Visitor arrivals, tourism receipts, and traveller spending on accommodation in Singapore all rose in 2016, but revenue per available room (RevPAR) dropped by nearly 5 per cent to US$142. How was this possible?
As David Spooner, executive vice-president Asia-Pacific, for Preferred Hotels & Resorts (PHR), points out, RevPAR dropped 4.6 per cent because of a 7.1 per cent increase in the number of available rooms.
There were other problems, as well. An uncertain global economic outlook and major changes in two key industries – oil and gas as well as banking and finance – had a further impact on Singapore’s travel industry during the second half of the year.
“Had it not been for this, we might have expected the hotel market to have shown stronger growth for the full year,” Spooner says.
“As such, a more cautious approach was taken by many hotels to show flexibility on rates to maintain occupancy. With the current climate continuing, this prudent approach would appear to be the wiser option in order to maintain Singapore’s preeminent position amongst the key capital cities in APAC.”
According to Dr. Richard Helfer, chairman of One Farrer Hotel & Spa, a member of PHR, while visitor arrivals were up for 2016, hotel occupancies were static or lower throughout most of the year because of “an overhang of hotel inventory” as well as visitors having more “alternative choices” to hotels.
“In what was in many ways a challenging year for Singapore hotels and the overall economy, we saw double digit growth in our business segments over 2015,” Dr. Helfer points out.
“Visitor arrival choices also include serviced residences, students, people with homes in Singapore, as well as the entry of Airbnb into the marketplace. These factors will continue to make for a volatile outlook for the next year or so, one in which occupancy is king and rates will continue to be soft.”
One of the challenges hoteliers are facing is the continuing increase in the number of hotels. According to CRE, about 3,400 new hotel rooms in the mid-range to high-end will come on line this year.
“There was an over-supply in the Singaporean market with the opening of about 13 new hotels in 2016, of which we were one,” says Ken Leow, director of sales and marketing at ibis Styles Singapore on MacPherson, a three-star hotel that opened in April last year. “It was a super challenging time.”
And the situation isn’t going to get better any time soon. “This year, 11 new hotels are opening,” Leow notes. “For the local market in Singapore, sharing the same type of business, the strategy this year will be to look at the capture of advanced bookings.”
Another challenge is the labour shortage, which only seems to be getting worse as the number of hotel rooms in Singapore continues to outstrip growth in the workforce. (For more see Management report page 20).
To address this issue, the Industry Transformation Map was launched last year to help hotels adopt “manpower lean business models”.
“Labour shortages are always a challenge in Singapore,” Leow says. “The government has to protect the interests of local citizens before they engage foreign talent. There is usually a three-to-one or even a four- or five-to-one ratio.” Like many other hotels in Singapore, the ibis Styles on MacPherson is already adopting measures to address the issue. Initiatives include a grab taxi kiosk at the front door, an over-the-counter express check-out service, and currency exchange kiosks that will accept between five and 10 foreign currencies.
While these innovations can help relieve staff shortages, they can also offer an enhanced experience for the hotel guest, who will no longer need to wait in line, for example, to check-out.
But other factors are at play, as well. According to Patrick Fiat, general manager of Royal Plaza on Scotts, the slowing economy has been encouraging both business and leisure travellers to turn from five-star hotels to three- and four-star properties.
“There is also an increase in the number of Asian visitors, who are opting to stay with their relatives instead of finding accommodation in hotels,” Fiat says.
To stay competitive, five-star hotels need to focus on enhancing service standards. “One example is Singapore’s first 100 per cent smoke-free hotel to offer complementary refreshments from the minibar, in-room gourmet coffee, and high speed Wi-Fi accessibility for multiple devices,” Fiat says.
“The hotel prides itself in creating emotional connections with both staff and hotel guests as the hotel strongly believes in the old adage that ‘happy staff makes happy guests’.
As the workplace happiness index increases, the guest satisfaction increases in tandem and as a result, the percentage of repeat guests is growing steadily over the years.”