New travel rules likely to boost Singapore hotels from mid-2022

Singapore

SINGAPORE'S hotel sector may only start seeing a boost from the new Vaccinated Travel Framework (VTF) in the second half of 2022, and it could take until end-2023 before occupancy rates near pre-Covid levels, industry analysts told The Business Times.

"Despite much anticipation, we do not expect the impact of the VTF to become significantly apparent until after an initial settling-in period in Q2 2022," said Govinda Singh, Colliers executive director of valuation and advisory for Asia. He added that the first half of 2022 will be "a term of adjustment and limited change" for the Singapore hotel market, in terms of visitor arrivals and industry performance.

From Apr 1, under the new VTF, all fully-vaccinated travellers and non-vaccinated children can enter Singapore quarantine-free. They will still need to take a pre-departure test, but need not test upon arrival.

Jesper Palmqvist, area director for Asia-Pacific at hotel industry research firm STR, highlighted the emergence of a potential "demand" gap in the next few months, as more hotels in Singapore move away from serving as government isolation facilities while waiting for visitor arrivals to pick up.

"As the need for quarantine hotels disappears, how quickly can normal demand return? There's an uncertainty for imminent occupancy rates, because the restrictions have just been lifted, and it may take longer than we think to fill this gap," Palmqvist said, adding that other factors such as inflation and airline capacity may affect travel demand.

But he and Singh both expect arrivals and occupancy rates to pick up in H2 2022, with arrivals reaching a third of pre-Covid 2019 levels by year-end.

According to Singapore Tourism Board (STB) figures, the average occupancy rate was 57.8 per cent in January. Singh estimates that this could rise to 63 per cent by year-end; DBS analyst Geraldine Wong expects it to reach 70 to 75 per cent by year-end; while Zhang Jia Hao, associate director of CBRE Hotels, Asia-Pacific, expects occupancy rates to increase by about 5 to 10 percentage points this year, to reach 62 to 67 per cent.

Analysts expect that 4 out of Singapore's top 5 inbound markets for visitor arrivals will remain the same: India, Malaysia, Indonesia, and Australia, all countries where border curbs have been or are set to be relaxed, matching the pace of Singapore's reopening. The only exception is mainland China, which continues to prioritise its zero-Covid policy ahead of border reopening, said DBS' Wong.

As demand and occupancy pick up, so will the average daily rate (ADR) and the revenue per available room (RevPAR). CBRE's Zhang Jia Hao expects the ADR to increase to an average of S$173.10 in 2022, up from an average of S$157.39 in 2021 as recorded by STB.

"Furthermore, the planned expansion of Resorts World Sentosa, the renewal of the Formula 1 Singapore Grand Prix contract and our plans to host more MICE (meetings, incentives, conferences and exhibitions) events could induce more demand for hotel accommodations... hence, CBRE's outlook for the Singapore hotel market remains optimistic," Zhang added.

DBS' Wong expects RevPAR to rise 40 per cent year on year in 2022, to reach 70 per cent of pre-Covid levels by year-end or a range of S$105 to S$115, up from the bank's estimated current base of S$70 to S$80. STB figures put RevPAR at S$96.37 in January. But she caveated that these are "conservative" numbers which have not factored in the impact from a strong line-up of MICE events and Formula 1 in the later half of 2022.

Calvin Li, JLL Asia-Pacific's head of transaction advisory services for hotels and hospitality, said loosened restrictions on alcohol curfew and dining limits should spur a stronger recovery in leisure tourism, which is likely to improve before corporate and MICE demand arrives. "We expect MICE activities to start rebounding towards the end of 2022, after Formula 1 in October. Singapore should see a notable pick-up from 2023 onwards," he said.

Still, tourism performance could fall short of pre-pandemic levels for another year. DBS' Wong expects RevPAR to grow 29 per cent year on year in 2023, to reach 90 per cent of pre-Covid levels. By end-2023, Singapore may be back to 90 per cent of pre-pandemic occupancy rates, RevPAR and ADR recorded in 2019, said Palmqvist.