Chart of the Day: Mid-tier hotels to suffer as massive room supply floods the market

Rates and occupancy will drop this year.

Almost 4,000 new hotel rooms are expected to become available in Singapore's already-saturated hospitality market this year. The hefty new room supply will drag average daily rates and hotel occupancy over the next few months, according to a report by DBS.

DBS said that approximately 3,899 hotel rooms will be added this year, equivalent to 6.3% of existing supply. With tourist arrivals expected to remain stuck in the doldrums, DBS estimates that revenue per average room (RevPAR) will drop by 4.4% to $201, while occupancy is forecasted to fall to 83.7%.

The major new supply will be concentrated largely in the CBD area with 816 rooms being added from the following developments: The South Beach, Oasia Downtown Hotel, Premier Inn and Clermont Hotel.

The other major areas of concern would be the Singapore River precinct with the opening of M Social, Intercontinental Singapore Robert Quay (old Gallery Hotel) and The Warehouse Hotel.

Combined with the completion of refurbishment works at Swissotel Merchant Court, a total of 705 rooms will hit the market. Beyond the new supply in the Singapore River area, the rebranding of Riverview Hotel as Four Points by Sheraton should also cause competition in this sub-market to be more keenly felt.

DBS also noted that majority of new supply this year will come from the mid-tier category, with 40% of rooms coming from this segment.
"This should place the greatest pressure on RevPar for the Mid-Tier and Economy sectors as the new hotels seek to build up their initial occupancy and brand awareness,” DBS said.