Business travel and meetings to do heavy lifting in Singapore’s tourism recovery

SINGAPORE’S tourism industry, though not yet at pre-pandemic levels, is expected to continue its recovery into the new year.

With leisure travel still regaining ground in the wake of the Covid-19 pandemic, the business travel and meetings, incentives, conventions and exhibitions (BT-Mice) segment is expected to do the heavy lifting.

Kwee Wei-Lin, president of the Singapore Hotel Association (SHA), told The Business Times (BT) that the sector is expected to cap the year “on a positive note”.

She described the outlook for 2023 as “one of cautious optimism for sustained tourism recovery supported by a healthy pipeline of Mice events and elevated tourism offerings”.

Richard Ireland, president of the Singapore Association of Convention and Exhibition Organisers and Suppliers (Saceos), added that the industry “is on course for a return to pre-pandemic levels with a solid pipeline of events”.

The optimism defies risks such as the hazy timeline for Chinese travellers’ return, as well as fresh challenges such as rising business costs and a long-running manpower shortage.

Hotel resurgence

Hotel industry room revenue jumped to S$2.5 billion in the first 10 months of 2022, up from just over S$966.3 million in all of 2021, according to figures from the Singapore Tourism Board (STB).

Revenue per available room (RevPAR) was up to S$239.10 in October, up from S$102.71 in the year-ago period and beating the RevPAR of S$194.37 clocked in October 2019, before the Covid-19 pandemic.

The remarkable recovery in RevPAR has come on the back of elevated average room rates. Room rates averaged S$239.58 from January to October this year, topping the full-year average of S$220.82 seen in 2019.

The high rates have sustained a rebound in RevPAR, even as the 10-month occupancy rate of 74.1 per cent remains below the average occupancy of 86.9 per cent in 2019.

Calvin Li, head of transaction advisory services for real estate consultancy JLL’s hotels team, noted that industry manpower shortages had prompted hotel operators to cap occupancies until late in 2022.

“With international tourists expected to continue travelling to Singapore, we believe the occupancy levels will gradually improve by the end of 2022 and in 2023. We remain cautiously optimistic for 2023,” he said.

“The recovery will depend on the segment; revenue in luxury hotels is expected to exceed 2019 levels in 2023, while the upscale segment should exceed pre-Covid levels too, boosted by strong rate growth...

“Only the mid-scale to budget segment should recover at a slower pace as these hotels rely mostly on leisure groups. We expect 2023 RevPAR to be boosted by strong growth in ADR (average daily rates) to offset a lower occupancy level, which we believe won’t exceed 2019 levels in 2023.”

Still, occupancy has been on an uptrend over the course of this year, rising from 58.7 per cent in January to 84.8 per cent in October – close to the pre-pandemic occupancy rate of 86.9 per cent in October 2019.

Paul Kent, an advisory partner at professional services firm KPMG, said: “We see the recovery in RevPAR to likely to remain sustainable for the next few years, since Singapore has been drawing both business and leisure travellers for major events in 2022... and is expected to continue doing so in 2023 and beyond.”

China’s continued absence

In a mid-year review, the STB projected that Singapore would receive between four million and six million visitors in 2022, and full-year arrivals now look set to come in at the higher end of that range.

The Republic welcomed 5.37 million international visitors in the year to end-November, up from roughly 330,000 in all of 2021.

Still, the visitor count is a far cry from the 19.12 million travellers hosted in 2019.

The lack of tourists from mainland China – Singapore’s biggest sending market pre-pandemic, and a major contributor to tourism receipts – has been a heavy blow.

Mainland Chinese arrivals made up about 111,180 visitors in the first 11 months of 2022, paling against 3.63 million in 2019, as China’s borders remain largely shut to both inbound and outbound travel.

Maybank economist Lee Ju Ye told BT: “While the absence of China tourists leaves a substantial gap, arrivals from other major source countries have recovered swiftly due to pent-up demand, including from Malaysia, Australia, India, and Indonesia.”

“There will certainly be some impact from the lack of Chinese travel due to recent events since these tourists have in the past formed a substantial proportion of Singapore’s tourism arrivals,” said KPMG’s Kent.

“However, with the shift towards more ‘pragmatic travel’ for current travellers to Singapore, this could reduce some dependence on one market.”

By pragmatic travel, he referred to Singapore’s use of business travel to recapture tourism demand as well as the stimulation of leisure travel by “specific high-profile events” such as the recent Formula 1 Grand Prix, as consumers become more selective about their choice of destination and purpose of travel.

Chinese travellers have also historically tended towards leisure travel, with less of an impact on the Mice industry, according to Saceos’ Ireland.

All the same, he added that “for Singapore to truly be a global-Asia node for Mice events, we require the full and active participation of all key players and markets”.

Kwee of SHA also said: “If key markets remain closed next year, it would be hard to reach 2019’s visitor arrivals.”

She added that “our recovery narrative for 2023 is about demand generation to increase international visitor arrivals”.

Pointing to the STB’s Hotel Industry Transformation Map 2025, which was announced in October, she added that the SHA will work on aspects such as “fresh hotel concepts” and sustainability.

Besides the dearth of Chinese visitors, other challenges include higher business costs from expenses such as utilities, and the impact of a stronger Singapore dollar.

Alvin Liew, senior economist at UOB, also highlighted an upcoming one-point increase in Singapore’s goods and services tax in 2023, which will push up prices for both local and overseas spenders.

He also noted that higher demand will spur the need for manpower in tourism-related services industries, which “will keep the labour market tight and add to domestic wage and inflation pressures”.

KPMG’s Kent said the trend will make recruitment and training “critical to ensuring that recovery remains on track”.

Runway ahead

The tourism recovery is unfinished. Despite the glitz of tentpole events like the Formula 1 Grand Prix, Singapore hosted just 125 STB-supported Mice events in the first three quarters of 2022, against 685 in all of 2019.

Still, Liew was upbeat on the domestic tourism and retail segment, which he said would be complemented by education-related tourism, medical tourism, and events such as sports, concerts and BT-Mice activities.

Ireland said of the Mice market: “The immediate goal from industry and government is a return to 2019 numbers by 2023 to 2024, and all signs continue to point towards this.”

Lee, from Maybank, told BT that the recovery in Singapore “has been relatively swifter than the rest of Asean and Asian peers”.

As a share of pre-pandemic levels, visitor arrivals in Singapore outpaced destinations such as Thailand, Indonesia and Japan in October, according to Maybank’s estimates.

Lee credited Singapore’s high vaccination rates as well as the gradual relaxation of Covid-19 curbs over the course of the year, with confidence in the Republic’s ability to manage the outbreak and host large events.

“Singapore is also benefiting from continued tight Covid restrictions in Hong Kong, which makes Singapore the preferred choice for high-profile conferences,” she added.

She noted that, in terms of real GDP (gross domestic product), the accommodation services sector was still 12.5 per cent below pre-pandemic levels as of end-September “and still has room for recovery”. As such, “we expect the sector to continue rising from its low base, and return to pre-pandemic levels by 2024”, she said.

She flagged the risk of rising competition for tourists, as other popular destinations like Japan, Hong Kong, and Taiwan ease pandemic-related restrictions on travellers.

In the rest of the region, BNP Paribas expects South-east Asia to benefit amid a global tourism rebound.

“The economic recessions we expect are unlikely to be a major impediment to further recovery in foreign travel,” BNP Paribas economist Luiz Eduardo Peixoto wrote in a late-November report.

“The looming tourism recovery we expect will lead to significant inflows for Asean: Thailand, Malaysia and the Philippines will benefit, in particular, in our view.”

He added that, if China reopens its borders, “the marginal impact could be significant”, as Chinese tourists used to generate a hefty chunk of spending in Asean markets such as Thailand, Vietnam and the Philippines.

Said Liew: “Lifting of Covid-19 restrictions and reopening of domestic economies across Asean... since mid-2022 was instrumental to tourism recovery momentum as visitor flows surged and services sectors rebounded. These factors are expected to be the main pillar for various Asean economies in 2023.”

But Lee from Maybank added that “overall impact on the economy via the tourism demand will likely be small” in Singapore, which will benefit more from an increase in import demand.

Despite signs that China is relaxing some domestic coronavirus curbs, watchers are uncertain over the timeline for Chinese tourists’ return – possibly only around end-2023.

As for the hotel market, JLL’s Li said property transaction volumes have beat pre-pandemic levels to hit S$1.2 billion in the first nine months of 2022.

“Transactions have been mainly in the mid-market segment and were driven by conversion into co-living properties,” he said. “(We) expect Singapore to have a similarly active 2023 as investors continue to be lured into the market for its safe-haven status, while sellers look to capitalise on improving market conditions.”