Hotels poised for lackluster performance in 2Q

April tourism figures less rosy than 1Q’s while channel check shows weaker 2Q, says OCBC.

The weak global macroeconomic conditions have begun to take a toll on the short-term performance of the local hotel industry. Apr figures released by the Singapore Tourism Board show that visitor arrivals grew 9% YoY, much less than the 14.6% YoY growth for 1Q12.

Indonesia showed a significant slip in growth rate for Apr (+10.3% vs +16.0% for 1Q). Australia, HK and the UK showed YoY declines of 4.0%-14.4%. Average RevPAR for Apr grew 10.3% YoY versus the 14.7% for 1Q12.

According to OCBC, based on their spotcheck with hotel rooms wholesaler, they infer that while Apr performance for local hotels was alright, the start of May marked the beginning of a relatively quiet period for hotels, except during Herbalife Extravaganza event where influx of 24k people are expected from 18-20 May.

"We estimate that occupancy growth for May was two-thirds of what was seen for Jan-Apr. 3-star hotels were different from the pack and had strong occupancies around 90%. Jun so far has been quite slow too. As an indication of the less upbeat conditions, hotels are more willing to engage wholesalers and use discounts. Even some 5-star hotels have been cutting rates by 50% at the last minute,"  said Sarah Ong, analyst at OCBC.

3Q uncertain?

According to OCBC, Jul and Aug are traditionally slow months for the hospitality sector. Hotel figures for Jul last year were very strong (highest occupancy month for all four hotel tiers) and could present a reasonable hurdle
for this Jul to outdo. Jul figures, Ong said, currently do not look impressive but the short lead time means that the visibility is reduced.

"The integrated resorts were exceptions in 2Q and they continue to prove themselves as all-weather attractions, with their hotels clocking good occupancies through till Aug," she said.