More spending on rooms, but not all rosy for hotels

Due to a surge in supply of hotel rooms last year, the average occupancy rate dropped 0.9 percentage point to 84.2 per cent. However, the decline was less than expected due to last year's record number of tourist arrivals.
Due to a surge in supply of hotel rooms last year, the average occupancy rate dropped 0.9 percentage point to 84.2 per cent. However, the decline was less than expected due to last year's record number of tourist arrivals.PHOTO: ST FILE

Revenue per available room dips 5% due to surge in supply of rooms

Tourists spent more on accommodation for the first nine months of last year, an increase of 28 per cent compared with the same period the year before.

But it was not good news for all hotels. Revenue per available room (RevPAR) fell nearly 5 per cent to $199, according to preliminary full-year estimates from the Singapore Tourism Board (STB).

This came on the back of falling room rates, due to a surge in supply of hotel rooms. There was a 4.8 per cent year-on-year increase in room stock last year, which brought total inventory to 63,850 rooms across 413 hotels, according to STB.

The average occupancy rate dropped 0.9 percentage point to 84.2 per cent, though the decline was less than expected.

This was due to last year's record number of tourist arrivals, said CBRE Hotels Asia-Pacific executive director Robert McIntosh.

 
 

"It's been a bit of a saving grace for the hotel industry with serious concerns about extra supply," he said. STB's strategy of targeting Tier 1 and 2 cities in China, Indonesia and India - the top growth markets for arrivals last year - has paid off, he added.

Some hotels said they have benefited from the increased arrivals from these cities, despite keen competition among hotels.

Orchard Hotel said it saw an increase of about 50 per cent in the number of nights Chinese travellers stayed in its hotels last year, and 30 per cent from Indonesian travellers.

Marriott Tang Plaza Hotel saw a 10 per cent increase in occupancy rates last year, as it has been engaging Chinese tourists through Chinese social media and online travel agencies.

At Royal Plaza on Scotts, occupancy went up 4 per cent last year, with business travellers making up 80 per cent of guests. The hotel works with local agents who have distribution channels in the Tier 1 and 2 cities, said general manager Patrick Fiat.

Mr Imbert Fung, director for South-east Asia and India at travel search engine Kayak said tourists from China, India and Indonesia have a penchant for luxury hotels. "Tourists from these markets typically favour four and five-star accommodations, accounting for over 60 per cent of their hotel searches."

According to CBRE's hotel marketview report for the second half of last year, about 3,400 rooms from luxury to mid-scale hotels are expected to enter the market this year.

Overcapacity in room supply is expected to taper off after next year, which will put the industry in a more stable position, said Mr McIntosh.

"With slowing supply and static occupancy, it looks like 2017 will see the bottom of the drop in RevPAR, then (it will) start to increase," he said.

The number of hotel rooms in Singapore is expected to grow at a rate that is likely to outstrip growth in the workforce. To address this, an Industry Transformation Map for the sector was launched last year, aimed at helping hotels here adopt manpower-lean business models, innovate, internationalise and grow the workforce.

• Additional reporting by Melissa Lin and Jalelah Abu Baker

A version of this article appeared in the print edition of The Straits Times on February 16, 2017, with the headline 'More spending on rooms, but not all rosy for hotels'. Print Edition | Subscribe