The return of travel, coupled with pent-up demand accumulated during the COVID-19 period, drives our prediction of a V-shaped recovery for the sector to 2019 levels in the years to come.
The re-opening of borders will depend on the speed of the roll-out of mass vaccination and governments' ability to coordinate on a vaccination travel ID.
Nevertheless, travel will return. It's not a matter of if, but when. There will be changes and more emphasis on factors such as hygiene, but history has shown that the world can and will adapt, with travel continuing to go from strength to strength.
Most of the trends that we expect to emerge post-COVID-19 are the same trends that showed signs of emerging pre-COVID-19; they have just been accelerated.
Our inherent wanderlust, relatively cheap cost of travel and pent-up demand will drive our prediction of a V-shaped recovery for the sector over the next three to four years, although recovery will likely be uneven across sectors, segments and destinations.
Read more: Colliers Hotel Insights | Q1 2021
So, what shall we expect for Singapore hotels?
Overall, Singapore hotels remain attractive to investors, with a positive outlook and firm pricing. A return to pre-COVID-19 performance levels is expected by 2024.
Resumption of MICE activities pave the way for Singapore
For 2020, the total number of international visitor arrivals to Singapore declined by 85.7% to 2.7 million, due to unprecedented global travel restrictions and border closures amid COVID-19. While the situation seems to be abating and governments across the world are starting to ease travel restrictions, the outlook for inbound tourism arrivals to Singapore in the immediate term remains uncertain, as much will depend on the economic outlook globally and regionally, how long COVID-19 persists across the world, and how long travel restrictions remain in place with reciprocal openings and mutual recognition of a vaccine pass being key in the early stages. At present, there is still no cohesion amongst governments in responding to COVID-19, with countries being affected differently and at varying times.
Compared to tourism arrivals in the first three quarters of 2020, tourism receipts fell 78.4% to S$4.4 billion, considering the fallout from COVID-19. However, we expect a recovery as the government has recently actively promoted and launched various tourism initiatives that should drive visitation in 2021. Initiatives include the business travel lane, which allows corporate and diplomatic to skip quarantine on arrival, the launch of "Air Travel Pass Program" allowing tourists to apply for travel to Singapore without undergoing the 14-day quarantine period and more recently announced, the potential for an Australia travel bubble.
In addition, the World Economic Forum has also recently announced that it will be hosting its annual meeting in Singapore in August 2021. If the event takes place successfully, it will boost Singapore's MICE and hospitality sector as it will prove that the city can host large global events despite COVID-19.
As such, we expect any recovery to be uneven, possibly following an extended V or swoosh, with a tentative return to business travel in late Q3 or Q4 2021.
Hotel supply and performance to remain muted in the short
Including the two white sites at Marina View and River Valley available on the government land sales reserve list, which can together potentially accommodate circa 1,070 rooms in our estimation, we expect another circa 4,765 rooms to be added between 2021 and 2025. Significant new hotels scheduled to open between 2021 and 2023 include the Pullman Singapore (342 rooms), Banyan Tree Mandai (338 rooms), Mondrian Singapore (300 rooms), (142 rooms) and Club Street (800 rooms). In addition, in circa 2025 we expect Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) to add 2,100 rooms as part of their integrated resort (IR) expansion plans. It is therefore likely that demand will continue to grow as the IRs expand their offerings.
For 2020, the performance of the hotel industry in Singapore was affected by the effects of COVID-19. This is evident in the hotel performance during the first eleven months of 2020, which saw room occupancy and ADR fall by 30.8 pp and 39.5% y-o-y, respectively, during the period. As highlighted earlier, the situation seems to be abating. However, 2020 performance is not representative of true occupancy given the use of hotels for quarantine at prescribed rates set by the government and the partial or full closure of some hotels, which means that the operating performance statistics can be misleading compared to previous years.
Looking ahead into 2021, the outlook for the hotel industry in Singapore in the immediate term remains cloudy as much will depend on the economic outlook globally and regionally, how long COVID-19 persists across the world, and how long travel restrictions remain in place, with reciprocal openings key to a sustainable upward trajectory.
Notwithstanding, Singapore's hotels performance is expected to remain cautiously optimistic in the medium to long term, depending on external factors given Singapore's high exposure to global events (such as uncertain global economic uncertainties, forex movements and geo-political events). Therefore, assuming healthy demand post-COVID-19, alongside a moderate level of new hotel room supply and barring any external shocks, hotel room occupancy in the medium to long term is expected to grow marginally as the number of international visitor arrivals.
Govinda Singh, Executive Director, Head of Hotels and Leisure, Asia, shares more about the success of vaccination programmes and how this might impact the hospitality sector's recovery and whether Singapore hotels are still attractive to investors with MONEYFM 89.3, in "The Breakfast Huddle”.
Contact our Colliers Editorial team here.