Chart of the Day: Hotel supply plunges to 10 year low in 2018 as land shortage bites

Only 281 new rooms will be built this year.

Singapore's annual hotel supply is poised to crash to a ten-year low to 281 new rooms that will be coming online by end-2018, according to CIMB Research.

This compares an average of around 3,000 rooms per annum in 2008-2017.

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The dismal supply figure is expected to rise slightly to 1,680 rooms by 2019 but taper off again to 651 by 2020. In fact, CIMB expects new hotel room supply to slow down to a compound annual growth rate (CAGR) of 1.3% in 2017-2020 compared to a CAGR of 5.5% in 2014-2017. 

The city state's chronic land shortage is largely to blame for low hotel levels as the government has less and less land set aside for hotel development. Data from CIMB show that from 101,798 sqm of gross floor area awarded from the government's land sale programme in 2007, there were only 24,716 sqm in 2014.

"Based on our checks on the URA website, we noted that there have been no new sites for the development of hotels since 2015," the report's authors noted. 

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A silver lining, however, could be found in this dismal tale as the low room supply environment was complemented by strong tourist arrrivals. This, in turn, gave hoteliers the confidence to raise room rates which have been improving since February. As of end August, Singapore received around 12.61 million tourists.