Hazy outlook for tourism sector
By Kang Wan Chern
By Kang Wan Chern
As smoke from the forest fires in Sumatra continues to engulf Singapore in a thick layer of hazardous haze, concerns are mounting over its impact on the country’s tourism-related industries, which comprise about 5%-6% of its GDP. At 12pm on June 21, the Pollutant Standards Index (PSI) – a gauge on air pollution levels monitored by the National Energy Agency – hit an all-time high of 401 which beat the previous record of 226 in 1997 before falling to 143 at 5pm.
More worryingly, the poor weather conditions are expected to linger for several more weeks, enough to significantly curb the volume of visitors coming into Singapore and adversely affect the revenues of retailers, hotels, restaurants and the country’s two casinos – Marina Bay Sands and Resorts World Sentosa. Indeed, many visitors have already cut short their stays in Singapore and some are considering calling off plans to visit the country altogether should the haze persist, surveys conducted by the local media suggest.
In 1997, tourist arrivals in Singapore dropped by about 15% a month between September and October. In 2006, when the haze reached a PSI reading of 106, tourist arrivals dropped by about 6% a month between September and October. This time, brokerage house Barclays estimates that the drop in arrivals “should be somewhere between the two. We think arrivals will recover quickly when the haze dissipates…but prolonged hazardous conditions could affect Singapore’s international reputation [as a tourist destination],” it writes in a June 20 report.
Meanwhile, local brokerage OCBC Research has also issued a June 21 report on the impact of the haze on the Singapore hospitality sector. “The haze will likely weigh on the performance of Singapore hotels through part of 3Q2013,” OCBC notes. “While an industry source indicates that new hotel bookings are not affected just yet, we think that a relative weakness in bookings later is likely, given that the haze could last at least several weeks.”
That could worsen a declining trend in the revenues of Singapore hotels seen between January and April this year. During the period, revenue per average room (RevPAR) for Singapore hotels fell 2.6% yoy to $218. Average daily room rates were down across all the hotel sub-sectors, with upscale hotel rates down 9.8% yoy to $267.70, followed by economy hotel rates, which fell 8.3% to $100 a night.
Meanwhile, bookings in 1Q2013 grew by only 2.8% to 2.8 million room nights even though visitor arrivals rose 6.4% over the same period. “Visitor arrivals are converting into few room nights, continuing a trend we note in 2012,” writes OCBC. During the year, total bookings were flat even though visitor arrivals grew by 9.1% yoy, as more tourists are now stopping in Singapore for day trips while on transit.
That’s not all. The haze will also exacerbate an already poor year for the meetings, incentives, conferences, exhibitions (MICE) business, as outdoor activities are likely to be called off. Typically, odd-numbered years see less MICE activities – which contributes a significant portion to the revenues of the two Integrated Resorts – being conducted.
In that light, OCBC is maintaining its neutral stance on the Singapore hospitality sector. “We forecast that hotel room supply will grow at 5.8 per annum in 2013-15, higher than the hotel room demand growth of 5.4% per annum,” the brokerage writes. Its top pick in the sector is Global Premium Hotels, which operates the chain of Fragrance Hotels in Singapore.
In 1997, tourist arrivals in Singapore dropped by about 15% a month between September and October. In 2006, when the haze reached a PSI reading of 106, tourist arrivals dropped by about 6% a month between September and October. This time, brokerage house Barclays estimates that the drop in arrivals “should be somewhere between the two. We think arrivals will recover quickly when the haze dissipates…but prolonged hazardous conditions could affect Singapore’s international reputation [as a tourist destination],” it writes in a June 20 report.
Meanwhile, local brokerage OCBC Research has also issued a June 21 report on the impact of the haze on the Singapore hospitality sector. “The haze will likely weigh on the performance of Singapore hotels through part of 3Q2013,” OCBC notes. “While an industry source indicates that new hotel bookings are not affected just yet, we think that a relative weakness in bookings later is likely, given that the haze could last at least several weeks.”
That could worsen a declining trend in the revenues of Singapore hotels seen between January and April this year. During the period, revenue per average room (RevPAR) for Singapore hotels fell 2.6% yoy to $218. Average daily room rates were down across all the hotel sub-sectors, with upscale hotel rates down 9.8% yoy to $267.70, followed by economy hotel rates, which fell 8.3% to $100 a night.
Meanwhile, bookings in 1Q2013 grew by only 2.8% to 2.8 million room nights even though visitor arrivals rose 6.4% over the same period. “Visitor arrivals are converting into few room nights, continuing a trend we note in 2012,” writes OCBC. During the year, total bookings were flat even though visitor arrivals grew by 9.1% yoy, as more tourists are now stopping in Singapore for day trips while on transit.
That’s not all. The haze will also exacerbate an already poor year for the meetings, incentives, conferences, exhibitions (MICE) business, as outdoor activities are likely to be called off. Typically, odd-numbered years see less MICE activities – which contributes a significant portion to the revenues of the two Integrated Resorts – being conducted.
In that light, OCBC is maintaining its neutral stance on the Singapore hospitality sector. “We forecast that hotel room supply will grow at 5.8 per annum in 2013-15, higher than the hotel room demand growth of 5.4% per annum,” the brokerage writes. Its top pick in the sector is Global Premium Hotels, which operates the chain of Fragrance Hotels in Singapore.
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