Hotel rates up while occupancy dips

July 23, 2008
Hotel rates up while occupancy dips
ADRs at 5 and 4-star hotels rise 20% and 26% from last year
By NISHA RAMCHANDANI

IN the first five months of this year, average daily rates (ADRs) for
five and four-star hotels in Singapore increased 20 per cent to $331
and 26 per cent to $234 respectively from 2007. But occupancy rates
dipped slightly - down four percentage points from 81.4 per cent in
2007 for five-star hotels, and dropping from 87 per cent to 84 per
cent for four-star establishments.

As such, cost-conscious travellers may opt for the economy tiers if
prices keep rising.

In 2007, Singapore's revenue per available room (Revpar) was the
highest in 10 years, according to Jones Lang LaSalle's (JLL) Hotels'
Digest Asia 2008, with 22.4 per cent Revpar growth in the four-star
category and 18.8 per cent Revpar growth in the five-star category.

Still, ADRs are unlikely to keep growing at the same steep pace, JLL
Hotels said. 'Rates will go up 7-10 per cent over the next year but
there's a fair bit of catch up being played,' said Mike Batchelor,
managing director of Investment Sales Asia for JLL Hotels.

JLL Hotels said that overall, Singapore's tourism outlook is
positive, spurred by the island's increasing MICE capacity and new
developments such as the two integrated resorts. 'New hotel rooms
coming onstream in Singapore would provide a wider spectrum of
lodging to cater to various segments,' said Scott Hetherington,
managing director of JLL Hotels (Asia). About 4,800 rooms will be
added to Singapore's hotel industry in 2009, and another 4,000 or so
in 2010.

The main visitor markets for Singapore are Indonesia, China and
Australia, with 1.9 million, 1.1 million and 770,000 arrivals last
year. India was the market with the biggest growth, jumping 13.7 per
cent to 750,000 arrivals.

The first half of 2009 is expected to be a 'challenging period' for
the industry in South-east Asia, said Mr Hetherington. Hotels
catering to business travellers may suffer. With inflation and high
interest rates, there will be a 'gradual slowdown in some of that
traffic', he said, though things will get better after that. One way
to manage softer demand would be to keep costs low and lock in big
block bookings for next year, he suggested.

While hotel transaction activity quietened down in H108, the pace is
expected to pick up in H2. The investor profile has been changing.
Previously, investors were largely real estate investment trusts
(Reits) and investment funds. Currently, investors tend to be high-
net-worth individuals and sovereign wealth funds. FDI in the region
is expected to grow from US$230 billion in 2007 to almost US$250
billion over the next few years.

India is also expected to see strong growth, boosted by business and
leisure travel. However, there is a shortfall of hotel rooms in major
cities such as Delhi, Mumbai and Bangalore. India needs to add
150,000 new rooms in the next four years, JLL Hotels said.