SINGAPORE: Moving into 2009, hotels in Singapore are expected to suffer as travel slows and room rates weaken.

This year, average room rates increased by about 8 per cent, reaching S$240 a night.

But with room occupancy rates dropping and tourist arrivals declining since June, hotels have to start making themselves competitive by pricing sensibly.

Tourism Management Institute of Singapore's CEO, H P Loi, said: "Next year, room rates will have to drop, if you look at, not just Singapore, (but) at the region; you have to compare with the region, and also look at the present financial crisis which is worldwide, whereby people have less purchasing power to travel. Singapore cannot afford to price itself out by having hotels that are too expensive. I foresee that probably, conservatively, a 10% drop in hotel room rates may be necessary."

With the full economic impact likely to be felt next year, analysts say companies can be expected to pull back on travel spending.

Mr Loi said: "The best hotel, at this stage, that I think that will do well will be basically the mid-tier hotel. Why I'm saying that is because during a crisis, people will not go for the high end. For corporate travellers, they will not go to the extreme low end; they will strike a balance and I think the mid-tier hotels will do an excellent job."

Ibis, one of the five largest worldwide hotel operators, says it is well positioned to ride out the storm. Its 3-star hotel, which opens in February next year, has over 500 rooms, all of one category, charging one standard rate that includes free Wifi access.

Ibis Hotel's general manager, Puneet Dhawan, said: "We will be the first and, for the time being, the only international economy hotel in Singapore. With the location, we can actually promise international quality of service as well as a great special opening rate of about less than $150, which even today is difficult for somebody trying to book a hotel on the Web or trying by looking at various ads, to find a decent international hotel in a good location in Singapore for under S$150."

To date, Singapore has over 200 hotels and some 37,000 rooms. More rooms are in the pipeline.

In mid-December, the Urban Redevelopment Authority (URA) released for sale a site at the Stamford Road/North Bridge area. This land parcel is to include a hotel component which will synergise with existing hotels in the area.

By March 2010, 60 per cent of the integrated resorts in Singapore will reportedly be ready, including four of their six hotels. This will put another 1,400 rooms on the market.

And, 15,000 new rooms will be added over the next three to four years.

The Singapore Tourism Board says that while tourism outlook in the short term poses a challenge, the mid- to long-term outlook remains positive.

- CNA/ir