STB Voices

This month, Sim Beng Khoon, Director of Travel and Hospitality Business, shares his views on how he intends to balance the divergent, yet aligned interests of hotels and travel agents.

As Director of Travel and Hospitality Business at the STB, you could say that Beng Khoon sometimes finds himself caught between a rock and hard place, as he has to balance the sometimes divergent, yet aligned interests of the hospitality and travel trade sectors.

This is particularly true in today’s business climate when the hotel sector is performing strongly and when tour operators and other customers are complaining of either a lack of rooms during critical periods or of rate increases.

Let’s look at the statistics. Last year, average occupancy rates hit a high of 84%, previously achieved in 2000 and 1995. The ARR (Average Room Rate) of upper tier hotels have also surpassed previous levels, at an all-time high of S$217, with Rev Par at $176. Industry-wide though, the ARR achieved in 2005 was $135, still below the 1996 level of $150 – a fact hoteliers are quick to point out.

This year, four new hotel developments will add slightly to the room count – the New Majestic Hotel, which soft opens this month, with 30 rooms; the Tiong Bahru re-development which will yield 288 rooms; the Fragrance Hotel at Selegie with 120 rooms and the Siloso Beach Resort with 139 rooms.

Given those statistics, is Singapore facing a room shortage?

“Our position right now is that there is no physical room shortage. If visitor arrivals continue to increase in line with projections, we will see a physical shortage in 2008,” said Beng Khoon.

“However we are mindful of concerns expressed by buyers of hotel rooms in Singapore and we recognize there is a tight room situation currently due to market dynamics.”

Bulk buyers such as tour operators and MICE customers have voiced concern that they are unable to get their room allotments from hotels and where hotels are willing to commit rooms, they come with a higher price tag and this, they say, could affect demand for Singapore.

Could it affect demand? Said Beng Khoon, “If the situation is prolonged, then it could potentially impact demand. Tour groups could opt to go elsewhere or meeting planners could move their events out of Singapore.”

While there are no official statistics on hotel rate increases, industry feedback pegs rate increases at between 25% and 30% across the board this year. Does this make Singapore over-priced as a destination?

“Firstly, we do not set rates, we let the market decide. STB feels that hotels, as an asset class, need to see decent returns. This in turn will encourage new investments and allow current properties to rejuvenate," said Beng Khoon.

“We also tell our trade partners that Singapore has been operating on an artificially low rate structure for a long time, almost 10 years, and this is merely a period of re-adjustment.”

Beng Khoon added, “What we want to do is encourage more dialogue among all parties. We will talk to hoteliers to see whether they can be more flexible with their yield management systems, for instance, and we will work with our regional offices and BTMICE Group to see how we can even out the peaks and troughs.”

On the supply side, the STB is working with the relevant government agencies to make available land parcels for new hotel developments. “We will leave it to the market to trigger the sale of such sites as it responds to demand/supply conditions.”

In the meantime, the STB is also addressing the shortage of tour guides in specific market segments. “For example, we need more guides who can speak Vietnamese or Russian, because we have new markets coming in.”

It has thus initiated a pilot scheme in which it will allow a travel agency to bring in a foreign national to Singapore. This employee can then do an intensive course in tour guiding and be allowed to guide tours. However, he or she has to undergo a formal tour guide course within eight months of arrival in Singapore.

“We have 1,762 registered tour guides, out of whom about half are active. About 41% are English-speaking and 32% are Chinese-speaking, so you can see we need more foreign-language guides.”