International Cruise Terminal won’t propel Singapore’s hotel sector

ICT will be busy by 2Q12 but OCBC expects most cruise passengers will fly into Singapore, take a cruise, return to land and then fly off, without staying in hotels.

According to OCBC, the Marina South International Cruise Terminal, which is scheduled to be ready in 2Q 2012, is slated to become one of the world’s busiest cruise centres by international passenger traffic.

Here’s more from OCBC:

The two-berth facility will be able accommodate large liners and will double Singapore’s current cruise handling capacity. As part of its commitment to grow the tourism business, the Singapore government announced in its budget speech that the GST Tourist Refund Scheme will be extended to international cruise passengers departing from the Singapore Cruise Centre and the ICT.

The ICT will be operated by SATS, which should see business grow as the volume of passengers going through the ICT increases with time.

The integrated resorts will be part of the catchment area for the cruise passengers and we think that Genting Singapore will see growth in its gaming business and visits to Universal Studios Singapore. Genting HK runs the Star Cruises line and might also be a beneficiary.

International Cruise Terminal means staying onboard, not onshore. We are bullish on the hotel sector over the long term, but do not read the potential 6.6% CAGR in visitor arrivals from 2012-2015 (to reach the 17m STB target) as being indicative of a 6.6% increase in hotel room night demand.

We project hotel room demand to be slightly lower at 6.4% due to “leakage” in the translation of visitor numbers into hotel room nights because of the increasing importance of the cruise business. Our understanding is that most cruise passengers will fly into Singapore, take a cruise, return to land and then fly off, i.e. Flight/Cruise/Flight, without staying in hotels.

The STB is targeting cruise passengers of 1.6m by 2015. Including noncruise arrivals by sea, the number of visitors arriving in Singapore by sea in 2011 was 1.33m. We project that the annual number of visitors arriving by sea could increase by at least 0.5m, that is, equivalent to 1,370 visitors/day. This figure is reasonable – one cruise ship landing at the ICT each day could give this figure.

The total passenger capacity of SuperStar Virgo is 2,800, which includes 1,870 in the lower berths. With accommodations in their own “floating hotels”, most cruise visitors will not require hotel rooms onshore. Granted, there will be accommodation for cruise crews and some visitors who stay in hotels before/after their cruise trips, but since the vast majority of current cruise visitors do not stay in hotels, we project that this will translate into a relatively small number of hotel room nights.

Assuming hotel room nights per hotel guest does not change, we have calculated a revised hotel demand growth at a CAGR of 6.4% from 2011-2015.