Singapore remains a hotel investment hotspot

INDUSTRY observers concur that Singapore will continue to be a hotel investment hotspot for now, given that room rates are anticipated to resume their bull run for the foreseeable future.

“Occupancy rates should remain around the 80 per cent mark in the next couple of years, and this should keep rates relatively buoyant. Prior to the opening of the integrated resorts in 2010, Singapore room rates were lower than they should have been and now hotels are making up for lost time,” said Robert Hecker, managing director, Horwath HTL.

Some 10,000 rooms are coming on-stream in Singapore across all categories between now and 2016, raising the country’s total room inventory by 20 per cent and bringing room count to just over 50,000. Average room rates are expected to rise by five to 10 per cent from 2011. Hotel industry analyst CB Richard Ellis expects occupancy to hover between 83 and 86 per cent in 2012.

Eric Levy, managing director of Tourism Solutions International, said investors were drawn to Singapore because “it is a safe bet”.

“The yield per square footage in Singapore is better than most other markets in the region. Singapore offers hoteliers and investors ample opportunity to secure modest, but guaranteed returns, as tourism arrivals should remain relatively robust given the onslaught of new tourism infrastructure anticipated in the next couple of years.

“In fact, the main problem hotel investors face is actually finding a suitable property or piece of land in Singapore to put their stake down in the first place,” added Levy.

Hecker remarked that hotel investors in Singapore were also keen to gain a foothold here, as the country offered not only “good levels of revenue and profit, but high capital appreciation as well”.

However, he warned that escalating price inflation in Singapore could potentially erode margins. “On top of escalating land costs, operational costs are rising, and this will inevitably eat into the bottom line,” he said.

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