Chart of the Day: Brace for another back-end loaded hotel room supply in H2

About 1,925 rooms are expected to hit the market.

It looks like there will be a sequel to 2H15’s overabundance of hotel rooms, as analysts predict that the flood of new supply expected in 2H16 may drown the market again.

According to a report by UOB Kay Hian, 2015 saw 3,736 new rooms, which included the shock addition of 1,500-room Hotel Boss in the last quarter of the year. This partly resulted in the back-ended loaded supply for 2015.

Accordingly, in the first quarter of 2016, room rates slipped 2.8% YoY while occupancy remained stable at 84.3% thanks to a spike in visitor arrivals cushioning 2H15's supply glut at the expense of rates charged by hoteliers.

The report warns that there will be further pangs of indigestion from back-end loaded 2H16 supply.

"Some 1,925 rooms, which account for 67.2% of 2016F supply (2,866 rooms), are slated to hit the Singapore market. The mid-tier and upscale/luxury (segments account for 82.5% of 2H16 estimated supply of 1,925 rooms, according to consultant Horwath HTL. For the year, the mid-tier (49%) and the upscale/luxury (29%) segments account for 78% of room inventory," UOB Kay Hian asserted.

"This may also partially explain the softer industry RevPar (-2.5% yoy) in 1H16 as the sector grapples with supply indigestion," it added.