,Singapore

Here are the 3 key drivers of Singapore's hospitality industry

Medical tourism is on the list.

According to OCBC Investment Research, the three key drivers of the Singapore hospitality industry are the Meetings, Incentives, Conventions and Exhibitions (MICE) business, the casino integrated resorts and the medical tourism business.

Here's more from OCBC:

The king of MICE. Within the global MICE industry, Singapore is a market leader. According to the Union of International Associations (UIA), Singapore accounted for the largest number of international meetings among all the cities in the world for 2011, and Singapore had a substantial lead over the runner-up, Brussels. This was the fifth time that Singapore was crowned the top city for international meetings. Singapore was also ranked, for the first time ever, the top countryfor international meetings in the UIA 2011 Global Rankings. The STB estimates that a third of the 13m visitor arrivals in 2011 were attending business events.

Given the economies of scale available because of its dominant position, the MICE industry in Singapore should continue to grow, and hospitality establishments should see increasing numbers of corporate guests. Singapore’s position as a business and finance hub, its location (7 hours by flight to most parts of Asia and Australasia), its English-speaking environment, its high standards of safety and good public transportation are all contributing factors to its strength in the MICE industry.  

IRs still popular but gaming revenue may hit plateau. Singapore first mooted the idea of having integrated resorts (IR) in 2005 and when the two IRs opened in 2010, annual tourist arrivals hit a record high of 11.6m that year while tourist receipts surged 49% to S$18.8b, the highest in 10 years (ChannelNewsAsia, 10 Feb 2011). And with the opening of new attractions like the Marine Life Park (MLP) in Dec 2012 and a new theme park ride in early 2013, Resorts World Sentosa (RWS) expects to attract 17m visitors (local and foreign) to its IR in 2013, an additional 1m over 2012.

On the gaming front, Marina Bay Sands (MBS) raked in gross gaming revenue of over US$2b in 2011, while rival RWS turned in close to US$2.6b in net gaming revenue. Their combined gross gaming revenue of US$5.7b was just a shade below the total gaming revenue of US$6.1b collected by the Las Vegas Strip casinos (ChannelNewsAsia, 2 May 2012). However based on 9M12 figures, we estimate that the gross gaming revenue could decline by 10% or so in 2012. And unless the global  economy stages a sharp recovery, we do not expect gross gaming revenue to show any significant pickup in 2013.  

Medical tourism revenue projected to grow at 8.8% p.a. for 2007-2016. Singapore is a key medical tourism destination in Asia. Most of the medical tourists come from Southeast Asia, South Asia and the Middle East. There are also visitors from Europe and North America who travel to Singapore for affordable quality healthcare. The latest available statistics from STB show that visitors who come to Singapore for medical treatment or related reasons grew 30.0% to 725k in 2010 compared to 2007. Singapore is targeting 1m medical tourists in 2012, implying a growth of 17.4% p.a. from 2010.

We believe that the rise of the middle-class and affluence in the region, as well as Singapore’s growing reputation as Asia’s medical hub, will help the medical tourism trade to flourish. There has also been an uptrend in the number of emergency international medical evacuation cases to Singapore. Indonesia, which we believe accounts for the majority of medical travellers to Singapore, remains on track to deliver robust economic growth despite external macro headwinds.

Backed by rising disposable income levels and a lack of domestic healthcare infrastructure in other countries, we expect continued growth in Singapore’s medical tourism activity, although the strength of the SGD against other currencies could be a deterring factor. Frost & Sullivan projected that the number of medical travellers to Singapore and their corresponding revenues generated would grow at a healthy CAGR of 10.4% and 8.8%, respectively, from 2007 to 2016.  

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