Rising hotel rates dull the lustre of Singapore?

With Singapore hotel rates keeping up a string of record-setting months, some may be wondering: How long can the hospitality bullrun last and at what point will the Republic’s attractiveness as a destination become a casualty?

Latest figures from the Singapore Tourism Board (STB) showed the Average Room Rate (ARR) in February at an all-time high of S$256.

This was an astronomical year-on-year hike of 43.7 per cent – and significantly, this occurred even as average occupancy rates dipped to 79 per cent from January’s 85 per cent, and from last February’s 83 per cent.

One reason, said Mr Colin Tan, of property consultancy agency Chesterton International, could be that more budget hotels have upgraded their offering and hiked prices, raising the industry average.

And there appears to be no let-up in rising room rates at least for the next 12 months, say industry watchers. Fuelled largely by a shortage of rooms and a tourist influx, ARRs busted the S$200 ceiling in June last year.

Last month, the Lion City saw yet another record of 811,000 visitor arrivals, a 7 per cent growth year-on-year. Visitors from Indonesia, mainland China and Australia made up the top three markets, accounting for almost half of all visitors.

With more MICE visitors as well as foreign talent being courted, some expatriates may stay on for short-term contracts, and more hotels are allocating some of their rooms for “permanent occupancy” of up to six months. This could put the squeeze on room availability and push rates up, said Mr Donald Han, managing director of property consultants Cushman and Wakefield.

And while at least 10 new hotels — including the Crowne Plaza Changi Airport and the Park Hotel Clarke Quay — are slated to open their doors this year, Mr Han says it may not be enough to meet the overall demand-crush in the short term.

The government has put up 12 sites for new hotels, adding another 5,000 rooms to the pipeline for the next few years. But Mr Han estimates there will still be an acute shortage of about 2,000 rooms here until the new developments are completed.

And with the F1 night race set to hit our shores in September, some hotels have already announced even higher room rates. According to the official F1 website, the cheapest room at the Hilton Singapore is S$950 a night, while rooms at the Grand Hyatt go for S$1,800 to S$2,100.

It is hard to tell now if hoteliers will adjust room rates down after that, said Mr Tan.

The soaring prices hold worrying implications for Singapore’s bid to be a regional Mice hub. Said Mr Tan: “Even corporate clients look for bargains when they come for events. We can’t race too far ahead of our competitors if we want to keep visitors coming here instead.”

President of the Singapore Association of Convention and Exhibition Organisers and Suppliers Edward Liu noted that if ARR hikes for the year exceed 20 per cent, exhibitors might turn to neighbours like Hong Kong.

“A wide cross-section of people attend trade events and exhibitions here, from CEOs to middle managers to technicians. Not everyone will be able to afford the expensive accommodation,” said Mr Liu.

With a large segment of visitors made up of budget-conscious tourists, industry players are also concerned Singapore may lose out in the mass-market sweepstakes.

The issue of catering to budget travellers’ accommodation needs may be out of the government’s hands — developers must be willing to invest in lower-end hotels, Mr Tan noted. – TODAY/ra

Source : Today – 26 Mar 2008

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