HOTELIERS are caught in a dilemma over the Government’s latest land sales programme which has made available a range of new hotel sites across the island.
On one hand, some fear that if all the sites are snapped up, there could be a repeat of the mid-80s room glut which led to a sharp fall in occupancy rates and prices.
But few hoteliers want to be left out of the game so they are eyeing each other to see who bids for what and how aggressively they do so.
‘It’ll be alarming if a lot of the recent sites are triggered and completed in two to three years. Rates will be even lower,’ said a major hotelier who declined to be named.
The spark for this latest round of jitters was the move to make available eight new sites that can be used for hotels. These were in addition to three hotel sites released in the first half of the year.
Nerves went up another notch last week when the Government launched the Collyer Quay site for sale, stating that at least 40 per cent of its gross floor area must be for a hotel.
‘It is very possible that if all the released hotel sites are completed at the same time, it may lead to a situation of oversupply,’ said Singapore Hotel Association’s president, Madam Kay Kuok.
‘However, if the corresponding projected visitor arrivals materialise in tandem with the new supply of rooms, this situation may not arise.’
The sites are being released to meet an anticipated tourism boom that could see arrivals double to 17 million and receipts jump to $30 billion by 2015.
Singapore has about 37,000 hotel rooms, but could see a further 10,000 rooms in four to six years, industry sources said.
There is also rising optimism with hotels enjoying improved room rates.
But while average occupancies have risen to 85 per cent last year from 67 per cent in 2003, hoteliers say there is no risk of a room shortage.
There is not yet a need for more rooms unless hotels are ‘consistently running at a 80 to 90 per cent occupancy rate’, said Amara Holdings’ chief executive Albert Teo.
In fact, what the industry fears most is a glut of rooms which will hit rates, already low by global standards.
Hospitality consultant HVS International said that a five-star hotel room costs an average $213 a day here, compared with $215 in Bangkok and $346 in Hong Kong.
‘We are First World in terms of cost, but not First World in terms of room rates,’ Mr Teo said.
Yet despite high operational and investment costs, there appears to be keen interest in the new sites. Hoteliers see that growth prospects are good in the mid- to long-term, said HVS managing director David Ling. ‘There are opportunities for the three- to four-star hotel players,'’ he said.
Industry players say the key is in the timing. ‘If the 10,000 new rooms are completed over four to five years, then it will be ok,’ said the unnamed hotelier.
The completion must be ‘gradual and in tandem’ with the rise in tourist arrivals, said Hotel Phoenix general manager Noel Hawkes.
The hotel sites are on the reserve list so the land is put up for sale only if a developer commits to a minimum bid. And developers, being ‘rational investors’, may not take up the sites simultaneously, said Madam Kuok.
‘The experience of the oversupply in the mid-80s is still fresh in the minds of most of us in the hotel industry.’
Source : Straits Times - 7 Jul 2006
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