IN the first five months of this year, average daily rates (ADRs) for five and four-star hotels in Singapore increased 20 per cent to $331 and 26 per cent to $234 respectively from 2007.
But occupancy rates dipped slightly - down four percentage points from 81.4 per cent in 2007 for five-star hotels, and dropping from 87 per cent to 84 per cent for four-star establishments.
As such, cost-conscious travellers may opt for the economy tiers if prices keep rising.
In 2007, Singapore's revenue per available room (Revpar) was the highest in 10 years, according to Jones Lang LaSalle's (JLL) Hotels' Digest Asia 2008, with 22.4 per cent Revpar growth in the four-star category and 18.8 per cent Revpar growth in the five-star category.
Still, ADRs are unlikely to keep growing at the same steep pace, JLL Hotels said. "Rates will go up 7-10 per cent over the next year but there's a fair bit of catch up being played," said Mike Batchelor, managing director of Investment Sales Asia for JLL Hotels.
JLL Hotels said that overall, Singapore's tourism outlook is positive, spurred by the island's increasing MICE capacity and new developments such as the two integrated resorts.
"New hotel rooms coming onstream in Singapore would provide a wider spectrum of lodging to cater to various segments," said Scott Hetherington, managing director of JLL Hotels (Asia).
About 4,800 rooms will be added to Singapore's hotel industry in 2009, and another 4,000 or so in 2010.
The main visitor markets for Singapore are Indonesia, China and Australia, with 1.9 million, 1.1 million and 770,000 arrivals last year.
India was the market with the biggest growth, jumping 13.7 per cent to 750,000 arrivals.
The first half of 2009 is expected to be a "challenging period" for the industry in South-east Asia, said Mr Hetherington.
Hotels catering to business travellers may suffer. With inflation and high interest rates, there will be a "gradual slowdown in some of that traffic", he said, though things will get better after that.
One way to manage softer demand would be to keep costs low and lock in big block bookings for next year, he suggested.
While hotel transaction activity quietened down in H108, the pace is expected to pick up in H2. The investor profile has been changing.
Previously, investors were largely real estate investment trusts (Reits) and investment funds. Currently, investors tend to be high-net-worth individuals and sovereign wealth funds.
FDI in the region is expected to grow from US$230 billion in 2007 to almost US$250 billion over the next few years.
India is also expected to see strong growth, boosted by business and leisure travel. However, there is a shortfall of hotel rooms in major cities such as Delhi, Mumbai and Bangalore. India needs to add 150,000 new rooms in the next four years, JLL Hotels said.
This article was first published in The Business Times on July 23, 2008.
