Hotels – Room for Growth

DBS Research is maintaining its overweight stance on the Singapore hotel industry given the strong tourist arrivals which has remained firm in April at 826,000 visitors and matching last year's levels.

That is despite the average occupancy rate (AOR) for hotels falling a notch by 1% to 84% in April due to the lack of major events occurring during the month.

DBS Research however noted that the average room rate (ARR) for April had seen a remarkable rise of 32.5% compared to the same period last year to S$254 per night.

According to the Singapore Tourism Board (STB), the AOR for 2007 was 81.4%, up 2% from the previous year while the figure for ARR was $276, a significant 16.5% increase from 2006. The ARR figures are a far cry from those in the mid-1990s when rates were often between $110 and $120.

Some market observers such as Donald Han, the managing director of property consultant firm, Cushman & Wakefield believe room rates may nudged the $300 mark within a year, especially during the Formula One race in September this year.

Looking forward, DBS Research anticipates further growth in visitor volume in the coming months with both occupancy and room rates expected to be underpinned by event-driven demand from the annual Great Singapore Sale between May and July, the inaugural F1 night race in September and various other major conferences and exhibitions in the final quarter of 2008.

According to Jones Lang LaSalle Hotels Research, the opening of the republic's own Universal Studios theme park within the Resorts World Sentosa integrated resort (IR) in 2010, the completion of a new passenger cruise terminal at Marina South and Singapore's winning bid to host the inaugural Youth Olympic Games in 2010 will ensure a continuing steady growth in visitor numbers that will translate into healthy demand for the local hotel sector.

"Overall, prospects for the Singapore hotel industry remain upbeat over the next few years, barring any external shocks. 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," says JLL Research.

It also notes that the Singapore government will be investing heavily in tourism infrastructure, focusing on the meetings and conventions market and medical and cruise tourism to attain its annual target of 17 million visitors by 2015.

"Hoteliers will continue enjoying higher room rates in the midst of a strong occupancy environment from rising demand and tight supply situation in the near future. We do not expect this situation to ease at least until 2009/10 when the two integrated resorts (IRs) are open," says DBS Research in its latest report on the hotel sector in the republic.

Its top pick for the sector is the CDL Hospitality group, which is the 'purest listed player and a direct beneficiary of rising revenue per available room (RevPAR) in the wake of a limited supply of hotel rooms in Singapore. Its other picks are the UOL group and Amara Holdings.


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