Steeper ups and downs for hotels?

Steeper ups and downs for hotels? 

Luxury brands impacted as travellers watch their budgets

 

 

Esther Fung

 

 

esther@mediacorp.com.sg

 

 

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ROOMS that are had to get, even at record-high rates. A dire shortfall ahead, as visitor numbers rocket. Such has been the fanfare about the booming hotel scene in Singapore, but of late, a few discordant notes have emerged.

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Occupancy rates have seen increased volatility in recent months. Looking ahead, hotels may have to brace themselves for more abrupt peaks and troughs, as business and leisure travellers both tighten their belts for a gloomier global environment.

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Not surprisingly, although hotel room supply remains generally tight, the first ones to already feel the hit are the luxury brands.

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Some told Today they have more empty rooms than they like and it is beginning to hurt margins. Even business travellers, who are generally less price-sensitive than leisure travellers, are more wary of rising room rates, which in April averaged $254 a night — up from $191 a year ago..

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Ms Lim Ee Jin, director of marketing communications at Meritus Mandarin, said: “Based on feedback from some of our corporate clients, we know that some companies are being more cautious now should the (global) situation worsen.”

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The hotel’s occupancy rate fell 5 to 10 per cent in May, compared to the same period a year ago.

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Millennium and Copthorne International’s Cecilia Lim, vice-president of sales (Asia), said that while its five hotels here have seen healthy growth so far this year, “due to global uncertainties and recentcalamities in China and Myanmar, we have to review our outlook cautiously”.

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In spite of such incipient caution, such hotels are reluctant to reduce prices — counting on upcoming mega-events like the Formula 1 race in September and major conventions such as the Singapore International Water Week at the end of this month to bring in visitors.

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As for what they will do when guests are not handed to them on a platter, hotels pointed to room promotions. One employee of a downtown luxury hotel said staff were now being offered discounted room rates, on top of the regular benefits, in order to fill up rooms.

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One step down from luxury hotels, ‘four-star’ accomodations are still seeing consistently high occupancy rates. Park Royal Hotel at Beach Road and Rendezvous Hotel, both of which target business travellers, are usually fully booked on weekdays.

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“The market is big enough for players like us,” said businessman Mr Norman Hsu, who oversees Hotel Rendezvous.

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With air ticket prices on the rise also, travellers are finding ways to cap expenses — and one obvious way is to move down a rung in hotel accomodation.

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Said Mr Robert Khoo, chief executive officer of National Association of Travel Agents Singapore (Natas): “Leisure travellers are going for cheaper hotels so that they can pay the same price as before.”

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Some are opting for two- and three-star accommodation, such as budget chain Fragrance Hotel. “Other than the location, the furnishings in these hotels are actually not bad,” said Mr Khoo. Ironically, he noted, prices at these hotels are now rising in tandem with demand.

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Nationally, the monthly average occupancy rate (AOR) in April was 84 per cent.

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The AOR is calculated from records of some 100 gazetted hotels and Ms Ong Huey Hong, STB’s director of planning, said it “may fluctuate over time”.

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The reason: “Visitors may adjust their choice of accommodation depending on factors such as the availability of hotel rooms and hotel pricing, as well as the availability of alternative accommodation choices such as non-gazetted hotels or staying with their friends and relatives.”

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But with Government-spurred efforts to now boost the supply of hotel rooms – in expectation of 17 million visitor arrivals by 2015, the STB’s target – what if tourist numbers fall short?

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Then there could be a supply glut when the extra rooms come on line, warned CIMB analyst Janice Ding.

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In the meantime, she expects to see business continue to shift from five-star to four-star hotels, if prices continue rising. From a corporate customer’s perspective, Mr Loh Chee Mun, senior vice president of Biosensors International Group, said his company has managed to secure good corporate rates with some hotels for visiting personnel.

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But “if the prices continue to rise, we may have to negotiate a better corporate deal, or we might have to consider switching hotels. That is not something we are currently pursuing”.

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Colleagues on a more consistent schedule here are put up instead at service apartments, which are cheaper than a hotel’s per-day rate.

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The labour crunch is another variable hotels have to contend with. Meritus Mandarin’s Ms Lim said: “What we see as a bigger challenge would be the rising operational costs due to the ever increasing oil prices, inflation and competition for talents in the hospitality industry.”

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Tight room supply or not, Natas’ Mr Khoo pointed out that hotels have always been mindful of periods of fewer visitors: ”Hotel rooms are perishable – when the night is over, it’s over. So hotels have to be quick to get their rooms filled.”

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Source: Today Newspaper

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