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Demand

Resurgence in local cases to take a toll in the coming quarters. Singapore imposed stricter COVID-19 measures from 16 May to 13 June in a bid to curb community transmissions. Staycation demand will likely be dampened in the coming weeks and across the June school holiday season. Hotels with government bookings saw extension of government contracts, which contributed to the higher monthly average occupancy of 51% in 2Q21. As Singapore exited Phase 2 Heightened Alert (P2HA) in mid-Aug into ‘endemic mode’, we expect to see continued demand for quarantine rooms alongside rising case counts as the nation maintains its relaxed rules.

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Vaccinated travellers can soon serve quarantine in their own residences, reducing travel ‘sunk cost’. Meeting the herd immunity threshold with 75% of population vaccinated in August 2021, Singapore is now the most vaccinated country in the world. Besides easing restrictions within Singapore, border measures have also been relaxed for a selected few countries. From 9 September onwards, fully vaccinated travellers from countries such as Australia, Republic of Korea and Germany can apply to opt out of SHN facilities and serve their quarantine in their own residences, thus reducing ‘sunk cost’ to be paid for hotel quarantine. Quarantine is set at 14 days, and this has also been reduced to 7 days for certain countries. We anticipate demand will come from the return of long-term work passholders, corporate travellers, and friends and families for the remaining of 2H21. We are cautiously optimistic for leisure demand to gain more traction towards year end as international travel sentiment improves and partner country pandemic situation remains well controlled.

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Operating stats showing YTD improvement. Operating stats for the quarter continued to see recovery q-o-q on both fronts – occupancy and average room rates. Occupancy improved 11ppts q-o-q to 51% monthly average in 2Q21 while average room rates improved 4% q-o-q to S$151.80. The improvement in occupancy is likely associated to more hotels onboarded onto the government’s quarantine business as Singapore entered P2HA in 2Q21. Within the listed S-REITs, Village Hotel Sentosa (joint venture held by Far East Hospitality Trust) came onboard the SHN business to be Singapore’s 6th COVID-19 community care facility. Most hotels with SHN business also saw an extension of their contracts into 3Q21 at least.

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Supply

Low risk of competing supply. The supply outlook remains tepid with only 1.5% CAGR increase in the number of total rooms expected to be completed between 2021 and 2023. A good number of rooms are in the upscale (43%) and luxury (32%) end of the hospitality sector and located within the city centre. Key notable projects include Hilton Singapore Orchard (rebranded from Mandarin Orchard) with 1,080 rooms expected to be launched in 2022, and Worldwide Hotels with 900 rooms expected in 2023.