Singapore hotels feel the squeeze as corporate budgets tighten

Sun Nov 18, 2012 4:08pm EST
 

By Charmian Kok

SINGAPORE (Reuters) - The best may be over for Singapore's booming hotel market as tightening corporate budgets and bank job cuts leave more luxury rooms empty, crimping profits at firms such as CDL Hospitality Trusts CDLT.SI.

Singapore runs neck-and-neck with Hong Kong for the title of the world's busiest hotel market, with both boasting occupancy rates that exceeded 85 percent for 2011, according to the two cities' tourism boards. That's higher than in global tourist hot spots such as New York and London.

Hong Kong's occupancy rate may pull ahead of Singapore's in 2013, largely because it has fewer new hotels slated to open. If Singapore's demand stays lukewarm next year, as many hotel operators expect, room rates and profits will slip.

"We will see a slight drop in occupancy rate (in Singapore) mainly due to new supply that is about to come on board in 2013," said Jonas Ogren, Asia director at hotel data provider STR Global, based in Singapore.

"In Hong Kong, we are not seeing so much new supply coming on board, which means the hotels that are already there will continue to do better and better."

The supply of four- and five-star hotel rooms in Singapore is expected to increase by 17.4 percent from 2011 to 2014, while Hong Kong's will grow by just 13.5 percent, according to real estate services firm CBRE.

The city-state's high-end hotels have been hit harder than moderately priced rooms, which suggests that weaker corporate travel rather than tourism is weighing on demand. September's occupancy rate for upscale and luxury rooms dipped to an average of 81 percent, compared with 86 percent for mid-tier accommodations.

Far East Hospitality Trust (FAEH.SI: Quote), which operates 11 hotels and serviced apartments in Singapore, said some customers were downgrading to cheaper rooms.   Continued...

 
A general view of Raffles Hotel in Singapore is seen in this September 10, 2012 file photo. The best may be over for Singapore's booming hotel market as tightening corporate budgets and bank job cuts leave more luxury rooms empty, crimping profits at firms. Hong Kong's occupancy rate may pull ahead of Singapore's in 2013, largely because it has fewer new hotels slated to open. If Singapore's demand stays lukewarm next year, as many hotel operators expect, room rates and profits will slip. REUTERS/Tim Chong/Files