4,000 hotel rooms to be added next year - will room rates be reduced?

This article is more than 12 months old

Dec 16, 2015 06:00 am

With some 4,000 hotel rooms coming on stream next year, will room rates be reduced?

The new hotels include the 314-room Oasia Hotel Downtown in the city centre and the suburban 451-room Holiday Inn Express Singapore Katong.

So does this mean the average room rate of $265.50 as at September 2015 will drop?

The rate was $258 last year.

Mr Govinda Singh, 39, valuation and advisory director of real estate services firm Cushman & Wakefield,said that while next year's added supply is significant, it is hard to compare the number with the previous years because "it all depends on demand and the investment point of the business cycle".

But he said of the upcoming hotels: "They will most likely have discounts and offers during their first year and this will affect other hotels as they will have to lower their room rates as well."

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Savills Hotels' associate director Julien Naouri, 31, said that with the new supply, hoteliers will face a drop in occupancy rates but it will not be drastic.

"Hoteliers either have to maintain their rate and decrease occupancy or maintain their occupancy and decrease their room rates," he explained.

"But they have to be careful because once the room rates drop, it will be very hard to raise it back to its original."

Mr Naouri specialises in consulting, valuation and investment-related service associated with hospitality assets and developments.

The strong Singapore dollar also contributes to the challenging outlook for hotels. Regional tourists will find it more expensive to travel here.

For example, 2 million Indonesians visited in the first nine months of this year, 11 per cent down from the same period last year.

Mr Naouri said that while "the Singapore dollar remains strong, fewer Indonesian tourists will come because of their weaker currency".

When asked about the outlook, a spokesman for CDL Hospitality Trusts said: "The global and regional economy as well as currencies' performance affect travel in general, as seen with the recent drop in arrivals from Indonesia.

"The rupiah's decline against the Singapore dollar has also made travel to Singapore more costly for these tourists.

"As with every even-numbered year, there are large-scale biennial events such as the Singapore Air Show in February and Food and Hotel Asia in April, so that should help in the trading performance of hotels."

OPTIMISTIC

Mr Arthur Kiong, chief executive of Far East Hospitality, said that while the hospitality industry may face short-term challenges, he is still optimistic about the near future.

"The future of tourism is bright even though there are short-term challenges like productivity and manpower crunch," he said.

"To address these meaningfully, we have seen the industry galvanising, coming together under the leadership of the Singapore Hotel Association to form a Hotel Innovation Committee to tackle these opportunities on a national level."

Mr Kiong added that Singapore has been constantly reinventing itself with new attractions such as Gardens by the Bay, Sports Hub and the National Gallery Singapore.

"These attractions will continue to attract a diverse spectrum of visitors to Singapore," he said.

"Also, the construction of the new airline terminal and an ever increasing number of flights position Singapore well."

BY THE NUMBERS

50,676

gazetted rooms in 2014

57,172

hotel rooms in 2014

4,361

new hotel rooms in 2015

3,899

new hotel rooms in 2016

2,419