Chart of the Day: RevPARs to face further downward pressure in 2017

RevPar was down 3.3% to $201.9 from January to September this year.

According to OCBC Investment Research, international tourist arrivals to Singapore have seen positive YoY growth every month this year from Jan to Sep. However, this growth has been moderating, with an increase of 2.5% in Aug and 1.1% in Sep, as compared to double-digit growth from Jan to May.

"Overall visitor arrivals are up 9.4% for 9M16. There was also a robust 12% improvement in tourism receipts to S$11.6b for 1H16, underpinned by higher expenditure in shopping, accommodation and F&B. In terms of hotel statistics, occupancy was stable at 85.0% from Jan-Sep 2016 (-0.1 ppt), but RevPAR was down 3.3% to $201.90," OCBC said.

This was likely due to tepid corporate sentiment and competitive pressures from a higher supply situation. Hospitality REITs largely recorded uninspiring RevPAR/RevPAU and DPU figures during the recent financial period.

"Looking ahead, industry watcher Horwath HTL has estimated that there would be a 4.1% and 6.1% increase in hotel rooms in Singapore in 2016 and 2017, respectively. In addition, given the uncertain geopolitical and macroeconomic environment, we believe travel budget from the corporate segment may remain cautious. This would impact the margins of hospitality REITs as the average room rate for the corporate segment is typically higher than the leisure segment. Hospitality players may adopt more aggressive pricing strategies as they grapple for market share to maintain their occupancy rates. We expect single-digit RevPAR declines in 2017," the firm explained.

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