Recent Trends in Singapore's Hotel Sector

Slower growth in the hotels and restaurants sector as a result of falling room lettings...

The real value-added (VA) of the hotels and restaurants sector grew by 2.5 per cent in the previous three quarters, lower than the 5.1 per cent growth registered in the first three quarters of 2007 (Exhibit 1). The slower growth was largely due to the hotels segment of the sector. While the catering index (a proxy for the performance of the restaurants segment) continued to register positive growth during this period, the number of room lettings of gazetted hotels (a proxy for the real growth of the hotels segment) has been in decline since the fourth quarter of 2007.

But the hotel industry is enjoying double-digit growth in RevPAR across all segments…

Singapore hotels have been increasing their room rates, which has resulted in higher revenue per available room (RevPAR). In the first half of 2008, the average room rate (ARR) rose by 30 per cent. The higher ARR led to growth in RevPAR of 25 per cent over the same period (Exhibit 2). Hotels from all tiers experienced this strong growth in RevPAR (Exhibit 3). As a result, the hotel industry posted a robust 22 per cent growth in revenue in the first half of 2008, achieving a record high of $1.1 billion. As this was due to higher prices, discounting for price changes would result in a decline in real VA, consistent with the decline in room lettings.

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