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Spike in Singapore hotel room rates reflects pent-up demand; affordable options still available, say experts

The average hotel room rate in Singapore rose to S$259 in July, the highest in nearly 10 years, according to Singapore Tourism Board data.

Spike in Singapore hotel room rates reflects pent-up demand; affordable options still available, say experts

The prime district area around Singapore's Orchard Road, with hotels, shopping malls and residential housing. (File photo: AFP/Roslan Rahman)

SINGAPORE: The near-decade high in the average room rate for Singapore hotels reflects pent-up demand for travel resulting from the COVID-19 pandemic, but affordable options remain available, industry experts told CNA.

The Singapore Tourism Board (STB) released data earlier this month showing that the average room rate rose to S$259 in July. This was the highest since September 2012, when the average room rate was S$261.66, and almost 70 per cent higher compared with a year ago.

Hotels here are getting a "flood of enquiries" from overseas visitors and are seeing a "desperation" for rooms, said tourism consultant Christopher Khoo.

"Our international markets (are) opening up and they are starting to do their forward bookings or negotiating rates ... and hoteliers are starting to feel comfortable with quoting higher rates," said Mr Khoo, who runs tourism consultancy MasterConsult Services.

"The flood of enquiries right now is really reflecting the pent-up demand that had built up over the two years."

The corporate and MICE (meetings, incentives, conventions and exhibitions) sectors are also helping to drive demand, said another tourism expert, Dr Barkathunnisha Abu Baker.

This is in part due to Singapore's reputation as a safe destination amid the pandemic, said Dr Barkathunnisha, who is the founder of Elevated Consultancy and Training.

"People feel they can trust a country like Singapore and therefore that is driving a lot of demand," she said.

"Travel is about consumer confidence," Dr Barkathunnisha added. "When you see a country back to normal in terms of events, promotional campaigns and new attractions are coming up … it is a signal, there’s a cue that is going out there to say to people that … everything is going all right, it’s good, start travelling to Singapore."

Hotels that CNA contacted all confirmed that demand for rooms has been on the rise.

Pan Pacific Hotels Group said occupancy across its hotels has reached more than 90 per cent, especially during peak holiday periods and long weekends.

"Our room rates are determined by dynamic pricing, reflecting the demand for stays and depending on seasonality, such as public holidays and school holidays," said the hotel group. "With Singapore opening up to international travel and receiving higher tourism levels, demand has risen and influenced the pricing."

Parkroyal Collection Marina Bay at night. (Photo: Pan Pacific Hotels Group)

InterContinental Singapore said bookings have risen recently, leading to higher average daily room rates.

The increase in demand is partly due to the resumption of global events such as the International Luxury Travel Market expo earlier this month and the upcoming F1 race, said the hotel's general manager Andreas Kraemer.

The Westin Singapore also said it expects demand from business and leisure international travellers to continue over the next few months.

Analysts pointed out that hotels are raising room rates due to higher operational costs too.

"Manpower costs due to labour crunch, energy costs, the cost of supplies have all gone up. So it's inevitable that the hotels have to raise their rates," said Ngee Ann Polytechnic senior lecturer in tourism Michael Chiam.

"We also need to factor in that not all hotels are running at full capacity as well. So the capacity part of the equation is still not back to the pre-pandemic level."

Based on STB figures, the average occupancy rates for hotels in Singapore stood at 79.15 per cent in the month of July. While this is the highest since Jan 2020, the highest occupancy rate in the last decade stood at 93.19 per cent in June 2019.

"DEALS TO BE HAD"

Despite the higher room rates, there are still affordable deals and good bargains for staycations for local residents, said Mr Khoo.

"For Singaporeans, it makes sense to shop around. There will always be deals to be had … Singaporeans who are a little bit diligent will be able to find those deals and that’s what shopping around does for you," he said.

"I don’t think every hotel is going to be booked to the gills. Shopping around will find you some reasonable rates to get for your staycation."

Some will continue to opt for staycations instead of overseas vacations, said Dr Chiam.

"At least for this year, not everybody will go overseas to travel. Hotels are still working very hard to keep our locals in Singapore for the staycation packages. So you look around … there are quite a few interesting staycation packages that there have been selling in the market.

"For those who really cannot travel overseas for one reason or another, they can still shop around – there are still some hotels with good rates."

The experts were divided on whether the average hotel room rate would continue rising.

Dr Chiam said he believes the average rate will remain largely stable in the months to come, perhaps even dipping slightly.

"If you increase prices and there's still a demand, the price will stay. If you increase price to a point that people think that is so expensive, there is no point in making a purchase, then of course, businesses will know how to adjust their price downwards," he added.

"When other cities start opening up, I think what we could most probably see is that there will be an adjustment of prices again. Demand may not be so high."

On the other hand, Dr Barkathunnisha said that travel and tourism will become more expensive in 2023.

She pointed out that current geopolitical conditions and inflationary pressures mean that operating costs for hotels will remain high.

"Capacity is not going to increase but demand is going to increase largely," she added. "2023 will definitely see prices continue to escalate."

Source: CNA/mt(cy)
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