SINGAPORE (Sept 30): Against the backdrop of an ailing economy, the only bright spot in Singapore seems to be the tourism sector. Visitor arrivals were up 1.76% y-o-y to 11.1 million between January and July, according to the Singapore Tourism Board (STB). A total of 18.5 million visitors came here last year. Whether the number of arrivals will be similar this year remains to be seen, but momentum has picked up since April, after flat to negative y-o-y growth in February and March. Economists say the Hong Kong protests have diverted tourists here.

The higher number of arrivals has translated into a better occupancy rate and higher revenues for hotels (see table). Luxury hotels had an occupancy rate of 87.7% for the January-to-July period, up 0.7% compared with the same period last year. Mid-tier hotels had an occupancy rate of 88.5% for the period, up 1% y-o-y. Revenue per available room (RevPAR) was up for both categories. RevPAR for luxury hotels and mid-tier hotels rose 1.1% y-o-y for the January-to-July period. RevPAR for upscale hotels, on the other hand, declined 1.1% during the period.

Luxury hotels are capitalising on the rise in visitor arrivals by creating unique experiences for travellers. For instance, Usha Brockmann, communications director at the Mandarin Oriental Singapore (owned by Singapore Exchange-listed Mandarin Oriental International), says the hotel is “curating packages to cater for the different markets based on the psychographics and demographics”. Peter Mainguy, general manager of the Ritz-Carlton Millenia, says his hotel also has exclusive packages with partners. The host for the Mercedes-AMG Petronas Motorsport team for the Formula 1 race over the Sept 20-to-22 weekend, it had a “race in style” package, which allowed guests to watch the race in the privacy of their rooms or join in the celebrations at the Podium Lounge. 

Such personalised plans have helped hotels garner robust bookings, particularly in July and August, and expectations are that bookings will be healthy until year-end. Preliminary estimates from STB show that total hotel room revenue from January to July rose 2% y-o-y to about $2.33 billion. The average occupancy rate dipped 0.2 percentage point y-o-y to 86.1% while RevPAR was $186, down 0.2% y-o-y. Hoteliers such as Brockmann and Mainguy are preparing for higher occupancy rates until year-end, citing the upcoming holidays as revenue boosters.

Services sector to provide countercyclical impetus

The positive numbers in the tourism sector provide a glimmer of hope for Singapore’s economy, which seems to be heading for a technical recession, defined as two consecutive quarters of negative growth.

Adding to that is the drop in business confidence for the final quarter of the year to a near two-year low, as the manufacturing and wholesale trade sectors — key contributors to Singapore’s economy — are bracing for a downturn. Business sentiment dipped from +6.91 percentage points for the current quarter to +4.82 percentage points for 4Q2019, according to data from the Business Optimism Index study released by the Singapore Commercial Credit Bureau (SCCB) on Sept 16. On a y-o-y basis, the index nearly halved from +9.19 percentage points for 4Q2018.

The figures are aggregated from a poll of 200 business owners and senior executives representing major industries, and are calculated by subtracting the percentage of respondents expecting decreases from the percentage of those expecting increases. The six indicators it assesses are sales, profits, new orders, employment, inventory and selling price. Results for five fell, with selling price being the only factor that inched up from -7.32 percentage points in 3Q to -3.33 percentage points in 4Q.

While key export-oriented sectors remain downbeat, the index revealed some bright spots: services, transport and construction. Says Audrey Chia, CEO of SCCB: “Despite the moderated outlook, we are still seeing signs of green shoots in [these] sectors. [Their] growth is expected to be sustained into the remaining months of the year.”

Data from the Department of Statistics shows that transport and storage contributed to 6.7% of Singapore’s GDP in 2018, while general services accounted for 11.3%. This latter segment is led by growth in tourism, which makes up 4% of its total revenue. With tourism receipts rising 1% y-o-y to $27.1 billion in 2018, following higher visitor arrivals and spending, STB’s CEO Keith Tan expressed happiness that the tourism sector had “performed well despite some economic uncertainties”. He expects receipts for this year to grow 1% to 3% to $27.9 billion, on the back of higher visitor arrivals.

The World Travel and Tourism Council (WTTC) also expects the tourism sector in Singapore to grow. It forecasts an annual growth of 3.6% until 2028. This translates into an estimated value of US$46.5 billion ($64 billion) and a GDP contribution of 11.4% in 2028. The growth is expected to come from more business travel and MICE (meetings, incentives, conferences and exhibitions) and an increase in hotel occupancy rates and cruise participation.

With most of Singapore’s visitors entering the country through Changi Airport, Changi Airport Group has posted y-o-y increases in passenger movement from January to July. March, April and May were the slowest months, with y-o-y increases of 1.4%, 2.8% and 2.1% respectively. Still, there was an overall growth in the number of visitors each month, with total visitor arrivals of 39.1 million up to July. During the period, Singapore hosted prominent MICE events such as the Asia Pacific Precious Metals Conference and the Asia Infrastructure Forum.

Song Seng Wun, senior economist at CIMB Private Bank, says the tourism numbers are “positive”, especially given that several countries are facing an economic slowdown in the wake of geopolitical uncertainties such as the US-China trade war. This can be seen from the 2.2 million Chinese tourists who arrived here from January to July despite China’s slowing growth.  (see chart). Last year, mainland Chinese accounted for 18.5% of total visitor arrivals. This year’s statistics show that Chinese arrivals will remain a key growth driver to overall tourism numbers. 

Reaching out to visitors

To maintain Singapore’s appeal to visitors, STB has teamed up with different organisations. For instance, it signed a three-year memorandum of understanding (MOU) with Alibaba Group Holding in April to drive visitor arrivals and spending by Chinese tourists using data analytics. STB will also tap Alibaba-affiliated businesses such as Fliggy, Youku, Damai and Alibaba Cloud to engage with Chinese visitors and gain deeper insights into their travel behaviour. STB’s Tan says this will be a “game changer for Singapore”, allowing it to “engage with visitors at every step of the consumer journey, from pre-arrival to post-visit, for the first time”.

To engage the Southeast Asian traveller, STB has an MOU with Indonesian tech unicorn Traveloka. It wants to promote Singapore as an attractive destination to five Asean markets: Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Tourists from these markets accounted for $4.17 billion, or a third, of tourism receipts in 2018. The number of visitors from the region between January and July dropped to 3.81 million, from 3.82 million a year earlier. Through the MOU with Traveloka, STB is looking to make Singapore’s attractions and activities offerings available for online booking through Traveloka’s regional platforms.

A check with three travel agencies — Mustafa Travel, Chan Brothers and Misa Travel — shows that substantial packages were bought by tourists from these Asean countries. One travel consultant, who wanted to be known as Shirley, says Singapore’s strategic location makes it easy for visitors to stop by for a few days while en route to another country.

In line with improving the tourist experience, the Ministry of Trade and Industry has been working on the hotel industry transformation map, launched in 2016, to upskill people and create solutions. With 63,000 rooms across 400 properties, a revamp to the hotel industry was necessary for it to remain productive and match changing guest expectations. The move saw several hotels redesigning processes by introducing technology to enhance guests’ experience. Innovations included seamless check-in and check-out counters powered by facial recognition. Some hotels are going back to the basics by making guests feel at home.

Creating new attractions

Despite these initiatives, Singapore remains an expensive destination. With similar-looking attractions around the world, such as the recent US$34 billion integrated resort (IR) in Hainan, China, there is a need for the city state to differentiate itself.

Indeed, countries all over the world are competing to attract the same group of middle-income travellers. Singapore has been rejuvenating its attractions — the most recent being the $9 billion investment plan to grow its two IRs. Marina Bay Sands will be adding a new entertainment arena and hotel tower, and Resorts World Sentosa will extend Universal Studios Singapore to include two new attractions — Minion Park and Super Nintendo World. The additional investment is nearly two-thirds the initial investment of $15 billion made in 2006. CIMB’s Song says: “We may not be the cheapest, but we can definitely compete based on the experience we provide. The enhancement of the two IRs will serve to achieve that.”

STB’s Tan also has plans to weave elements that will be attractive to tourists in search of an authentic experience into places where locals live, work and play in an attempt to persuade them to spend more time here. These include attractions in each of the four corners of Singapore. In the east region is the recently launched mall and hotel Jewel. In the north and south is the Mandai ecotourism hub housing the new Bird Park and Rainforest Park, as well the Greater Southern Waterfront development. And in the west is a 7ha site at the Jurong Lake District that is set to have attractions, hotel, eateries and retail shops by 2026. In addition to these, Singapore is set to ride its position as a safe and secure digital and innovation hub and will continue hosting MICE events.

Economists polled by The Edge Singapore say the tourism sector has potential to boost Singapore’s GDP as it experiences a drag in other sectors. But Maybank Kim Eng’s Chua Hak Bin warns that the country should not put all its eggs in this basket, as a decline in global economies can translate into reduced purchasing power and a corresponding reluctance to travel. Still, he, along with CIMB’s Song, says gains from the sector can be reaped since STB’s diversified approach caters not just for visits to attractions but also for MICE events, which are expected to remain popular.