Singapore hotels: A legacy of resilience

By Mike Batchelor,

CEO

/ JLL Hotels & Hospitality Asia |

February 28, 2020 4:32 PM SGT

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SINGAPORE (EDGEPROP) - Since January, the spread of the Covid-19 coronavirus has become a confronting reality for individuals, communities and businesses all across the globe. The unpredictable nature of the outbreak has also prompted a substantial realignment of personal and professional priorities, forcing a significant rethink of short term and medium term strategies to ensure the continuity and stability of businesses across Asia Pacific and beyond.

With travel restrictions implemented by many corporations globally, the cancellation of conferences, and a shift of individual leisure plans, the region’s hotel sector has received wide scale attention. But these government, corporate and personal responses have been swift and the impact on the hotel sector — while too early to accurately predict — has been immediate.

The dynamics of hotel occupancy in Singapore have changed exponentially since 2003 and the market share of Chinese visitors increased considerably from 8.9% in 2002 to 19.0% in 2019 (Samuel Isaac Chua/EdgeProp Singapore)

The big question now confronting members of the hotelier community and observers of the sector is whether the impact will be short-term or long-term in nature. For Singapore — a major international tourism and business travel destination — this question became louder in recent weeks but the government has responded accordingly on Feb 18, committing significant resources to combat businesses impacted by Covid-19 in the 2020 Budget.

But perhaps the best indication of what the impact of coronavirus will be on the city state’s hotel sector is found by examining a similar scenario which occurred in 2003. While the full impact of this current outbreak is still unclear, we have looked to Singapore’s resilience to severe acute respiratory syndrome (SARS) as a benchmark. While the SARS virus and its short-term impact on the tourism sector were significant, it does however provide meaningful insights into the potential recovery tract of the epidemic for Singapore hoteliers. Limited long-term impact

SARS, its spread and containment are different from Covid-19. However, it should be understood by hoteliers that there was no long-term impact on visitor arrivals to Singapore. As a testament to the city-state’s resilience and appeal as a global destination, the recovery in visitor arrivals was almost immediate after the city-state was declared SARS-free on May 30 2003. In 2H2003, visitor arrivals rose to 3.6 million from 2.5 million in 1H2003. By 1H2004, visitor arrivals had rebounded to pre-crisis levels.

Expecting a China push

The dynamics of hotel occupancy in Singapore have changed exponentially since 2003. Significantly, the market share of Chinese visitors increased considerably from 8.9% in 2002 to 19.0% in 2019. Using SARS as a guide — where mainland China was the most affected country — its travellers quickly returned upon containment and the lifting of restrictions. Mainland Chinese visitor arrivals to Singapore recovered swiftly, and in 2004 — the first full year after the epidemic — visitors from China increased by 54.8% relative to 2003. Encouragingly, China was the quickest

to rebound after SARS, registering an increase of about 31% in 2004 from 2002, higher than the 10.1% improvement in total visitor arrivals during the same period.

The post-SARS bounce

Historical data shows that Singapore’s market- wide occupancy rate averaged at around 74.5% during the 12 months from March 2002 to February 2003, when the SARS situation intensified. Amazingly, just 60 days after Singapore was declared SARS-free on May 30 2003, market-wide occupancy had quickly recovered, exceeding the 70% threshold by July 2003. By October 2003, the average occupancy rate was 75.7%, already surpassing the pre-SARS 12-month average of 74.5%. Similarly, the average daily room rate (ADR) and revenue per available room (RevPAR) rebounded quickly and robustly to pre-SARS levels by October 2003.

The Singapore government will help to ensure that the impact on the hotel and hospitality sector will be cushioned. On Feb 18, it announced a property tax rebate of 30% for the year 2020. This will primarily focus on the accommodation and function room components of licensed hotels and serviced apartments, as well as prescribed MICE (meetings, incentives, conferences and exhibitions) venues.

Furthermore, a temporary bridging loan programme will be introduced for a year to help businesses in the tourism sector with their operating costs and cash flow. This will undoubtedly help and stand as measures we wholeheartedly support, but we must be mindful that this situation changes each day and hotels will need to review strategies in the short-to-medium term.

The aviation sector will also be the recipient of assistance. Primarily, Changi Airport will receive a 15% property tax rebate. Additionally, rebates on aircraft landing and parking charges will be rolled out to the aviation sector, along with rental rebates for shops and cargo agents at Changi Airport.

Encouragingly, the budget also outlined enhancements to the adapt and grow Initiative for directly directly impacted sectors, such as hotels, retail, food services, tourism, and air transport. Elsewhere, funding support duration for the following existing redeployment programmes, including the Job Redesign Place-and-Train (PnT) Programme for Hotel Industry, will be extended from the current three months to a maximum of six months.

Bringing it all together, SARS was a tragic and unexpected event. The Covid-19 outbreak, while a fluid situation, also fits this mould. However, if this situation is contained quickly and when normalcy returns to global travel, Singapore’s hotels could potentially experience a sharp influx in arrivals. Using SARS as a benchmark, we remain confident in the Singapore hotel industry’s ability to persevere during this challenging time, to be prepared when travel restrictions and tourism confidence returns, and foremost, again, display the resilience it showcased during and post-SARS.

At this time, our main priority should remain the health and safety of our families and communities, and to closely monitor this unpredictable situation to make sound judgments. While challenges will undoubtedly continue for the global hotel space, once we receive more clarity and the Covid-19 outbreak is contained, we’re confident that Singapore will quickly emerge as one of the first tourism locations to rebound. Why are we so sure? Because Singapore has a legacy of resilience.