Jan-Feb hotel room rates up slightly, occupancy steadies

SINGAPORE - The local hotel industry started the year on the right footing as average room rates (ARR) edged up slightly in January and February while the average occupancy rate held firm, according to preliminary estimates.

Initial figures from the Singapore Tourism Board (STB) showed that ARR climbed 2.5 per cent year-on-year to $260.10 for the two months, while industry-wide occupancy inched up 0.8 per cent to 86 per cent. As a result, revenue per available room (RevPAR) - a performance indicator which hinges on ARR and average occupancy - rose 3.5 per cent to $223.60. However, economy hotels appear to be having a harder time so far compared with other segments in the industry as budget hotels lost 4.7 per cent in ARR to $95.80 in the first two months of this year, while RevPAR dropped some 8 per cent to $76.20.

In contrast, the other hotel categories - namely luxury, upscale and mid-tier - all reported slight increases in ARR and RevPAR.

Luxury hotels had the strongest pick-up in RevPAR - up 4.7 per cent to $390.70 - while ARR for the segment increased at the slowest pace, up 1.6 per cent to $434.40. ARR for upscale hotels gained 2 per cent to $270.50 while RevPAR for the segment edged up 3.7 per cent to $235. Meanwhile, mid-tier properties saw ARR climb 1.7 per cent to $188.80 and RevPAR increased 2 per cent to $160.

Last year, hoteliers saw a marginal softening in operating indicators as the industry absorbed a 6.5-per cent increase in room supply, taking the total number of hotel rooms here to nearly 55,000. Average occupancy slid one percentage point to 86 per cent in 2013, while ARR declined from $262 in 2012 to $258 in 2013. RevPAR worked out to $223, down slightly from $226.

A further supply of about 3,000 hotel rooms is expected to be injected this year, the STB said at a briefing in February.

But despite the additional supply stated to come onstream this year, Park Hotel Group (PHG) chief Allen Law expects ARR to pick up slightly from last year. "I think occupancy will remain about the same at 85-86 per cent. I do see the rate growing this year at a moderate rate," said Mr Law.

The group, which sold its Orchard Road and Clarke Quay hotels recently, is keen to invest in new properties to fuel its next phase of growth.

"It's part of rebalancing our portfolio and mitigating certain risks. The two projects we divested last year reached a mature investment stage whereby we saw the opportunity to divest," he said, adding however that an acquisition may take time as it needs to find a project that suits its portfolio.

PHG also plans to grow its management side of the business to a more substantial level, focusing on key markets overseas such as Indonesia, Thailand and Malaysia. It may disclose a new management contract to operate a hotel overseas "shortly".

Aside from continuing to manage the Grand Park Orchard and Park Hotel Clarke Quay, it has already sewn up two management contracts in Singapore to run Park Hotel Alexandra and Park Hotel Farrer Park - both of which are expected to open in 2015. The group also has hotels in China, Hong Kong and Japan.

nishar@sph.com.sg

This article was published on April 12 in The Business Times.

Get The Business Times for more stories.