S'pore could face dire shortage of hotel rooms: Report

There could be a dire shortage of hotel rooms in the years ahead unless more hotel sites are released for sale here, said a property consultancy report.

The report by Chesterton Singapore said average hotel occupancy rates here will rise to 91 per cent in four years from 80 per cent now.

"We strongly suggest that the Government review its policy and release more hotel sites for sale under the Government Land Sales programme, sooner rather than later," said Ms Chee Hok Yean, the firm's executive director of hotels, capital markets and valuation, in a report yesterday.

The projections are based, among other things, on visitor arrivals growing at 7 per cent a year over the next four years, with a similar proportion of visitors requiring hotel rooms.

"Healthy hotel occupancies typically hover around the 75 per cent mark. Our projection of steadily increasing average occupancy rates from 80 per cent in 2014 to 91 per cent in 2018 suggested a dire situation of room crunch," the report said.

"Without any new rooms injected, the situation seems set to worsen in 2017 and 2018, when average occupancy rates spike to 88 per cent and 91 per cent respectively. It is also foreseeable that hoteliers would raise room rates given the severity of the developing hotel room crunch situation," it added. Singapore hotels ranked among the most expensive in Asia and the projected hotel room crunch would only amplify this, the report said.

Property and hospitality group Roxy-Pacific Holdings, in its first-quarter earnings released earlier this month, said the completion of fewer than expected new hotels this year could lead to a room crunch, which "bodes well for room rates" of existing hotels.

"Almost one-third of the planned hotel pipeline, or about 987 rooms, may be delayed till 2015. This means actual supply growth may only be about 3.5 per cent year on year, with openings mainly skewed towards the end of 2014," it said.

"Coupled with optimistic projections from the Singapore Tourism Board that visitor arrivals would reach 16.3 million to 16.9 million in 2014, the hospitality industry may be faced with a room crunch in 2014, which bodes well for room rates," the firm added.

Chesterton said that in addition to releasing more hotel sites for sale, perhaps, in the second half of the year, incentives could be given to existing hotels to add new rooms to alleviate the potential supply crunch.

Some 11,147 hotel rooms are expected to hit the pipeline over the next four years, adding to the stock of 54,962 licensed hotel rooms as of last year. The bulk of the new rooms is expected to come onstream this year and next year, the report said.

While existing hotel stock tends to be concentrated along the Orchard Road shopping belt, the Riverfront and the Central Business District, 52 per cent of new rooms this year and 78 per cent of next year's supply will be in the fringe and suburban areas, Chesterton said. These include One Farrer hotel and spa in Farrer Park, and the 550-room Genting Singapore in Jurong.

This article was first published on May 27, 2014.
Get a copy of The Straits Times or go to straitstimes.com for more stories.

Become a fan on Facebook