Singapore hotel market

Singapore hotel market seeing nascent recovery as border restrictions ease: CBRE

The Singapore hotel market is finally starting to show signs of recovery. According to data compiled by CBRE, the hotel segment started picking up in 2H2021 following the opening of Singapore’s borders through the implementation of the Vaccinated Travel Lane (VTL) scheme.

Published in Edge Prop by Atiqah Mikhtar on MAR 21, 2022 – 11.36 AM

Since the launch of VTLs on Sept 8, 2021, over 100,000 travel passes have been issued as of the end of 2021, contributing to a 172.4% y-o-y surge in visitor arrivals to Singapore in 2H2021 to 211,306. India, Malaysia, Indonesia, Australia, and the UK comprised the top-five markets for VTL applications.

Monthly international visitor arrivals to Singapore in 2021
Singapore hotel market

“The high number of VTL passes issued in the last four months of 2021 indicates huge pent-up demand for travel to Singapore,” CBRE states in a research report. The hotel market has benefited from the increase in visitors, with average hotel occupancy of 65.3% chalked up in 2H2021, 6.5% higher than the year before. Hotel room rates also began to increase, with the average daily rate (ADR) increasing by 23.8% y-o-y to $168.10 in the second half of last year.The higher occupancy rates and ADR resulted in revenue per available room (RevPAR) growing 35% y-o-y to end 2021 at $111.40. Luxury hotels registered the strongest increases in RevPAR while those in the economy segment posted the weakest performance, indicating that the premium segment of the market is leading the recovery.

Monthly hotel performance in 2021
Monthly hotel performance in 2021

Investment activity in the hotel segment also picked up in 2021 as sentiment improved following the launch of the VTL scheme. Four transactions worth a combined total of around $51.4 million were completed last year, compared to just one transaction in 2020. These included the sale of the 42-key Balestier Hotel for $15 million and the 29-key Malacca Hotel and its adjacent residential plot for $18.1 million.

“Transaction volume remained low as deals mainly involved smaller boutique hotels, while a sizeable price gap between buyers and sellers also somewhat impeded activity,” CBRE remarks.

CBRE notes that while the 2H2021 figures show encouraging signs of recovery, the hotel market’s revival still has a way to go before rebounding to pre-Covid times. RevPAR for the whole of 2021 was approximately 59.8% below 2019 figures.

Nonetheless, the market is expected to steadily pick up in 2022 with the inclusion of more countries in the VTL scheme, especially Australia, which recently reopened its borders to vaccinated travellers last month after two years of closure.

Also supporting the market is limited new room supply in the short term, coming off the back of pandemic-related disruptions. Only a few new hotels came on stream in 2021, including the 324-key The Clan Hotel at Far East Square and the 191-key Oasia Resort Sentosa, which was branded from Le Meridien Singapore. Total hotel room supply as at end-2021 was approximately 69,590 rooms.

CBRE anticipates growth in new hotel room supply to fall to a compound annual growth rate (CAGR) of around 2.1% in 2022, compared to a CAGR of 3% between 2015 to 2021. “This short-term tapering will provide relief for the industry as visitor arrivals recover from a very low base,” the research report reads.

Given these market factors, CBRE’s outlook for Singapore’s hotel market for this year is “cautiously optimistic”, even as it notes potential headwinds such as the delayed reopening of travel to and from China, as well as volatility in fuel and labour costs amid the ongoing Ukraine-Russia conflict. “Despite all these challenges, CBRE believes Singapore has built a solid foundation for a steady recovery, which should bring about a further improvement in hotel performance in 2022,” CBRE states in its report.

In the medium term, an estimated pipeline of 5,200 new keys is projected to come online between 2022 to 2024, mostly led by the luxury, upscale and midscale properties. This includes the 135-key Citadines Connect Rochester Singapore; the 204-key The Edition by Marriott; the 62-key Raffles Sentosa Resort & Spa; the 338-key Banyan Tree Mandai Park; the 900-key Club Street Hotel; the 142-key Artyzen Cuscaden; and the 303-key Mondrian Singapore.

It also includes the reopening of the 350-key Pan Pacific Orchard; a new hotel on Short Street developed by Cityview Holdings and a new property by Fragrance Group to be built via the redevelopment of Tower Fifteen.

CBRE also notes that with the pandemic having exerted significant pressure on hotel cashflows, owners and investors continue to consider alternative uses. Examples include the 29-key Malacca Hotel, the 36-key Amber Hotel Katong, and the 27-key Gay World Hotel, all of which were recently acquired with a view to being redeveloped into co-living facilities.

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