Hotel occupancy plunges to 60%

Source : Straits Times - 28 Feb 2009

HOTELS bore the brunt of the impact from a steep slide in tourist arrivals last month, with average occupancy tumbling to the 60 per cent mark - the lowest level since the 2003 Sars outbreak.

Average hotel room rates, which had been on the uptrend for the past two years, also took a beating, and are now at levels not seen since 2007.

The cause of the fallout: A 12.9 per cent drop in tourist arrivals for January compared to the same month last year.

In all, Singapore saw just 771,000 visitors last month, compared to 883,000 in January last year.

Visitor numbers from all but four of Singapore’s top 15 markets fell, with Indonesia - the Republic’s best ‘customer’ - dropping 24 per cent.

The only ones that grew were Vietnam, Hong Kong, the Philippines and Germany.

The Singapore Tourism Board (STB) said the overall decrease was due to the ‘impact of the current global economic slowdown on consumer sentiments and discretionary spending’.

January’s fall was swift but not unexpected. Though Singapore had been bracing itself for the impact of the global recession on tourism, numbers had been falling since last June, sparked by what STB referred to as ‘challenging global economic environment’.

As a result, expectations for a record-breaking year fell meekly by the wayside in July, and last month, the STB predicted that the number of visitors to Singapore this year will drop to 2005 and 2006 levels of between nine million and 9.5 million.

Hoteliers interviewed said that things might get worse.

Grand Mercure Roxy’s general manager Kevin Bossino said the real test will come in March and April, when business travel usually picks up.

He said corporate travellers curtail their travelling during festive periods like Chinese New Year, which fell in January this year.

But, once the festivities are over and people go back to work, they are expected to travel to make deals and attend meetings and conferences.

If the numbers stay bad this month and next, he said, they will point to a really bad year ahead.

Established hotels are also looking over their shoulders at new kids on the block, who are expected to make competition for the shrinking market even more cut-throat.

Rendezvous Hotel general manager Kellvin Ong is taking no chances. He has lowered rates from $200 to $190.

Such moves may mean that a price war might break out among hotels, said Shatec Institutes chief executive officer Steven Chua.

However, he advises against manic price-cutting as this could compromise service levels.

Instead, his advice for hoteliers is to focus more on adding value for the same price.

The knock-on effects of tourism’s downward spiral are being felt elsewhere too, such as at attractions, restaurants and nightspots.

Mr James Heng, chief executive officer of Singapore Duck & Hippo Leisure Group, said business has dropped by 30 per cent since financial markets began going south last September.

He said: ‘For the first time since our inception, we are not expecting to turn in good numbers.’