and Chinatown (above). As of July, there were 56 licensed hostels, compared with 46 last year, says the STB. They also offer attractive services, such as bike rentals, to meet guests' needs.ST PHOTOS: LAU FOOK KONG, RACHEL TAN

Competitive pricing is driving growth but new players may squeeze profits

Cheap and cheerful hostels that offer a bed for as little as $25 a night are thriving here as tourists look for alternatives to pricey hotel rooms.

The number of hostels around town has shot up over the past year, with Little India and Chinatown the most popular areas.

"As of July 2013, there were a total of 56 licensed hostels in Singapore, compared with 46 in 2012," said Ms Heng Li Lang, director, hotels, at the Singapore Tourism Board (STB).

Pricing is clearly driving growth with a stay in a hotel costing on average $261 a night, said property consultant Knight Frank.

But other factors are at play as well, including a change in the kind of travellers coming here and more attractive hostel services on offer, such as bike rentals.

"More hostels have now observed the different needs of the evolving traveller, such as flashpackers, and are enhancing their spaces and services to provide their guests a more welcoming experience," said Ms Heng.

"Since last year, 40 to 50 per cent (of hostel guests) are backpackers with the rest comprising value travellers on leisure trips, students and businessmen."

Mr Tony Tan, owner of Betel Box Hostel in Joo Chiat, told The Straits Times: "We are seeing more gap-year travellers - those between jobs or waiting for university - and flashpackers who can afford nicer accommodation but like the communal environment of a hostel. We also see retirees reliving their wanderlust and job seekers."

However, this recent surge of hostels, defined as having four or more rooms and licensed by the Hotels Licensing Board under STB, may be squeezing profits.

Mr Heng Choon Boon, manager of Wink Hostel in Chinatown, started his business two years ago. "There was a clear gap in the market for good-value accommodation," he said. But he soon witnessed a "bubble-tea phenomenon" where new players quickly emerged, hitting revenue.

The expansion in numbers has some owners fearing that the extra competition is hurting the industry.

"Over 20 new hostels have opened in the Lavender and Little India area in a short space of two years," said Mr David Seah, owner of The Little Red Dot hostel in Lavender Street.

"This results in excessive supply, which directly harms the viability of the backpacker business and also erodes the low-end hotel business," he added.

Mr Tan of Betel Box Hostel said travellers are also not staying here as long due to the high costs.

But other hostel owners notice the opposite. "Periods of stay are getting longer with guests staying for an average of six days instead of two to three days in the past," said Footprints Hostel general manager Christina Phang.

"Perhaps with the increase of attractions in Singapore, visitors are staying longer."

There are challenges ahead, with property consultancy Knight Frank noting the number of hotel rooms will grow by more than 20 per cent over the next three years.

That will add to the competition among hostels, but many owners seem undeterred, especially for the short term at least.

Many say they do not have a bed to spare for this week's Singapore Grand Prix.

rmytan@sph.com.sg