Hotels in Singapore’s upscale segment have felt the greatest impact, with RevPAR down by 76% y-o-y for March as occupancy rates fell by 69% y-o-y (Picture: Samuel Isaac Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - Consumer preferences and behaviour are likely to change as the Covid-19 situation evolves, and hotels will have to adapt to these changes “to stay afloat mid/post-pandemic”, according to a CBRE report on Singapore’s hotel industry. Factors such as hygiene and sanitation in hotels will be among the top priorities when people start to travel again, says CBRE.
The report points out that in hotels, physical check-in services and some face-to-face interactions between service staff and guests will have to be more carefully managed, as safe distancing becomes the new normal. Hoteliers must leverage technologies such as self-check-in kiosks and mobile check-in systems for contactless services in order to keep up with changing consumer preferences. Robots can also help improve overall operational efficiency by taking on some housekeeping duties.
The MICE (meetings, incentives, conferences and exhibitions) industry is also likely to be affected by safe-distancing measures, with the scale of future events reduced, says CBRE. Event organisers will also have to work more closely with venue holders to ensure hygiene and sanitation standards are met, and health screening measures put in place.
CBRE notes that when the post-Covid-19 recovery phase begins, the relatively small size of the Singapore market will put the local hospitality industry at a disadvantage, especially when compared to some neighbouring countries which can tap a larger pool of domestic tourists.
Universal Studios Singapore as at April 21, 2020. Singapore is experiencing one of its lowest international visitor travel numbers since the SARS outbreak in 2013. (Picture: Albert Chua/The Edge Singapore)
So far this year, Singapore’s hospitality and tourism industries have been badly hit by the abrupt halt in international travel as well as the government’s “circuit breaker” measures. These have caused heightened uncertainty in the tourism and hospitality industries.
Statistics from Changi Airport Group show that in March 2020, passenger movements at Changi Airport fell by 71% y-o-y to just 1.65 million passengers. The Singapore Tourism Board (STB) also reports that only about 240,000 international visitors arrived in the city-state that month, a decline of 85% y-o-y and one of the lowest international visitor tallies on record since the SARS outbreak in 2003.
According to CBRE, gazetted local hotel performance in 1Q2020 was subpar due to the performance in March. The month saw occupancy rates hit 40% — a decline of 50% y-o-y — while the average daily rate (ADR) was $171, down 20% y-o-y. As a result, revenue per available room (RevPAR) took a big hit, declining 62% y-o-y to $69, close to the same levels recorded during SARS.
Upscale hotels felt the greatest impact, with RevPAR down by 76% y-o-y for March, as occupancy rates fell by 69% y-o-y and ADR dropped by 21% y-o-y. Economy hotels were partly cushioned by the influx in demand from workers from Malaysia seeking accommodation in Singapore after their country announced a movement control order on March 18, says CBRE.
RevPAR changes (y-o-y) across different segments
When the pandemic began to impact international travel in March this year, Singapore hotels initially shifted gears to focus on the staycation market, banking on some local demand to stave off the decline in international travel. However, the circuit breaker in April halted the hotels’ preparations.
The CBRE report notes that the Singapore government has been supporting the local hospitality and tourism industries. It has implemented various measures, including tax rebates and job support schemes, to prop up the sector. Some of the measures are included in the Resilience Budget, and the government has set aside $90 million to support the expected tourism recovery. STB has also set aside $20 million in the form of its Marketing Partnership Programme, aimed at offsetting part of the marketing costs for Singapore hotels to maintain their international presence and to woo more domestic visitors.
The government has given a 100% property tax rebate for qualifying properties, including registered hotels, serviced apartments and MICE venues. It also covers some of the retail shops within the qualifying properties. Further, job support schemes are in place to stem unemployment in the industry, as the government provides wage support for local employees.
Looking ahead, CBRE says for the local hospitality sector, some insights into the post-virus recovery could be drawn from the SARS experience, but the impact of Covid-19 and SARS differs. The consultancy says that the shock to Singapore’s hospitality sector during the SARS outbreak in 2003 was relatively short-lived, and overall performance rebounded to typical levels about five months after the industry bottomed out.
According to CBRE’s research, RevPAR levels in 2004 were higher than in 2002. However, the recovery from Covid-19 will take longer as the scale and impact of the pandemic are significantly greater, it notes. Governments around the world have been forced to close borders, limit domestic travel, and issue lockdown decrees to curb widespread community transmissions.
For the long term, CBRE says the outlook for the local tourism industry remains healthy on the back of strong fundamentals. About 2,400 new hotel rooms are in the pipeline for the next two years, representing an annual growth rate of 1.8%, which is much lower than the annual growth rate of 4.5% from 2014 to 2019. CBRE says that “a swifter recovery is plausible, riding on the well-controlled supply situation in Singapore over the next couple of years”.
Top-down investments in improving tourism offerings in Singapore will also support the recovery. These include redevelopment plans for Sentosa Island and the neighbouring Pulau Brani, the expansion of the two integrated resorts, the new Mandai eco-tourism hub, and a planned tourism hub in the Jurong Lake District from 2026.
The Singapore government has been supporting the local hospitality and tourism industries through measures such as tax rebates and job support schemes. (Picture: Samuel Isaac Chua/The Edge Singapore)
Separately, Colliers International has released its quarterly Hotel Insights report showing that for the Asia Pacific as a whole, room occupancy fell to 42.1% in 1Q2020, while ADR came in at US$97.86 ($138.50). These levels were last recorded when the Global Financial Crisis hit the region in 2009.
Hong Kong, Osaka and Shanghai were the only markets in the region that saw double-digit y-o-y declines in ADR during the quarter, says Colliers. Bali, New Delhi and Sanya (in China) were the only markets to record y-o-y increases in ADR in excess of 1% during the period, as they implemented lockdown measures later than other cities in the region.
The Colliers report also states that hotels in mainland China, Hong Kong and Taiwan have been severely affected by the ongoing pandemic. The steep decline was felt across all hotel tiers, with mid-scale and lower-tier hotels experiencing the steepest declines. The impact of the SARS outbreak in 2003 on hotels in these economies was relatively less severe, but mainland China’s outbound tourism expenditure has increased sharply over the past 17 years. The impact on tourism from a slowdown in the Chinese economy, coupled with a decline in the number of outbound tourists from China, has been deeply felt across the region, says Colliers.
Govinda Singh, head of hotels & leisure for valuation & advisory services, Asia, at Colliers International, says: “Due to the imposition of travel restrictions, lockdowns and border closures by governments across the world in response to the Covid-19 outbreak, hotels across Asia Pacific had lacklustre performance in 1Q2020. Our global economic outlook, as well as our outlook for the hospitality industry in the region, is expected to remain muted in the near term, given the ongoing uncertainty.”
Table: Colliers International
On the regional outlook, Colliers says: “It is unclear whether a strong rebound for the hotel industry in Asia Pacific will occur in the near term.” But the real estate consultancy advises hoteliers to take this time “to review their business strategies and position themselves for the eventual upturn”. It adds: “Hotels should adopt a proactive approach towards communication to maintain confidence amongst stakeholders and we expect a return to historically trusted brands.”
Colliers adds that hoteliers should not lower room rates as it is unlikely to drive occupancies and will extend the recovery period. Instead, hotels should take a “judicious” approach when developing pricing strategies, it says. This lull is also an opportunity to refurbish the assets if possible, which will ensure a higher return on investment when the upturn comes. Other key repositioning possibilities include co-living, serviced apartments, and senior living.
The consultancy says that it has received an increased number of cross-border enquiries for Japan, Singapore and other key urban and resort destinations, as private investors and owner-operators see this as “an opportunity to take advantage of possible or anticipated pricing dislocation in the markets”.
Singh says: “We expect the robust government stimulus packages, policies and strong economic fundamentals to provide some cushioning to short-term impact, and to place the hospitality industry in a strong position for when the eventual recovery occurs.”
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