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Midscale and economy hotels outperformed luxury segment in 1H2015

By Tan Chee Yuen

/ CBRE, The Edge Property |

August 13, 2015 12:00 PM SGT

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Midscale and economy hotels performed better than luxury hotels in the first half of 2015, bucking the trend for the previous quarters, according to CBRE. Tourists have become more price-sensitive because of the appreciating Singapore dollar and opted for midscale and economy hotels instead.

Occupancy rates for midscale hotels and economy hotels averaged 83.8% and 82% respectively in May 2015. In comparison, occupancy of luxury hotels slipped 5.2 percentage points y-o-y to 80.6%

Overall average daily rate (ADR) inched down 3.4% to $251.48. Notably, ADR for the luxury and economy segments both contracted y-o-y by 3.3% and 3.8% to $444.90 and $102.80 respectively in May 2015. For the hotel market as a whole, Revenue Per Available Room (RevPAR) also dropped 4.6% to $213.29 in the corresponding period.

Despite the drops in ADR and RevPAR, Robert McIntosh, Executive Director, CBRE Hotels Asia Pacific believes Singapore’s fundamentals are sound. What needs work, however, are service levels and property refurbishments, he says. "Singapore has the highest average room rates in Asia, and guests expect real value for money and the high occupancy levels," explains McIntosh.

Moving forward, CBRE expects Singapore’s tourism market to face several headwinds if the Singapore dollar continues to appreciate against other regional currencies such as the Malaysia Ringgit and Indonesia Rupiah. Within Asia, competition for tourist dollars has intensified with Thailand and Japan boasting strong visitor arrivals.

A steady supply of hotels will also continue to put pressure on occupancy rates and ADR over the next 12 months, adds CBRE.

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