REPORT FROM SINGAPORE—Hoteliers’ strides to push rate in Singapore are opening up new avenues for development in the heavily-zoned city-state.
Whereas the high cost of land justified only high-end investment previously, a significant uptick in average daily rates over the past decade has made feasible middle-tier expansion as well.
“Most of the sites that have been released for bid in the last few years ... the majority of those sites have gone for very, very high rates,” which made it difficult for developers to make financial sense of anything other than 5-star luxury assets, said Jonas Ogren, area director in STR Global’s Singapore-based Asia office. (STR Global is a sister company of HotelNewsNow.com.)
“In the last five years, developers have realized that building economy and mid-market (hotels) actually makes sense,” Ogren said. “The rates are coming up to a point now that even on a midscale level, even with these land prices, it still makes sense to build a midscale hotel.”
Of the nine projects under construction in the island nation, four are in the midscale or upper-midscale chains. The remaining five are either upscale, upper upscale or independent, according to STR Global.
InterContinental Hotels Group has two mid-tier assets set to open during 2013: the 220-key Holiday Inn Express Orchard Road and the 448-room Holiday Inn Express Clarke Quay. IHG will manage both hotels, which are owned by Valeside Pte Limited (a member of the Chee Swee Cheng Group of Companies) and RB Capital Hotels, respectively.
“The regional headquarters for IHG is here in Singapore, and it’s definitely critical for us to have the right brand presence here,” said Jean Tan, the company’s head of communications for Asia, Middle East and Africa.
“Right now, we’ve got InterContinental Singapore and the Crowne Plaza Changi Airport, as well as two Holiday Inn hotels. Come next year, we will have two Holiday Inn Express hotels, and we are looking forward to continue growing our presence strategically.
“Singapore is a significant business and tourism hub, so having our brands represented is important to us,” she added.
Controlled development
Singapore’s space constraints—the city-state is only 274 square miles (710 square kilometers)—and high concentration in the urban core necessitates strict zoning restrictions.
Instead of investors targeting specific plots of land, the government identifies sites for hotel development and then opens them up for bidding.
“It’s not a free for all. They don’t release everything at once to allow people to build hotels left, right and center,” Ogren said.
The result has been a slow, controlled flow of new supply—at a rate of 8% during the past five years, according to the Singapore Tourism Board—that has not weighed heavily on occupancy.
The market averaged 83.9% occupancy during 2011. Year-to-date November 2012 data shows occupancy rose 0.2% to 84.5%, ADR increased 4.7 percent to 297.73 Singapore dollars ($243.14) and revenue per available room jumped 4.9% to SG$251.47 ($205.37), according to STR Global.
In addition to the two Holiday Inn Express properties, the Tourism Board is projecting three other openings during 2013:
- Sofitel So Singapore (formerly the Ogilvy Center)
- The Westin Hotel, Asia Square Tower 2
- Dorsett Regency, New Bridge Road
The most significant additions in the past few years have been two integrated resorts: the Resorts World Sentosa, which comprises six hotels and more than 1,500 rooms; and the 2,560-room Marina Bay Sands.
“That was the biggest change, and everybody sort of thought the market would take a hit,” Ogren said, although that has not been the case. On the contrary, both resorts are prompting their own demand, he said.
Demand from both leisure and business travel continues to increase throughout all of Singapore, said Serene Tan, regional director Americas for the Singapore Tourism Board.
“Asia/Pacific region is the world’s fastest growing tourism market with an 8% growth in tourist arrivals in the first half of 2012. 2011 saw record growth with $17.4 billion in tourism receipts and 13.2 million international visitor arrivals, a 13% increase versus (the prior year).
“Going forward, our visitor arrival number will continue to be underpinned by Singapore's robust lineup of new tourism developments,” Serene Tan said.
The lineup could stifle growth in the city-state’s already high occupancy levels, Ogren said. “But certainly from a long-term perspective, the Singapore story is very strong.”
“It is one of the primary gateway cities of Asia,” he said. “Business is booming. It’s one of the two cities where a lot of international large companies, even smaller companies, put their headquarters. If you’re going to go in Asia where do you put your headquarters? You’re either going to put them in Hong Kong or Singapore.”