Singapore's economy-tier hotels suffer 5.4% drop in RevPAR

Hotels can only expect a recovery by 2018.

Economy hotels in Singapore will have to endure another year-long agony in revenue per available room (RevPAR) as analysts predict that better days will only come next year.

The Singapore Tourism Board categorises hotels into four tiers based on a combination of factors that include average room rates, location, and product characteristics: Luxury, Upscale, Mid-tier, and Economy, according to OCBC.

Looking at FY16 RevPAR trends by segment, the Luxury segment seems to have posted the most, with -1.3% year-on-year (yoy) growth.

"On the other hand, economy tier hotels posted the poorest performance with a -5.4% drop in RevPAR," noted OCBC.

Here's more from OCBC:

In 2016, average occupancy rate (AOR), average room rate (ARR), and RevPAR grew by -0.9 ppt, -3.6%, and -4.6% yoy, respectively. This compares to the 5.3% decline in RevPAR for the whole of 2015.

For FY16, key data points to note were the 4.3% increase in hotel room supply, 2.2% increase in visitor days (on the back of a 7.7% increase in tourist arrivals), and 2% increase in Singapore GDP.

Looking forward to FY17, with a forecasted 5.9% growth in hotel rooms and tepid economic growth outlook, RevPARs are expected to continue their decline, and especially so for hotels that rely on corporate demand.

In addition, with FY17 being an odd-numbered year, we expect the MICE events calendar to be less packed for corporates.

Barring an event-related collapse in tourist arrivals and/or a recession, RevPARs are expected to improve in FY18 with better supply-demand dynamics.