Strong demand for hotels in business parks, say analysts

SINGAPORE: As more organisations start to relocate all or part of their operations outside of the city centre in Singapore, analysts say there has been strong demand for hotels in business parks in recent years and hoteliers have only just began to tap those opportunities.

Capri by Fraser, located within the Changi Business Park, is running at an average occupancy rate of 80 per cent each month.

About nine in 10 of its guests are business travellers – many of whom work at banks and logistics firms nearby. 

Its operator Frasers Hospitality said unlike the leisure market, business travellers tend to stay much longer, at times up to a month.

And this offers a stable revenue stream.

On average, long-stay customers make up about 20 per cent of the customer base at the 313-room Capri by Fraser.

Frasers Hospitality said the average daily room rate at Capri by Fraser hover around S$250 to S$300 a day.

Its business model has also helped lessen the impact of stricter foreign worker policies.

Tonya Khong, Area General Manager of Asia Pacific, Frasers Hospitality, said: “We have felt the impact, perhaps not as prevalent as it would be for hotels that have a bigger FB unit. Unlike city hotels though, it’s the ballrooms and we don’t have major big ballrooms and this is where a large pool of service staff is required to man the ballrooms.” 

Capri by Fraser hires about 250 workers currently, and its operator says about 70 per cent of them are Singaporeans.

Meanwhile, Park Avenue Rochester, one of three hotels under the Park Avenue chain of hotels and suites, is also seeing healthy demand at over 80 per cent occupancy. 

Park Avenue Rochester has 271 hotel rooms and suites. 

It’s near the one-north business hub and draws customers from the area as well as travellers whose offices are in Jurong.

The other two Park Avenue hotels are located at Changi Business Park and Clemenceau Avenue near Clarke Quay. 

Its owner United Engineers says prospects are bright as the one-north area continues to develop. 

Still, the company has contingency plans.

Jackson Yap, Group Managing Director CEO of United Engineers Limited, said: “Our primary clients are business, so if there is a downturn in business of course we will try to then pitch for the tourist type customers. We would spend effort to build up that segment if we get hit on the business side.” 

The hotel is also tapping opportunities in the medical tourism segment with the National University Hospital located near by.

Based on estimates from the Singapore Tourism Board, the hotel sector has weakened slightly in the first quarter of 2013.

The average occupancy rate was down by 0.4 percent on-year to 86 per cent, while revenue per available room fell 3.2 per cent to about S$216.

Robert McIntosh, Executive Director of Asia Pacific, CBRE, said: “The revenue per available room is as high as it has ever been in Singapore at present, so I don’t think we should worry about marginal softening. In fact, the demand from investors in this market is still very strong indeed.”

Moving forward, CBRE said the hospitality REITs, particularly S-REITs are likely to increase their acquisition pipeline in the region to achieve more portfolio diversification.

Hotel transaction volumes in Asia are projected to hit US$5.5 to US$6 billion in 2013 as a result of strong investment sentiment.

Some analysts said the performance of the hotel industry in Singapore should remain fairly stable, despite the uncertainties in the global economy. And occupancies could also rise in tandem with the growth in intra-regional travel in Asia.

CBRE projects that there will be an increase of about 2,500 rooms each year for the next two years in Singapore.

Strong demand for hotels in business parks, say analysts