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New URA rules to affect expansion plans for hostels, hotels

Some industry players have said that the new measure by URA to restrict the number of hotels and hostels will likely affect expansion plans in the next couple of years.

SINGAPORE: There has been growing demand to convert land for use as new hotels, boarding houses and backpacker hostels. As such, the Urban Redevelopment Authority (URA) said it is tightening guidelines to ensure there is a good mix of commercial uses to meet the needs of visitors and residents.

Earlier this week, the URA issued a circular to the industry, outlining new measures to curb the potential proliferation of such developments.

One of those affected by the new guidelines is Rucksack Inn.

The hostel has grown nearly 5 times over the past five years in terms of the number of beds. It started as a 38-bed hostel, but now has 226 beds across three outlets in Singapore.

Rucksack Inn has three outlets -- Lavender Street, Temple Street and another in Hong Kong Street.

Rucksack Inn said the new restriction on the change of use for new hostels could limit the options for a growing group of budget travellers and push prices up if there are insufficient beds to cater to rising demand.

Jacquelyn Chan, general manager of Rucksack Inn, said: "We see a lot of influx from the new emerging markets like the Philippines, Malaysia and Indonesia. By limiting the number of bed, that would be a disadvantage to us in the long run. In the short run, yes, we may see an increase in occupancy."

Rucksack Inn said its average occupancy hovers around 80 to 90 per cent and the new measure could increase occupancy by another 10 per cent.

Backpackers' hostels are a pretty common sight in some areas such as Chinatown and Little India, and some of them have been converted from other commercial uses.

From July 7, the URA will not approve proposals for new hotels, backpackers' hostels or boarding houses on sites that are not zoned for hotel use.

This restriction, which will be reviewed in two years, applies to locations outside the central area and four planning regions in the city.

They include the Rochor area -- covering locations like Serangoon Road and Jalan Besar, as well as a section in Bugis, including Purvis Street and Liang Seah Street. The third area encompasses Carpenter Street and Hong Kong Street, near the Singapore River.

The new rule will also apply to the Outram area, including a substantial part of Chinatown as well as Duxton Road and Neil Road.

Some industry players said the new measure will likely affect expansion plans in the next couple of years. But there are other ways to grow, for example by taking over the business of an existing operator.

According to some analysts, the new restriction will provide a timely assessment of the industry.

Ku Swee Yong, the CEO of Century 21 Singapore, said: "The macro environment, traffic flow and the mix of trades... I think security, safety and some of the potentially harmful vice trades that may spring up or clustered around these locations, that could be a consideration with the authorities."

Nicholas Mak, executive director of research & consultancy at SLP International Property Consultants, said: "Some of these hostels are not running at full occupancy right now. So with the restriction, there is still enough supply of budget hotels, 3-star hotels to cater to budget-conscious travellers."

The URA said it has received more applications for new hotels, boarding houses and backpackers' hostels. There are currently 13 such developments in the Upper Circular Road precinct near the Singapore River -- 12 of which were converted to hotel use in the last three years.

URA said such conversions have "generally displaced" other commercial uses such as offices, restaurants, coffee shops, music studios, kindergartens and commercial schools in these areas.

According to data from the Singapore Tourism Board, there are 54,962 hotel rooms in Singapore in 2013. As at the first quarter of 2014, there are 12,673 rooms in the supply pipeline. 

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