Singapore hotels revenue per available room to nudge 3% higher

Rates to remain 'nimble,' says analyst.

According to DBS, in terms of strategy, it expects hoteliers to remain nimble in their rates, with a focus in maximising operating yields. As such, DBS projects RevPARs for the industry to rise 3% in 2013 to S$223/night.

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With a base case scenario of 16.2m visitors for 2014 and assuming that the average length of stay is maintained at 3.8 days, as for the last two years, we project accommodation demand to grow by c.4.8% to 16.9m nights, in line with the growth in room inventory.

Average occupancy rates (AOR) are expected to stay stable at c.87% in FY14 and to decline by 2ppts.

Trends that we have observed in the prior quarters are expected to continue – hoteliers are likely to have short booking visibility due to the popularity of online reservations and trips being booked closer to the actual travel dates.

We expect companies, especially financial institutions, to maintain a watchful eye on costs and travel budgets, based on our channel checks, while global Request for Proposal exercises (RFPs) for major corporates are likely to see flattish, if not minimal hikes.

As such, we believe that industry ADRs are likely to increase in 2014 on the back of a robust MICE pipeline, while supply completions are likely to cap upside at c.3%. Even then, we expect hotels with larger conference facilities to do better, given recovering demand.