Domestic tourism to cushion some of the blow for Singapore hotels
As the global coronavirus epidemic strikes at Singapore's tourism-related sectors, the staycation market is taking on newfound importance.
While the Singapore Tourism Board predicted last month that visitor arrivals could fall by up to 30 per cent this year, domestic spending could stem some of the bloodshed.
Hotels are pulling out all the stops to dangle promotions and woo domestic visitors, especially with the March school holidays now on, and the Singapore Hotel Association (SHA) lists some 100 staycation packages by members on its website.
Still, consumers should not hope for massive savings, as industry watchers warned that hoteliers here will not be able to rely on price cuts alone to draw guests during the downturn. With social distancing now encouraged, personal safety may take precedence over bargain vacations.
"It has to be more than just price. Customers are worried about their health and safety and most probably aren't willing to take a chance with sacrificing that in exchange for just a discount," said Sherri Kimes, visiting professor of analytics and operations at the National University of Singapore. "As a result, I think that
value-add becomes even more important."
As Singapore started to roll out travel restrictions on inbound travellers from Feb 1 onwards, hotel occupancy plunged to 46 per cent in February, down by 47.3 per cent year on year, according to preliminary data from industry analytics firm STR.
Yet domestic tourism could cover about one-tenth of the drop in business in the March-to-May window, estimated Nanyang Business School lecturer Wong King Yin, who has a background in marketing and tourism.
Margaret Heng, executive director of the SHA, also told BT: "Domestic tourism has become an important market segment for many hotels in Singapore, especially with recent travel restrictions and precautionary measures against overseas travel."
"The local market has always been a key source market to us, especially over weekends and school holidays," noted Kieran Twomey, chief operating officer of Millennium Hotels and Resorts, which counts hotels such as Grand Copthorne Waterfront, Orchard Hotel and M Social in its portfolio.
Similarly, Arthur Kiong, chief executive of Far East Hospitality, said that staycations took in close to S$8 million - about 4 per cent of all revenue - in 2019, up by 27 per cent on year.
Now, with Covid-19, "Singaporeans are thinking twice about travelling overseas, and with the upcoming school holidays, staycations have become even more attractive", Mr Kiong pointed out.
Elsewhere, Royal Plaza on Scotts' staycation bookings for the March holidays are up by 15 per cent this year, compared with the last two years, said general manager Patrick Fiat. To be sure, discounts - although welcome - can go only so far.
"While the Covid-19 outbreak (has) resulted in cancellations for both business and leisure travel, we recommend hotels limit the price reduction applied," said Jochen Krauss, managing partner at pricing consultancy Simon-Kucher & Partners.
He suggested "a moderate price decrease" of no more than 20 percent, as "price level should remain attractive and consistent with the hotel positioning".
That's even as hot deals on the market already include a promotional rate of S$108 a night at lyf Funan Singapore by Ascott, down from the usual S$150, while Royal Plaza on Scotts is touting free upgrades to premier rooms for S$168, against the usual weekday price of S$280.
Integrated resort Marina Bay Sands is running a "stay and save" promotion that starts at S$399 a night from Feb 21 to April 29, with a free room upgrade and breakfast thrown in.
By comparison, the average daily room rate was US$$454 (S$639) in the three months to March 31, 2019, back when occupancy was 98.1 per cent, according to financial statements.
Still, bookings by discount-savvy guests "are likely to only happen in the short term and will not provide much long-term uplift, should the outbreak continue", Dr Krauss added.
Mr Kiong said that, "when rolling out staycation promotions, it is important for us to provide value-add instead of going into (a) price war".
"Lowering prices can affect the positioning of the brands," he told BT, while value-added experiences "are good ways to improve our hotels' revenues and margins" and still turn a profit on staycations.
Meanwhile, the SHA has seen in recent weeks that "creativity is a key competitive edge" in the fight for business, according to Ms Heng: "In addition to the usual room-and-breakfast deals, our hotels have bundled services such as gourmet dinners and spa treatments into the offer."
Package deals could look like the "March Getaway" at Genting Singapore's Resorts World Sentosa, which throws in perks such as dining credits and attraction passes, on top of a room rate that starts at S$258.
Capsule hotel Yotel in Orchard Road, where rooms go for S$140 and up, has also included goodies such as dining credits and late check-out, in a three-day, two-night package.
Domestic and international guest volumes were both hit by Covid-19, but general manager Brendan Daly said: "From a product point of view we're introducing staycation bundles in 2020, as compared (with) price-driven seasonal promotions in 2019."
And, while Resorts World Sentosa is eyeing both tourists and staycationers, others honed in with pin-point precision on the local market: Hotel Fort Canning's "Time for Timeout" deal - which includes breakfast, drinks, and spa and dining discounts - is valid only for Singapore residents.
As for whether hotels' bottom lines could suffer from going all out to woo local guests, Mr Fiat noted that the impact of staycations on revenue per available room and occupancy is limited, as Royal Plaza's overall business is still expected to decrease by 30 per cent to 40 per cent for the year.
Dr Wong also told BT that margins should not be unduly affected if hotels avoid slashing rates: "Whether or how much the overall revenue can increase depends on how well the personalised packages can meet the needs and wants of the locals... to attract them to spend," she said.
All the same, one market segment risks being left behind in the staycation craze: budget hotels. "Lower-end hotels may need to explore other markets to serve," said Dr Wong, naming the household members of those on Covid-19 stay-home orders as one possible segment.
With regional hotel booking platform RedDoorz franchising and leasing in the budget hotel market in Singapore, founder and CEO Amit Saberwal also told BT that rental expenses must be lowered during the downturn: "Measures need to trickle down to tenants in order to sustain the long-term viability of Singapore's
hospitality sector... Subsidising fixed rental costs or introducing delayed payment initiatives could be viable options to help sustain business."
Ms Heng, from the SHA, said that, "for members operating in the lower-price range, their business strategy is driven by cost efficiency".
She added: "In addition to relief measures, SHA is helping these members to redeploy resources through work redesign and upskilling opportunities to lower operating costs."
Mr Saberwal says that rental expenses must be lowered during the downturn: "Subsidising fixed rental costs or introducing delayed payment initiatives could be viable options to help sustain business."