Chesterton again urges release of more hotel sites Property consultant cites high occupancies and room rates

BY

LEE MEIXIAN

LEEMX@SPH.COM.SG   @LeeMeixianBT

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Imminent room shortage at hotels? Chesterton says there appears to be no attempt to alleviate the looming shortage of hotel rooms, and that no new hotel sites were released under the 2014 government land sales programme. - FILE PHOTO

More supply needed?

PROPERTY consultant Chesterton is again calling for the government to release more hotel sites.

Hotels in Singapore have been enjoying high occupancies (85.5 per cent from January to July this year) and average room rates (S$256.10 per room per night over the same period), which should trigger supply, and yet, according to Chesterton, there appears to be no attempt by the authorities to alleviate the looming shortage of hotel rooms.

"Rather, the authorities seem to be tightening the supply flow," it said in an exclusive report to BT.

For one thing, no new hotel sites were released under the 2014 government land sales programme at all, Chesterton said.

For another, from July, the Urban Redevelopment Authority (URA) has tightened approval of new development applications for hotels, as well as boarding houses and backpackers' hostels.

URA had been receiving more applications for new hotels, boarding houses and backpackers' hostels, including proposals to change the use of sites not zoned for hotel use, and had implemented the change because it felt that "such uses should not dominate and displace other commercial activities in (commercial) areas".

The new policy affects the Outram, Rochor, Downtown Core and Singapore River Planning areas - which include a big chunk of Chinatown and Little India shophouses. URA will also not allow such proposals outside the central area.

Akshay Kulkarni, regional director of hospitality, South & Southeast Asia, for Cushman & Wakefield, echoed Chesterton's views on the imminent hotel room shortage - particularly in the mid-market and upscale segments - as well as a need for more supply of hotel-zoned sites.

"Unfortunately, most of the sites that were released in the recent past have been so expensive that they don't make sense for building anything except luxury hotels.

"Luxury hotels have done fairly well in the Singapore market over the last couple of years, but eventually I think there will be a need for more upscale and mid-market hotels. That will be the need of the hour," he said.

However, Margaret Heng, executive director at Singapore Hotel Association (SHA), expressed surprise at Chesterton's call for more hotel-zoned sites to be released.

She said: "According to the Singapore Tourism Board (STB), 12,200 hotel rooms are coming onstream until 2018, which is a healthy pipeline. I don't foresee any shortage.

"The reason why URA might have tapered its hotel site supply could be because of the slight slowdown in visitor arrivals now. It could be cautiousness on their part as they monitor the market."

Visitor arrivals in Singapore slipped 2.8 per cent to 7.5 million in the first half of 2014 as the number of Chinese visitors slumped 30 per cent. This was partly due to the disappearance of Malaysia Airlines flight MH370 in March this year as well as political tensions in Thailand. Chinese tourists usually travel to Malaysia, Singapore and Thailand together as a multi-destination tour.

In its report, Chesterton said it expects the average room rates of hotels to increase, due to the curb on supply and a consequent restriction on the number of potential competitors.

"Existing hostels and hotels located in these planning areas would also see an increase in their capital values over time, with demand from investors seeking good yields," it said.

As it is, the influx of tourists coming to Singapore this month for the Formula 1 Singapore Grand Prix will put additional pressure on current hotel occupancies and room rates. Likewise for October, which will likely see a spillover from those who choose not to travel the month prior due to the event, Chesterton's executive director of hotels, capital markets and valuation Chee Hok Yean said.

According to her calculations, some 9,500 rooms are expected to come onstream from now until 2018 - a difference of about 3,000 compared to STB's estimate - but she could not reconcile the difference between the two statistics.