Singapore posted a 4.8% yoy increase in tourism receipts to $14.8 bn in 2008 – a new record. Total visitors reached 10.1m, a 1.6% yoy decline, but visitor days were estimated to hit a record of 41.3m days, increasing 8.7% yoy. However, these figures were off the Singapore Tourism Board’s targets of 10.8m visitors and $15.5 bn in tourism receipts for the year.

The Average Occupancy Rate (AOR) for hotels in Singapore posted its first decline since 2003. At 81% for 2008, the AOR fell by 6 percentage points from 2007. However, this was compensated by a record high Average Room Rate (ARR) of $246, an increase of 21.9% over 2007. As a result, the average RevPAR (Revenue Per Available Room) reached a record- breaking $199, increasing 13.5% from 2007.

Overall RevPar has been on the decline since Sep 08, slumping from a record $224 then to $140 in Jan 09, the lowest level since Aug 06. Hotels in the luxury tier suffered the largest decline, with RevPAR declining by 45% from Sep 08 to $219 in Jan 09. The AOR for Jan 09 fell by 18 ppts to 67% - the last time the AOR dipped under 70% was back in Jan 04.

The possibility of a long-drawn recession is likely to result in a decline in international tourism as people cut back on discretionary spending. On top of that, the Meetings, Incentive Travel, Conventions and Exhibitions (MICE) space is expected to shrink this year. According to the Business Times, the Singapore Association of Convention and Exhibition Organisers and Suppliers forecast that 20% of the MICE events here will be cancelled, postponed or downsized in 2009.

Given the negative outlook on the tourism sector, hoteliers have the unenviable challenge of keeping up AOR and more importantly their RevPAR. We think that RevPARs are likely to continue its decline as hotel operators cut room rates to gain market share. We remain cautious about the sector’s outlook for 2009 and maintain our HOLD recommendations on the hoteliers HPL (TP:$1.00) and OPH (TP:$0.56).