Tourism industry growth shows signs of weakening

SINGAPORE - After charging at breakneck speed in recent years, the gravy train to tourism gold is finally slowing down.

Tourism industry growth shows signs of weakening

SINGAPORE – After charging at breakneck speed in recent years, the gravy train to tourism gold is finally slowing down.

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Signs of weakening growth were evident in the second half of last year, in the wake of a robust performance in the first half.

OCBC Investment Research analysts Sarah Ong and Carey Wong said in a report: “With no immediate catalysts in sight and an uncertain global economic environment, we see a muted outlook for tourism in 1H13. Corporates have also been tighter with their travel budgets.”

Data from the Singapore Tourism Board (STB) shows that tourism receipts for the first six months of last year – the full-year figures haven’t been released – came in at $11.5 billion, up 7 per cent year on year; visitor arrivals was nearly 7.1 million, an increase of 11 per cent.

But OCBC’s report for the first nine months of the year, when Singapore clocked 10.7 million visitors, points to a slowdown.

It said: “It is worth noting that the growth rate slowed from 14.7 per cent year-on-year in 1Q12 to 8.3 per cent in 2Q12 and 3.1 per cent in 3Q12.”

Nonetheless, Singapore is on track to meet the targets of $23-24 billion in tourism receipts, and 13.5-14.5 million visitor arrivals in 2012.

While tourism receipts for the year could wind up on the lower end of the range if the slowdown carries on at the same clip, industry players are still counting on the second half of the year for a fillip – the year-end holidays and the Formula One Grand Prix, for which the contract has been extended till 2017.

Tourism is hardly expected to fall off a cliff also because of new and upcoming attractions such as Gardens by the Bay, the Marine Life Park, River Safari and the Marina Bay Cruise Centre, analysts from DBS Group Research say.

Resorts World Sentosa’s Universal Studios is adding new rides, which will take its total to 24 this year; Johor’s visitor magnets such as its Premium Outlets, Legoland and Motorsports City could also lend fizz to Singapore’s tourism industry.

DBS projects a tally of 14.2 million visitors for last year and 15.3 million this year.

An STB spokesman said: “With the opening of the River Safari and expansion of our entertainment offerings, we hope it will help drive tourism arrivals.”

The spokesman added that in the meetings, incentives, conventions and exhibitions (Mice) sector, Singapore will host a number of inaugural business events, from the Global Young Scientists Summit to a conference on rehab technology.

Events such as CommunicAsia and Singapore International Energy Week are also slated to be held again.

The STB spokesman added: “Asia remains an important engine of growth and we are confident Singapore will continue to witness a healthy line-up of quality MICE events in 2013. Attracting quality events in strategic industry sectors remains a key priority. These include sectors such as urban solutions, information communications technology and media, travel and tourism as well as design.”

On the hotel front, the industry had a fairly solid run in the first half of the year, though some hoteliers BT spoke to reported a softening in bookings in the fourth quarter.

In the first six months, the average room rate hit a new high of $260, gaining 9 per cent year on year.

The average occupancy rate came in at a fairly strong 86 per cent, inching up one percentage point. This contributed to an 11 per cent rise to a record $224 for revenue per available room (RevPar), an indicator of hotel performance.

DBS analysts Derek Tan and Lock Munyee said in a report: “After a strong start in 2012, we sense that travellers turned more cautious in spending, from the weaker average spending per visitor in recent quarters and the relative weakness in the luxury and upscale hotel segments, implying that travellers are trading down to cheaper accommodation.”

OCBC analysts said that RevPar for the first 10 months of last year was down 3.3 per cent year on year, based on preliminary statistics.

CBRE Hotels noted that occupancies were flat year on year, or slipping slightly in the last couple of months of the year. Robert McIntosh, executive director of CBRE Hotels (Asia Pacific), told BT: “It’s not bad by any means, but a fraction softer than they were before.”

Going by anecdotal evidence, Singapore’s top two visitor arrival markets, Indonesia and China, are continuing to grow, while high-end European markets such as Britain, France and Germany are “suffering a little”, he added.

Meanwhile, room rates and RevPar continue to grow but growth is weakening, probably as a result of the global and regional economies – not an unreasonable development, Mr McIntyre said, given the strong growth in recent years.

But with room rates hitting new levels, coupled with the strong Singapore dollar, tourists could well cut back on length of their stay and how much they spend (if they don’t drop Singapore as a destination).

Already, the average amount spent per visitor has slipped 3 per cent between H111 and H112.

Rajiv Malhotra, head of marketing (South-east Asia) for, said: “Travelling to Singapore is more expensive than before, as accommodation usually forms the bulk of travel expenses. This slowdown in travel to Singapore can be attributed to shorter stays and downgrading from luxury to mid-priced hotels.”

DBS is projecting that RevPar will rise 3 per cent – versus 5 per cent previously – to $223 this year.

Cushman & Wakefield, more bullish, project an average daily rate (ADR) of US$220 (S$269), an average occupancy of 90 per cent and RevPar of US$198.

It expects ADR for last year to come in at US$207, occupancy to hit 88 per cent and RevPAR, US$182.

The STB noted that more than 1,000 rooms were added last year, and more than 3,000 rooms are expected to come onstream this year from projects such as the Ramada Singapore and Holiday Inn Express Orchard.

Among the new hotels to open their doors are a number of high-quality economy-tier and mid-tier hotels, which could draw guests from the luxury and upscale segments as tourists opt for more affordable rooms.

Mr Malhotra said: “As travellers to Singapore become more cost-conscious and in light of rising room rates here, demand for rooms in mid-range and budget hotels will increase.”

As at the end of 2011, the number of hotel rooms here stood at almost 50,000.