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Outlook for hotel room rates not rosy

Hotel room rates in Singapore are expected to remain under pressure in 2014 after falling by 8 per cent year-on-year in 2013.

SINGAPORE: Hotel room rates in Singapore are expected to remain under pressure in 2014 after falling by 8 per cent year-on-year in 2013.

But analysts also said that some new events in the pipeline may provide support and even help push room rates a little higher.

The events include the crown jewel event of women's tennis -- the WTA Championships -- the F1 Singapore Grand Prix, and business conferences.

For some industry observers, this strong pipeline of events is a boost for hotels in Singapore, which suffered an 8 per cent drop in room rates last year.

Derek Tan, equity research analyst at DBS Vickers, said: "The market is stabilising. We are expecting to see good growth from the corporate market this year, and corporate travellers tend to pay a bit more (in terms of) rates on an effective basis.

“From that perspective, we will see -- because of a larger mix of corporate travel for this year -- the average rate for the industry should see a marginal uplift."

The average room rate for a mid-tier to upscale hotel in Singapore is around S$220.

DBS Vickers said overall, room rates could increase by 3 to 5 per cent this year.

However, recent tourist arrival numbers paint a less rosy picture.

In 2013, tourist arrivals grew by only 6.9 per cent, down from 10.1 per cent the previous year.

But the slow tourism growth rate is not the biggest worry for hoteliers in Singapore. They are more concerned with the new number of hotel rooms coming up, and that the supply of hotel rooms will continue to outstrip demand.

The number of hotel rooms in Singapore is expected to climb by 17 per cent over the next three years.

According to consultancy CBRE, tourist arrivals will have to increase by 8 per cent this year in order to keep pace with supply.

CBRE said that is going to be difficult to achieve.

Robert McIntosh, executive director at CBRE Hotels, said: "The challenge is now, really, dealing with the additional supply, and dealing with the operating costs of hotels, which have been going up quite dramatically.

“So the profitability, in some segments, has been declining. But that has to be offset by the fact that investors have achieved great results in terms of capital values, where the price in hotels has gone up a great deal. So… those who actually own real estate assets have done very well recently."

Almost 3,000 new hotel rooms will be completed this year.

Three hotels -- Hotel Grand Central, Holiday Inn Express in Clarke Quay, and Traders Orchardgateway Hotel -- will account for the bulk of the rooms.

This is expected to bring the total number of hotel rooms in Singapore to 60,000 by 2016.

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