Hoteliers are reeling from a massive room glut.
The dark days of Singapore's tourism industry appear to be coming to an end. The city-state welcomed over 1.33 million tourists in February, marking a robust 11.9% year-on-year growth.
However, some analysts caution that the impressive numbers may fail to trickle down to the country's hotel operators, who are struggling with a massive supply of new rooms.
A total of 3,930 new hotel rooms are expected to enter the market in 2016, on top of the 4,115 rooms which became available in 2015, data from RHB Research show.
"Notwithstanding this positive monthly performance, we believe the outlook ahead remains largely cautious, given the uncertain macroeconomic environment and oversupply issue. We believe the outlook ahead remains largely cautious, given the uncertain macroeconomic environment and oversupply issue," OCBC Investment Research analyst Andy Wong said in a report.
Wong noted that the robust growth in arrivals in February is likely due to the biennial Singapore Airshow, which drew record crowds during the month.
Meanwhile, DBS Vickers analysts Derek Tan and Mervin Song said that while overall revenue per average room (RevPAR) rose by 1.9% over the month, full-year revenue growth outlook is still cloudy as the 6% increase in new room supply is yet to hit the market.
DBS added that the strong growth in revPAR was likely led by the luxury and upscale segments, which may have been boosted by a greater portion of higher yielding corporate guests attending the Singapore Airshow.
“Thus, given weak sentiment among corporates, the recovery in 2M16 may not be sustained especially as the Economy segment remains weak. We project 4-5% decline in RevPAR in 2016," DBS said.
Still, hoteliers are expected to benefit from the weak Singapore dollar and the occurence of new events this year.
"A weak Singapore dollar will help support the competitiveness of Singapore's tourism sector over the next 12 months in a challenging regional economic environment," BMI Research said in a report.
Meanwhile, RHB Research analyst Ivan Looi noted that the city-state's jam-packed events calendar this year should be a catalyst for higher tourist arrivals.
"We view the increasing number of tourist arrivals as a positive sign for the overall hospitality sector. In addition, we think that this growth in arrivals is sustainable. We think
that the supply-demand dynamics of the hoteliers have improved this year. This is given that the supply of hotel rooms is lower this year while demand is likely to improve slightly as tourist arrivals continue to grow," Looi said.
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