Hotel occupancies to suffer from oversupply of rooms

Revenue per available room could then drop to SG$227-229 in 2013F-2014F after hitting a new high in 2012.

Hotel room supply is estimated to grow at 6.3% CAGR from 2011 to 2015, outstripping demand growth of 5.9%.

Analysts from Maybank forecasted that the additional supply of hotel rooms will affect occupancy rates. The pending addition of 11,441 new rooms could outstrip demand in 2013-2014.

Here's more from Maybank Kim Eng:

Growth to moderate. The prospect of a slowing economy in China and India, the unfolding of the Eurozone crisis and the US economy’s snail’s- pace recovery will no doubt impact tourism in Singapore. After a record 2011, the Singapore Tourism Board expects 2012 to see a moderation in growth with around SGD23-24b in tourism receipts and 13.5-14.5m in visitor arrivals.

Supply glut looms. An expected 14.2m tourist arrivals is set in 2012, up 8% from 13.2m in 2011. From 2011 to 2015, the estimated hotel room supply, measured in terms of available room nights, will grow at 6.3% CAGR, outstripping demand growth of 5.9%. In all, 11,441 new rooms, 23.5% of existing stock, from known projects will be added to the market between 2Q12 and 2015. This will push the number of gazetted hotel rooms past the 50,000 mark by 2015. However, so long as occupancy levels exceed 80%, the average room rate may hold above SG$245.

ARR to slow to 3.2% pa over 2011-2015. Singapore hotels have, and will continue to benefit from the growth in tourist arrivals, which is projected at 5.2% CAGR over 2011-2015F. But the additional supply of hotel rooms will put a damper on occupancy rates and this is estimated to peak at 90% in 2012F before easing to 84% in 2014F. This means that revenue per available room could hit a new high of SG$233 in 2012F but fall to SG$227-229 in 2013F-2014F and peak again at SG$237 in 2015F.