Hotel room supply in Singapore predicted to spike 13% by 2015

Competition will remain stiff, says analyst.

According to DBS, it has seen significant investments made in growing the accommodation sector in Singapore, which has been completing progressively over the past few years.

Based on Horwath HTL, an expected 7,000 new hotel rooms are currently under construction, implying a further 13% expansion in supply over 4Q13-2015 or CAGR of 5.2% over the same period.

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This is equivalent to an additional 2.6m room nights. While we believe that the increase in new rooms aims to serve the expected growth in visitor arrivals to Singapore in the medium term, the pace of new supply entering the market is in our view likely to mean that competition will remain stiff.

In 2013, new hotel completions are mainly in the mid-tier segment and economy segment, which in our view caters to the accommodation demand from tourists and budget travellers who are more price-sensitive.

Contrastingly, hotel completions in 2014 will be well-spread across the Mid-tier (43%), Upscale (38%) and Economy (19%).

This is likely to mean that these new hotels will be competing with existing hotels that currently serve both the corporate and leisure segments. Thus, we believe that operational headwinds due to competition from new supply are likely to persist going into 2014.