RevPAR for hotels is anticipated to recover in 2022 and increase progressively in 2023

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The lifting of restrictions on international travel in 2022 has led to a rapid growth of the hotel business in Singapore. Resumption of big-scale MICE (meetings as well as incentives conferences, exhibitions, and meetings) events has helped a number of hoteliers regain the revenue per room available (RevPAR) to near pre-pandemic levels.

Based on the data from the Singapore Tourism Board (STB) The average RevPAR of Singapore hotels was $191.96 in the year 2019. The number dropped significantly in the range of $88.59 in 2020, before increasing little in value to $91.60 at the end of 2021. The average RevPAR was up to $177.42 at the end of October 2022.

The present RevPAR is 93% that of RevPAR reported in 2019. According to Calvin Li, head of transaction advisory servicesat JLL Hotels & Hospitality Group. “This performance is much better than anticipated as, after the removal of restricted travel rules, we’ve observed a significant increase of international flights from Singapore.”

The pipeline of events hosted by Singapore

Li claims that there’s been significant improvements in the local hotel industry’s recovery this year , thanks to the removal of border control measures as well as the reversal of safe-distancing laws in the first quarter of the year. Li adds that this has helped create a sense that there is a sense of “revenge travel” within local travelers.

“With the relaxation of travel restrictions within and around the Southeast Asia region and globally the second half of 2022 was a booming time for significant MICE occasions in Singapore as well as among our neighboring country,” he says.

The most notable events this year which led to an increase in international visitors to Singapore included events like the F1 Singapore Grand Prix in October, which brought in more than 302,000 race enthusiasts and spectators, as well as The Bloomberg New Economy Forum in November. Additionally there was the G20 summit at Bali, Indonesia, in November also brought in foreign visitors in Southeast Asia. Southeast Asia region.

“The elimination of the seven day Stay Home Notice requirement for travelers who are not fully vaccinated in August has led to a increasing number of tourists visiting Singapore,” says Lam Chern Woon director of research and consultancy, Edmund Tie. He also says the fact that Singapore has been in strong place to benefit from the current recovery in tourism because of its appeal as a major tourist destination both for business and leisure as well as a steady stream of events.

However, the recovery has been hindered by the global economic downturns, including a labor shortage in the hospitality industry, the rising cost of energy, F&B and labour; and also the fluctuations in currency around the world, says JLL’s Li.

“We anticipate that the RevPAR for 2023 to increase due to a substantial increase in the ADR, or average daily rate. (ADR) to compensate for an eroding occupancy rate and we expect it to not surpass levels from 2019 by the year 2023.” claims Li. The Hotel’s ADR is the amount of rental income earned by an daily occupied room.

Recovery was reintroduced but without Chinese tourists

The segment of luxury recorded the biggest increase this year, rising to an average of $194.73 at the beginning of January and $497.65 at the end of October. In addition, the RevPAR of hotels in the luxury segment climbed by $113.50 at the beginning of January and $279.39 at the end of October. In the same way those in mid-tier hotels segment increased by $70.91 to $188.81 in the same time.

“We are cautiously hopeful about 2023. The growth will be contingent on the specific segment. The revenues of luxury hotels are predicted to be higher than levels in 2019 by 2023. Meanwhile, the premium segment is expected to surpass pre-Covid levels as well, helped by a significant rate of growth” Li adds. Li.

He also says that the mid-priced and budget hotels could rebound at a slower rate because these properties depend on groups or the mainland Chinese tourists.

Based on STB statistics, the mainland of China is the most significant category of visitors to Singapore at 3.63 million people visiting in the year 2019. The number of visitors dropped dramatically to 111,180 by the end of October 2022. Travelers from Indonesia are now the biggest category of visitors this year, with over 906,900 people arriving in Singapore.

“Mainland China is a significant market, since it was our largest source market in the year 2019, which accounted for more than 20% of all arrivals the year. The growth in tourism will certainly be limited if visitors coming to mainland China remain limited,” says Lam.

Investment deals return in vengeance

The investment activities in the hotel property sector was in line with the rapid growth of international tourism. According to a study by JLL the transactions in the hotel industry within the Asia Pacific region in the beginning of the year reached US$8.4 billion ($11.39 billion) which is a 16% in a year-over-year increase.

In the past twelve months, the biggest purchase of a hotel for a hotel in Asia Pacific was the Hilton Millennium Seoul, which was sold by Singapore-listed property giant City Developments to South Korean fund manager IGIS Asset Management for US$929.8 billion. This is equivalent to US$1.37 millions per key. The deal was signed in February.

Then came an auction of Hyatt on the Bund in Shanghai, China, by Chinese developer Shimao Group Holdings. This hotel property was transferred by the Shanghai Land Group, a property investment firm owned by the Shanghai city government for the sum of US$720 million in the month of January this year. It’s around US$1.14 millions per key.

JLL anticipates the investment in hotel real estate in 2022 within the area will exceed US$10.7 billion. However the demand for investment grade hotels properties throughout the region exceeds the current availability.

“Buyers remain actively looking for mature markets, such as Australia and Japan and Japan, but they are also looking at markets for leisure. In the second quarter of 2022, higher rates of interest have impacted the private equity market which was the most popular buyer in the past 3 years across Asia Pacific,” says Li.

Significant transactions taking place in Singapore

In Singapore investments in the hotel sector were at US$923 million during the beginning of this year, which was higher than the same amount in the year 2019. JLL anticipates that the real estate market for hotels to close this year with USD950 million in investments.

The biggest hotels deal to be made to be made in Singapore during the past year is the Orchard Hills Residences Singapore MGallery located at 30 Bideford Road. The property was purchased through the jointly-owned venture (JV) that was led by the mainboard-listed Boustead Projects for $515 million in June. Other partners in the JV include Roark Capital, and Lim Teck Lee Investments.

The mixed-use property includes healthcare, hospitality commercial, and healthcare components. The property was acquired by a local privately-owned firm Sin Capital, which defaulted on a bond of $110 million which was secured with the property. The Boustead-led JV bought the property during a liquidation auction with 14% reduction from the original price at the time it went on the market for sale in December 2021.

Another important hotel deal of the season was the purchase of previous Sofitel So Singapore by developer Royal Land Group to Viva Land for $240 million in May. The deal is around $1.8 million for each key.

Viva Land also owns the neighboring Robinson Point and has indicated that it’s looking at “possible potential synergies” among the two properties according to the company in its press release to announce its acquisition of Robinson Point in May.

Despite a rather shorter recovery time during 2H2022, tourism in Singapore is quickly growing. In the process, investors have expressed interest in the hospitality sector that is expected to continue to increase until 2023, according to Edmund Tie’s Lam.

2023 and Beyond

According to a study by Cushman & Wakefield, Singapore’s average hotel RevPAR is predicted to rise to $179.60 throughout 2022. This is compared to $191.96 in the year 2019. The firm predicts that RevPAR will rise to $186.15 by 2023, but the local hotel market will likely remain below levels prior to the outbreak for now.

Certain of the major tourism developments that are expected to support the steady growth of the market for hotels in the coming years have been revealed. For instance The Resorts World Sentosa expansion and Mandai Eco-tourism hub are set to be completed by 2024. The expansion of Marina Bay Sands is also expected to be completed in 2026.

Future plans for development comprise Changi Airport Terminal 5, the renovation in Pulau Brani in the Greater Southern Waterfront project, as well as development of the Jurong Lake District development.

“Between 2023 and 2026 7,186 more hotel rooms will become available on the market, as compared with 10,747 in 2016 and 2019.” claims JLL’s Li. “We expect the hotel market in Singapore to be able to sustain its growth with no issues on the supply side however, we do note that there will be a limited number of developments within Singapore’s city-state.”

According to URA information and studies conducted by Edmund Tie, a total of 5,482 hotel rooms are planned between 2023 between 2023 and 2025. A majority% of these are expected to be completed by 2023 which includes the 987-room hotel project located at 8. Club Street by Worldwide Hotels and the 350-room Pullman Hotel.

Then the it is expected that 18% of the anticipated inventory will be complete in 2024. Then the remaining in 2025. In the near future, hotel developments will include the renovation of Faber House, Moxy Singapore Clarke Quay, and the revamp of Tower 15.

“The rise in the number of hotel completed in the coming years will be a reflection of Singapore’s changing tourism landscape and will cater to the anticipated growth in hotel demand,” says Li.