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Singapore's hotel room supply to outstrip demand with 5.9% growth
2,956 rooms to be added in first half alone.
Singapore may have bitten more than it can chew when it comes to tourist accommodations as total hotel room stock increased 4.3% in 2016, which was more than the 2.2% increase in visitor days, according to OCBC.
On top of this, OCBC believes that a weak corporate demand, which typically pays a higher ADR to hotels and forms the bulk of demand for serviced residences, contributed to the 4.6% decline in 2016 RevPAR.
"Looking ahead to 1H17, we believe the room supply injection will not be adequately matched by a growth in demand. Even though we remain mildly positive on visitor arrivals for this year, the outlook for corporate demand remains weak," OCBC said.
Here's more from OCBC:
Below is a list of the upcoming hotel supply for 2017 to 2019. Against the room stock of 63,518 at the end of 2016, 2,956 rooms are expected to be added in 1H17 and an additional 811 rooms in 2H17. These would fuel a +5.9% growth in hotel room supply.
In 2018, only 69 more rooms are expected. A recent amendment to the Planning Act makes it illegal to rent out private homes for shorter than six months, affecting Airbnb Singapore.
Nonetheless, the government is considering a new type of private residences for which short-term rentals would be approved.
Airdna, a third-party data provider, currently suggests active listings on Airbnb of around ~7.5K. We believe that the hospitality REITs under our coverage are largely unaffected by the recent changes, as they cater to business travelers, expats, and/or high-end leisure travelers and compete less directly with sharing economy businesses like Airbnb.
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