A drop in visitor arrivals and a strong dollar negatively affected Singapore hotel performance in 2014 and continues to make an impact in 2015.
According to a Singapore hotel market update from Chestertons, international visitor arrivals to Singapore in 2014 totaled 15.1 million, a dip of 3.1 percent year over year.
Channel NewsAsia reported that economy and midtier hotel segments were the most affected by the drop in the number of visitor arrivals, especially from Indonesia and China.
"Currency is a major issue. Because of the strong Sing dollar, it is a dampener for a lot of tourists coming to Singapore," Donald Han, managing director of Chestertons, told Channel NewsAsia.
Chestertons said the average occupancy rate of Singapore hotels dipped 0.9 percent year-on-year to 85.5 per cent in 2014. And the average room rate of hotels in Singapore declined 0.2 per cent to S$257.7 per room per night.
In comparison, the luxury segment has been holding up well, even achieving one of the highest room rates in the past few years.
"Luxury at the moment has been naturally achieving the highest occupancy levels, which is surprising because traditionally it's the mid-tier economy that does better," executive director of Asia Pacific CBRE Hotels Robert Mcintosh told Channel NewsAsia. "That suggests quite a lot of pent-up demand for the luxury elements, and over time that has enabled them to lift their room rates faster than the other segments, so it shows you that Singapore has perhaps managed to position itself quite well in terms of the types of tourists it's been trying to get."
For this year, Singapore Tourism Board is expecting visitor arrivals to remain flat or to grow modestly by up to 3 percent to 15.5 million, according to Channel NewsAsia.
According to Smith Travel Research numbers for March 2015, Singapore's occupancy dropped 2.2 percent to 83.5 percent, average daily rate dropped 4.7 percent to SGD288.46, and revenue per available room stood at SGD240.78, a decrease of 6.8 percent.
"Singapore reported declines in all three key performance measures for March 2015," said Elizabeth Winkle, managing director of STR Global. "With more rooms to sell and fewer rooms sold, occupancy and ADR struggled this month. That said, Singapore remains a strong market with occupancy in excess of 80 percent, and absolute rates are at a healthy level."
Events and attractions in 2015 could potentially provide a boost for the hospitality industry, reported Channel NewsAsia.
"Overall, we expect continued headwinds in the hotel market," Han said. "The good news of course, in 2015, is that there are high-impact attractions that will spring up. These include the SEA Games which will start in June, and you've got your National Gallery Singapore that will open this year, plus a lot of international sports events that will bring in the crowd. And this is SG50, where there is a lot of celebrations."
According to Chestertons, 13 new hotels will be completed this year - about 40 percent of which will be categorized as mid-tier and 32 percent will be classified as upscale. Altogether they will add more than 4,000 rooms. This increase in supply, coupled with sluggish demand, means competition within the mass market will remain intense, analysts said.