The number of visitors in Singapore is expected to rise this year, and so will the number of hotels competing for their share, said CBRE Hotels.
The consultancy firm expects the hotel industry to continue facing challenges this year, as room rates and room revenue could fall by 4 percent on an annualized basis.
CBRE Hotels noted that occupancy rates of 74 to 78 percent can be achieved. However, to reach a 76 percent occupancy rate, hotels must not increase their average daily rates (ADRs). In fact, ADRs might fall to $187-$196 and the revenue per room (RevPAR) might also drop to $141-$149.
Based on the figure for January to November 2009, the ADR was $193.40, while the RevPAR was $146.40. The occupancy rate played at 75.7 percent.
“Whilst it is extremely difficult to forecast hotel performance beyond 2010, it is likely that performance may continue to soften in 2011 and stage a recovery from 2012 onwards,” said Robert McIntosh, executive director of CBRE Hotels Asia-Pacific. “It is highly unlikely that hotel performance in Singapore will return to the market highs of 2008 for a number of years.”
The large number of hotels coming on the scene was the key factor determining CBRE Hotels’ outlook. It estimates that about 29 hotels with more than 10,700 rooms will be seen in the market by end-2012 and more than half of it will be ready this year.
On Tuesday, Resorts World Sentosa said four of its hotels, with a total of 1,350 rooms, will open later this month. There could be over 42 new hotels with more than 15,000 rooms by 2015, including several projects that were announced but still being planned.
“Many market participants have serious concerns as to whether the anticipated demand will be sufficient to absorb the additional supply,” said Alison Poore, a senior consultant from CBRE Hotels.
However, she added that the launch of the integrated resorts, as well as improving business and consumer sentiments, will “help to soften the impact of such a dramatic increase in supply over time”.
CBRE Hotels also noted that most of the rooms scheduled in 2010 will be ready at the end of the year. This will give the existing hotels time to improve and attract new businesses, and strengthen their client relationships.
Donald Han, managing director of Cushman & Wakefield Singapore, pointed out that the upcoming supply will mostly comprise of five-star hotels. Therefore, room rates at three and four-star hotels will remain relatively resilient and have a “potential upside”.