Singapore hotel industry takings could be near-normal by year-end

VISITOR arrivals and hotel revenues picked up in February on the month before, as Singapore resumed reopening international borders amid the Covid-19 pandemic.

Some 67,760 visitors arrived in February, up from 57,170 in the month prior, the Singapore Tourism Board (STB) has said. Hotel room revenues were largely stable on the month before, with takings at S$100.8 million, against S$101.7 million in January.

With travel set to keep normalising, "the arrivals data set should be exponential growth" from here; hotels' revenue per available room (RevPAR) could hit more than 70 per cent of pre-pandemic levels in 2022, said DBS analyst Geraldine Wong, who covers hospitality.

Meanwhile, hotel occupancy in 2022 could improve by 5 to 10 percentage points year on year, and room rates may rise by 8 per cent to 10 per cent, said Zhang Jia Hao, associate director of CBRE Hotels for the Asia-Pacific.

RevPAR came to S$116.86 in February, up from S$98.84 in January. Average occupancy climbed to 62.4 per cent from 57.8 per cent in the month prior. Meanwhile, the average room rate was S$187.42, compared with S$170.88 before.

The month's RevPAR came to 58.9 per cent of what it had been in February 2019 - even though overall visitor arrivals were just 4.5 per cent of pre-pandemic levels.

Jesper Palmqvist, Asia-Pacific area director for consultancy STR, has estimated RevPAR will be around S$113 in March, which is "still half of pre-pandemic levels".

But DBS' Wong noted that the average room rate and RevPAR "could easily surge past pre-pandemic" levels at peak periods in the second half of 2022, such as the Formula One Singapore Grand Prix season in end-September.

Citing hoteliers' pricing power, she said "we're expecting RevPAR to be driven by room rates more than occupancy", but added that hotels around the airport may also get a lift from aviation-related bookings, such as those by cabin crew.

Wong told The Business Times: "Now the market sentiment looks to be very strong, so these numbers are on the conservative side."

February was the first month with quarantine-free Vaccinated Travel Lane (VTL) entry back in place, after Singapore froze the sale of new VTL bus and plane tickets until Jan 20, amid the global spread of the Omicron variant.

Calvin Li, head of transaction advisory services for JLL Hotels & Hospitality Asia-Pacific, noted that the uptick in international visitors could be due to the easing of restrictions in the origin countries.

India, for example, removed its mandatory quarantine period and Covid-19 testing requirements at the airport from Feb 14, he noted. The sub-continent was tops among source markets for travellers, sending some 15,570 visitors in February, up from 11,430 a month ago.

Most travellers arrived from nearby countries that had VTL arrangements with Singapore: Indonesia (6,870), Australia (4,550) and Malaysia (4,470). China was in fifth place, at 3,820 visitors.

The arrivals outlook is expected to become rosier, as VTLs are replaced by a more liberal scheme. From Friday (Apr 1), all fully vaccinated travellers and unvaccinated children can enter the country quarantine-free, without needing to use VTLs or apply for related passes.

While Singapore's recovery may be hampered by continued outbound restrictions in the key mainland China market, Zhang told BT: "Singapore is able to diversify its marketing efforts to other source markets such as India, Indonesia, Malaysia and the Philippines."

Transport Minister S. Iswaran recently announced the goal of bringing Changi Airport's passenger volume to at least half of its pre-pandemic levels this year.

Wong Xian Yang, Singapore research head at Cushman & Wakefield, who said he was sanguine on the outlook for travel, added: "Simpler travel processes and requirements should precipitate a gradual recovery in international travel volumes into Singapore."

Still, Zhang added that, while hotels are expected to see an increase in revenue as visitors return, "the pick-up in profitability might occur only much later in the year" - especially amid an ongoing labour crunch and higher operating costs.

Li also warned that "there remains a chance that the region - and Singapore in particular - would retreat from further opening up" if new virus variants arise.