Hospitality sector faces sobering 2012

The global economic turmoil is translating into a slower increase in tourist arrivals. In fact, a rise of 12 per cent forecast for this year is almost half the pace of last year’s 20 per cent increase.

That is likely to slow further next year as economic uncertainty keeps travellers at home, although for now, the Asian tourist dollar is holding the industry up, against economic problems in Europe and the US.

Raphael Saw, Chief Operating Officer (Hospitality Group) at Far East Organization, said: “In Asia, I think relatively speaking, we are a lot more stable, a lot more healthy. There is still a fair bit of growth in the key markets that are surrounding Singapore, like China, India, Vietnam, Malaysia… Indonesia – they’re all growing.”

Brokerage firm DBS Vickers said a sharper-than-expected downturn in Asia could result in tourist arrivals falling to as few as 12 million in 2012. That would risk an oversupply of hotel rooms, because supply is on track to grow six per cent next year.

Under that scenario, average room rates could fall 15 per cent, and earnings at some hospitality REITs could drop by as much as 25 per cent.

Still, hoteliers are plowing on with their expansion plans, regardless.

A. Patrick Imbardelli, CEO of the Pan Pacific Hotels Group, said: “We’ve got 380 rooms coming on at Parkroyal on Pickering… Woha is doing our design and that is quite special because they’re a local designer. And at Beach Road, we’ve got about 180 service suites coming on as an extension to existing service suites within the hotel.”

These will come on-stream in the third quarter next year. As for Far East Hospitality, it will be constructing three hotels by 2015, increasing room supply by more than 600.

Besides slowing arrivals next year, the hospitality industry also has to contend with rising cost pressures.

Roland Jegge, vice-president (Asia Pacific) at Worldhotels, said: “There’s been so many new hotels opening in Singapore, so there has been more demand to have qualified labour. And at the same time, there’s restriction in bringing in new talent from outside of Singapore… it has pushed the payroll through the roof.”

While the hospitality sector is likely to meet its targets comfortably this year, the sector’s dream run may not extend into the next.

Source : Channel NewsAsia – 5 Oct 2011

Join The Discussion

Compare listings