In Focus
HOTELS & TOURISM | Staff Reporter, Singapore

Here's why the hospitality sector will grow amidst lower earnings

Revenue per room has fallen by 11.2% in just five years.

It is no surprise why most Singapore hotel owners are not in the highest of spirits these days. Since hitting a peak of $224.85 in August 2012, Singapore’s market average RevPAR has only fallen by 11.2% to $199.73 in 2017, Savills Singapore said.

According to its market perspectives report, even if this does not constitute a crash by any stretch of the imagination, the consistent and drawn out decline year after year has caused commensurate pain for owners, as well as institutional investors who have shareholders to answer to each quarter.

Despite a lack of positive tourism arrival, there are still factors that indicate a continued growth momentum for Singapore's tourism and hospitality sector.

The economy can serve as a macroeconomic support to growth, as it is expected to expand by more than 3% in 2017.

"Approximately a quarter of all international arrivals are for business purposes which is why the health of the economy has a significant impact on hotel performance, especially for those properties that are located in close proximity to the commercial centres," the report said.

Moreover, Asia Pacific is the fastest growing region in terms of international arrivals. In 2016 international arrivals grew by 9% to 308 million arrivals, accounting for 25% of global arrivals.

The pace of growth is expected to continue fuelled by increased air connectivity, more affordable travel and relaxation of visa requirements. Savills said Singapore is well placed to benefit.

The recent opening of Changi Airport's Terminal 4 (T4) also boosted handling capacity by 16 million passengers per year, bringing the total annual figure to 82 million movements.

"The new terminal together with Changi Jewel (on track to complete in 2019) will cement Changi’s status as a regional air hub and is expected to induce additional demand as airlines are likely to increase or add new services," the report added.

The planning of T5 is also already in progress.

The Mandai zoo precinct revamp, expected to complete by 2020, will add two more parks as well as a 400 key eco resort to open in 2023. It was recently announced that the resort will be operated by Banyan Tree.

Savills noted the Singapore Tourism Board's (STB) funding is currently amongst "the best funded and most proactive in the region." This is shown through projects like the $34m tripartite partnership between Changi Airport, Singapore Airlines, and STB.

Finally, Singapore's status as a top international destination is "regularly validated. In 2017, Mastercard Destination Cities Index and Euromonitor International’s annual Top City Destinations Ranking ranked Singapore in fifth and fourth place, respectively. 

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