Rising Singapore demand will drive airfare, hotel prices in 2018

TSky Development awaits shareholder approval to acquire the Sloane Court Hotel as they map out its redevelopment plans.
Marina Bay, Singapore

Singapore's airfares are likely to increase by 3.9 percent in 2018, outperforming the Asia Pacific region. The country's hotel prices are also expected to increase by 3.2 percent as its hotel market regains momentum. 

Meanwhile, the Asia Pacific region's airfares have been predicted to decline by 2.8 percent in 2018 as regional hotel prices will see a 3.5-percent increase. According to the fourth annual Global Travel Forecast, the increase will be attributed to higher demand from strong local economies, like those of China and India. 

Contributing factors to the rise in airfares include pricier fuel, fare segmentation and new long haul routes. Strong travel demand from emerging markets and increasingly from second- and third-tier cities also keep airfares on the rise, Katrina Leung, ED of trade show organizer Messe Berlin, told Business Times. Singapore is especially attractive for the meetings, incentive travel, conventions and exhibitions (MICE) industry, due to its infrastructure, transportation network and safe environment. 

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As for the hotel industry, 2018's slowing supply growth could help revive hotels in Singapore. RHB analyst Vijay Natarajan estimated that the local hospitality market's guestroom supply will increase by 5.9 percent this year. The rise may increase pressure on guestroom rate for now, but there are fewer guestrooms in the country's construction pipeline this year. According to CDL Hospitality Trusts and Horwath HTL data, 2018 will have a 0.1-percent rise in guestroom supply while 2019 will have a 2.2-percent increase. "Singapore is an established, high volume market for hotels in terms of demand," Richard Johnson, director at CWT Solutions Group, Asia Pacific, told Business Times. "With mergers taking place between hotel groups, consolidation will likely lead to a decrease in competitive price options typically seen in more fragmented markets, and therefore, contribute to hotel price increases in the market."

The Singapore Tourism Board estimated that guestroom revenue for the local hotel market dropped 2 percent YOY for January to April to about S1.06 billion while average guestroom rates decreased by 2.3 percent to about $233. The sectors that saw the most significant declines were those of upscale and midscale hotels as the average occupancy rate of the entire industry grew by 1 percent to 85.6 percent. These lower guestroom rates brought RevPAR down by 1.1 percent to about S$199.

However, inbound travelers from January to April increased by 4.4 percent to about 5.8 million as China emerged as the top source of visitors to the country. Therefore, the Global Travel Forecast estimated that airfares will increase by 3.5 percent next year, even though airlines add 6 percent in capacity due to higher crude oil prices. Global hotel prices are also expected to increase 3.7 percent on average in 2018 although actual hotel performance will vary by market. 

The report also predicted that disruptive technologies, like artificial intelligence, blockchain and chatbots, will impact the travel industry in the future. For the hotel industry, "smarter hotels" are on the rise, as hotel groups' investment in technology grows. Guests can now check in or out, lock their guestroom doors and remotely operate the TV or air conditioning by using mobile apps developed by hotel groups. These hotels are also using big data to customize amenities while driving ancillary revenue and AI to operate more efficiently, Leung explained.