Singapore Hotels Returning to Pre-Crisis Levels

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 percent 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 percent 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 percent for the first and 17 percent for the second.

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

- Beijing's average room rate decreased by 18 percent 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 percent 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 percent), has seen a dramatic reversal, experiencing the highest average rate reduction of 25 percent. 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 percent decline in 2009 to growth of 13 percent in 2010, assisted by a substantial increase in travel into the city from the Banking and Finance sector. Rome, Copenhagen and Dubai (-7 percent, -10 percent and -12 percent 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 percent in the first quarter but grew by almost 5 percent 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 percent and 17 percent, 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 percent and 20 percent 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 percent 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 percent, 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 percent 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 percent (Warsaw +10 percent).

The highest regional rate decrease was recorded in the MEWA region (-15 percent) with double digit rate falls being recorded in the UAE (primarily Abu Dhabi -26 percent and Dubai -12 percent), Bahrain (-14 percent), Qatar (-22 percent) and Oman (-24 percent). 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 percent. UK average rates fell by 1.2 percent or £1.25 per night, compared to the 5 percent decline seen in the first half of 2009.