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Signs of weakening in Singapore hotel market

There are early signs that Singapore’s booming hotel market which stands shoulder to shoulder with Hong Kong offering the most expensive hotel rates anywhere in the world, is beginning to weaken.

Citywide occupancy rates exceeded 85% in 2011, higher than in iconic cities like New York and London, but softening demand in 2012 has caused occupancies to subside.

Far East Hospitality Trust told Reuters that many corporate clients are opting to downgrade rooms and cutback on overall corporate travel in response to strains on western economies.  

Consequently, the lull is most evident among high-end hoteliers, while mid-scale operators continue to grow strongly. September’s occupancy rate for upscale and luxury rooms dipped to an average of 81%, compared with 86% for mid-tier accommodations,

If demand continues to slow through the next year, as many hotel operators pessimistically expect, room rates and profits will continue to slide.

The effects will be accentuated by continued hotel development, with four and five-star room supply due to increase by 17% from 2011 to 2014, according to CBRE.

Meanwhile, Hong Kong will fare better because the development pipeline is less extensive at growing by 13.4% in the upscale segment, whereas Singapore’s opportunistic start-ups will tip the balance of supply and demand in favour of the consumer and dilute industry earnings. 

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