Singapore Hotels Returning to Pre-Crisis Levels; Still Cheaper than HK

Singapore hotels seem to be returning to pre-crisis levels with the vibrant city-state leaping 19 places as most expensive city in the world for business travellers, according to the Global Hotel Market Survey from the Hogg Robinson Group.

Results for H1 2010 shows that Singapore is ahead of Beijing, but still cheaper than Hong Kong. Key trends from the update include:

-  Singapore jumped to 25th place as the most expensive city in the world for travellers from the UK, a leap from its 44th place ranking in 2009. The result reflects the report of the Ministry of Trade and Industry which says that average room rates in Singapore have risen by 20% this year. However, Singapore is still cheaper compared to Hong Kong.

- Hong Kong became the third most expensive city in the world for travellers from the UK, a rebound from its 10th place ranking in 2009. It posted a growth performance of 13% in the local currency due to increased demand from the Banking and Finance sector. Hong Kong posted the highest increase in rates in both the first and second quarters among all the cities surveyed-11% for the first and 17% for the second.

- Moscow maintains its standing as the most expensive city for travellers from the UK, despite a decrease of 12% in the local currency.

- Singaporeans may find it more cost-efficient to travel to Abu Dhabi, as it falls to eight place this year, a downward trajectory from its second place ranking in 2009. It saw the highest average room rate reduction of 25% in the local currency.

- Beijing's average room rate decreased by 18% in the local currency. The city is currently facing an oversupply of hotel rooms, due largely to massive investment from key industry players who are keen to develop this market.

- Double digit dips in average room rates occurred in the Middle East and West Asian region due to a decrease in occupancy coupled with new hotel openings.

James Stevenson, Executive Vice President (Asia Pacific) of HRG, said, "Expectation is high for further recovery in rates and the big hotel groups are understandably working to return their rates to pre-recession levels. HRG has witnessed companies reviewing and consolidating their travel programmes to secure lower hotel rates through increasing their market share with a preferred hotel supplier. We continue to help corporates navigate a complicated market and ensure business travellers have the best hotel deal."

Douglas McWilliams, Chief Executive of cebr (Centre for Economics and Business Research Ltd.), a leading economic think tank which analysed the HRG survey, said, "We are in the middle of a global economic recovery which remains in a fragile state. Whilst the possibility of a double-dip recession is relatively small, the pace of the recovery varies significantly across the world. The latest HRG Hotel Survey illustrates the effects of a multi-speed economic recovery in the hotel market. Many western economies are coming to terms with the budget cuts necessary to reduce sovereign debt levels which will inevitably soften room rate growth.

"Dynamic emerging economies have less need to take fiscal austerity measures in the current climate and we expect growth to be higher as a result. However, the survey shows that emerging economies have not, as of yet, fully recovered from the effects of the economic downturn."

HRG's interim survey is based on a combination of industry intelligence, actual room nights booked and rates paid by its UK clients between January and June 2010 compared to the same period in 2009.

Even taking into account the effect of currency fluctuations, average room rates vary significantly by city when compared to the same period in 2009, revealing a very mixed performance across markets. Six of the top ten cities managed to achieve average rate growth when measured in local currency.

Moscow has maintained its place at the highest average room rate for the sixth year despite a 12% fall in local currency. Meanwhile, Abu Dhabi, which in HRG's January to June 2009 survey was in second place and the only top ten city at the time to record any growth (5%), has seen a dramatic reversal, experiencing the highest average rate reduction of 25%. Like Dubai, Abu Dubai has faced a substantial fall in occupancy combined with ongoing new hotel developments, set to continue for some time to come.

Hong Kong achieved the highest growth performance in local currency terms, recovering from an 18% decline in 2009 to growth of 13% in 2010, assisted by a substantial increase in travel into the city from the Banking and Finance sector. Rome, Copenhagen and Dubai (-7%, -10% and -12% in GBP terms) drop out of the top ten, falling to 14th, 16th and 19th positions respectively.

With the exception of Dublin, where the average rate was static, when broken down on a quarterly basis, all the key cities saw average rates increase in the second quarter. Taken as an average across all 12 cities surveyed, average rates fell by 2.5% in the first quarter but grew by almost 5% in the second suggesting signs of a recovery in the global hotel market.

The country showing the highest increase in rates over both quarters was Hong Kong with growth of 11% and 17%, whilst Zurich, Amsterdam and Stockholm were the only other cities to record consecutive rate increases.

London's performance in the first quarter was adversely affected by the heavy snow at the start of the year. However, average rates grew in the second quarter due to a particularly strong April as a result of the effects of the ash cloud from the Eyjafjallajökull volcano and buoyant leisure demand.

Rates

While GBP rate increases in Sydney and Johannesburg seem prominent at 24% and 20% this result is due entirely to fluctuating Australian dollar and Rand exchange rates; when measured in local currency, average rates were either flat or showing a marginal 1% increase.

Stockholm managed to achieve rate growth due to a recovery in occupancy levels and a lack of any significant new hotel openings during the period.

Belfast and Beijing both suffer from an oversupply of hotels, the latter having experienced massive investment in recent years from major players keen to build a presence in this emerging market.

Bangalore, a city reliant on business travel associated with the IT industry and call centres, is a classic example of a market 'popping' as it has seen rates fall as a result of a drop in demand due to the global recession coupled with significant new hotel openings which have led to a current oversupply of rooms. Services apartments have grown in popularity and some of the IT industry has relocated to other areas in India.

With the exception of the MEWA region, the global hotel market has shown signs of stabilising when measured in GBP.

The region showing the highest increase was Africa where average rates grew by 16%, in part reflecting continued investment from global and multinational organisations engaged in the Oil & Gas, Banking & Finance and Telecoms industries in the region. Mostly, however, this was down to exchange rate variances, particularly in South Africa. The effect of the country playing host to the 2010 FIFA World Cup did not start to impact the rates until June.

Following a 17% fall in the first six months of 2009, average rates in Eastern Europe have held relatively firm, largely due to better performance in Moscow and strong results in Poland where average rates increased by 9% (Warsaw +10%).

The highest regional rate decrease was recorded in the MEWA region (-15%) with double digit rate falls being recorded in the UAE (primarily Abu Dhabi -26% and Dubai -12%), Bahrain (-14%), Qatar (-22%) and Oman (-24%). As explained previously, the region has faced a supply and demand issue and a substantial fall in occupancy combined with ongoing new openings.

In the US market, where exchange rates were relatively stable in comparison to the previous year, rates were flat or marginally lower. The primary exception was San Francisco, where average rates fell by 11%. UK average rates fell by 1.2% or £1.25 per night, compared to the 5% decline seen in the first half of 2009.

Global Hotel Star Rating Analysis January - June 2010

Reflecting the need for cost reduction, average rates have decreased in the 3 and 4-star markets as suppliers strive to maintain their share of the corporate market and clients downgrade between the star ratings as well as review their programmes and renegotiate rates where possible.

The budget sector achieved a rate increase of 3.75%, with the bulk of this growth being achieved in the second quarter. As in 2008 the budget, 3 and 4-star markets are all targeting the same clients but the 3 and 4-star markets have the ability to respond at short notice both in the packaging of rates and availability through flexible pricing. This has resulted in instances where the budget sector hotels aren't always the cheapest option when breakfast and other value adds are factored in.

The 5-star market achieved a marginal increase of 1%. Whilst there has undoubtedly been a trend for corporates to turn to the 4 and even 3-star sectors in the current climate, hoteliers in this sector have held out for rates at the expense of lower occupancy levels, conscious that any significant rate reduction has an adverse effect on service levels as costs are brought in line, resulting in damage to a hotel's reputation for quality and standards.

Summary

Margaret Bowler of HRG said, "2010 has so far proved an encouraging year for the global hotel industry. The average length of stay has increased by 9% suggesting that corporates have begun to relax their travel policies in light of the perceived improvement in the current economic climate. However, our data shows that it is not consistent around the world and it is still too early to predict how the rest of 2010 will pan out.

"In addition to lower pricing and in many cases last room availability (LRA), corporates have been able to negotiate added value items - or unbundled items as the airline industry puts it - within their rates such as food and beverage discounts, free Wi-Fi access and reduced parking charges. However, it is inevitable as the industry recovers that yield management will come back into play and suppliers will seek to unbundle further their pricing to gain maximum revenues. Even in the current market, certain cities are achieving high occupancy levels on peak nights and HRG continues to advise clients to secure sufficient allocation in high volume locations."

Margaret Bowler added, "Reflecting the need for cost reduction, clients are downgrading between the star ratings as well as continually reviewing their programmes and renegotiating rates where possible. In the 3 and 4-star markets average rates have decreased as suppliers strive to maintain their share of the corporate market. We continue to believe that budget options are not always the cheapest option when the add-on costs are taken into account.

"With the uncertainty in the market in 2009 the Request for Proposal (RFP) season was extended with many corporates delaying issuing their annual RFP in the hope that the market would continue to fall and more favourable rates become available. With the recovery underway it is likely clients will revert to the traditional RFP season. It will be interesting to see how rate negotiations progress over the rest of 2010 ahead of any further growth in the industry."

See other recent news regarding: Airlines, Airports, Awards, Flights, Codeshare, Lounges, First Class, Business Class, MICE, GDS, Rewards, Miles, Hotels, Apartments, Promotions, Spas, Yoga, Retreat, New Hotels, Traffic, Visitor Arrivals, Cruises, Free Deals, Videos, Singapore, Hogg Robinson, HRG, MasterIndex, Expensive