Rising Singapore demand creates opportunity for hotel development

Novotel Singapore Clarke Quay. Photo credit: AccorHotels Group(Image: AccorHotels Group)

Singapore's new hotel supply growth is forecast to slow down between 2018 and 2019, despite the growing number of tourists to the country, according to a Colliers International report

The Singapore Tourism Board predicts international visitor numbers in Singapore will grow by up to 4 percent to 18.1 million in 2018, besting last year's record of 17.4 million visitors. “Hoteliers in Singapore have weathered the lean years-particularly 2015 and 2016-admirably, and the hospitality sector outlook is decidedly brighter this year as market sentiment turns up. Considering the data from the STB, it suggests that Singapore still requires a significant amount of hotel rooms to accommodate its visitors, with growth in visitation being tempered by the low level of room supply, especially at the mid-market to lower end,” Govinda Singh, ED of valuation & advisory, Asia at Colliers International, said in a statement.

Singapore still needs more hotels although its market saw substantial increases in room supply at more than 5,500 guestrooms in 2015, 2,567 in 2016 and 3,400 in 2017. This year, hotel room supply is predicted to slow to 628 rooms in 2018 and only 1,300 rooms next year. 

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However, Colliers expects hotel occupancy in Singapore to remain at more than 84 percent. Guestrooms in the country are full almost all the time during peak periods, especially from Monday to Thursday and Saturday nights. “Our hotel needs analysis showed that the number of overnight visitors to Singapore has consistently outstripped hotel room stock since 2011, and is projected to remain so over the next few years. It suggests that there is a high degree of existing frustrated and latent demand, whereby visitors who wish to come to Singapore either cannot find rooms or have to turn to alternative accommodation providers such as serviced apartments or dare I say Airbnb,” Singh said. 

Although hotels had about 57 percent of hotel night stays in 2011, which should have equated to a 121-percent room occupancy, the STB recorded that hotels room occupancy reached 86 percent that year. Therefore, only about 40.5 percent of visitors in need of lodging stayed in a hotel. The country's market saw a similar trend last year, recording occupancy at 85 percent. Only 43 percent of the 57 percent of visitors in need of lodging stayed at hotels.

Colliers believes that this is the opportune time for more hotel development and investment in the hotels due to the market's growth potential. Singapore's slight increase in room supply between 2018 and 2019 isn't expected to decrease occupancy. Meanwhile, ADR is on track to improve slightly due to weak rupiah, ringgit and yuan. 

As the affluence of the Chinese middle-class continues to rise, Colliers expects Singapore will continue to be a key destination for China's growing outbound tourism. Trips to Singapore from China are expected to grow 47.7 percent to 177.4 million in 2020, compared to the 120.1 million recorded in 2015. 

Hotel owners and operators plan to attract approximately 70 million overnight visitors by 2020, up from the approximately 59 million visitors in 2016. The Chinese government is also set to invest RMB2 trillion into tourism. This will go towards enhancing airports and urban rail transit. “The recent sabre rattling between the US and China may weigh to some degree on business and consumer confidence, thereby tempering demand growth especially if it escalates. However, intra-Asia travel and the growing domestic markets in a number of the larger destinations across Asia, is likely to continue to underpin demand,” Singh said. 

Hotels in Asia-Pacific started off 2018 with mixed results. While room occupancy grew 1.5 percent year-to-date, ADR dropped 4.5 percent.