As Singapore lifts from the recessionary times of the past few years, it is becoming obvious that the nation’s new growth pattern is not based on the success of one or two Cinderella industries. No, it is growth on a broad front involving many industries and sectors, all combining together to produce the growth.
Some of these industries – such as the integrated resort being developed – have grabbed the limelight and public attention. And no doubt these will be significant factors in the growing economy. But far more activity is underway and much of this is gaining less public awareness and media attention.
The president of the Singapore Serviced Apartments Association, Tan Kim Seng, says, “There’s far more to it than the IR and glitzy conferences.
“One of these, the ship building industry, may actually be more important but less obvious. The number of oil rigs and drilling platforms that are being built here is massive. All the ship building yards are fully booked and the order books for these yards are booked up for years to come.
“There is no part of the globe to which we are not supplying oil rigs and sea-based drilling platforms. Every one of these rigs is a major project and many of the ships are unique in some feature of their design. Each building project, therefore, entails visits to Singapore by the owners, their design teams and the classification societies.
“All this activity is bubbling away quietly beneath the more high-profile developments such as integrated resorts,” he says.
Julie Shields, GM, The Ascott Group, Singapore, agrees on the importance of shipping, “Certainly, anything to do with shipping is attracting people to Singapore on a continuous basis.”
And, while on the subject of shipping, Singapore Port Authority is now one of the leading contenders to buy out P&O Ports with their vast interests in operating ports and terminals throughout Asia and the world. If and when this happens, Singapore will be the largest port operator in the world.
Singapore – the role of government
The restructuring of Singapore’s economy by the government has significantly enhanced its competitiveness, making the country an attractive location to foreign investors, especially those from newer geographies such as India, China and the Middle East. The influx of tourists and business travellers into Singapore can also be attributed to the rebound in the regional economies.
Shaw Lay See, senior manager, hospitality management, Far East Organisation, says, “Singapore government’s deliberate efforts to encourage investment projects from new cutting edge industries will also boost Singapore’s economy significantly, resulting in an increase of foreign talents into Singapore. These include; industrial biotechnology, digital media, alternative energy as well as minerals, metals and materials.
“In addition, the Singapore Tourism Board’s active role in promoting Singapore as a MICE (meetings, incentive travel, conventions, exhibitions) hub has achieved phenomenal success,” he says.
The role of the government in Singapore in this cannot be ignored as one of the ingredients of success. Tanya Khong, GM, Fraser Suites and Fraser Place, Singapore, says, “The drive by the Singapore government to achieve service excellence across all industries is enormously important. A good example of this is that the government has just invested $4.4 million in service training for the International Monetary Fund (IMF) and World Bank meeting here later in the year.
“This is only one of many initiatives to make Singapore a friendly destination,” Khong comments.
Singapore – the hub for virtually everything
Singapore’s role as a hub is hugely significant in the growing serviced apartments business. The economic boom in China, for example, has a spill over for Singapore. The Japanese economy is reviving and India too is becoming a big player.
All the significant Indian software companies have started offices in Singapore and this brings with it a large number of staff visits from executive management and board members from India, as well as technicians and IT personnel.
During 2005, the government of India and the government of China signed significant trade liberalisation agreements between the two countries. Although it is true that the two countries share a long land border, it is also true that mass transportation across that border by road can be difficult. The better option for trade in commodities and manufactured goods between India and China is therefore by sea. And this is where Singapore’s traditional role as a focus of world sea trade will again be reinforced.
For the trade between India and China, Singapore may emerge as the most convenient mid-point in the network and this will help underpin the serviced apartments business. It may be more convenient for Indian and Chinese delegations to meet in Singapore to talk contracts than it is for them to meet in either India or China. It may even be more convenient for trade between the two countries to be evidenced by contracts enforceable under Singapore legal jurisdiction than under the jurisdictions of India or China. The finance too can be arranged in Singapore.
The Ascott’s Shields says, “Everything that comes out of Singapore from a legal and financial point of view is very tight. It’s very safe.”
Air travel
“The leading role of Singapore airports is also a reason why there are, and will continue to be, more visitors to the nation,” the Association’s Tan reminds us.
The low budget airport terminal is near completion at Changi and it is expected to become a hub for budget carriers throughout the region. Combined with this, Changi is the only airport in this region capable of handling Airbus A380. This being the case, there will be a massive build-up of travelers coming by A380 to Singapore as the hub, and then feeding out to the region via the budget carriers.
Changi handled a record number of passengers in 2005 – around 30 million – and all indications are that this will rise significantly in the coming year. Changi’s completely new international terminal No 3 will open in 2006. All this means that the total numbers of visitors will rise and this will have a positive effect on serviced apartments demand.
Medical and educational hub
The role of Singapore as both a medical hub and an educational hub is helping stimulate this growth. Top ranking – world class – hospitals are a reason for patients to visit Singapore from many countries in the region. This invariably entails a stay of one or more weeks of one or more family members accompanying the sick person.
Park Avenue Suites’ vice president in charge of hospitality management, Anita Kwan, says, “While the stay in the hospital or clinic may be relatively short, the patient’s medical care may extend for a longer period on an outpatient basis. It is in this circumstance that the serviced apartment can perform a highly supportive role. The apartments are quiet and private and well suited to a person under recuperation of the needs of their family travelling with them.
“The same applies to the quality of the educational facilities in Singapore with leading world universities and institutes basing here,” Kwan says.
We’re seeing growing numbers
Fraser’s Khong asserts, “The visitor numbers are growing and I believe that Singapore is becoming a destination of choice. We have an ethical business culture, a multi-cultural setting, high quality of life standards for expats and a safe environment. The safety issue is really important at the moment. These factors, and the fact that so many MNCs are already based here, indicate that people are likely to keep coming.”
All this development in the economy is reflected in a growth of demand for the existing stock of serviced apartments. “The number of visitors to Singapore is increasing – and finally!!” comments Park Avenue’s Kwan.
“We find that a major difference with what is happening at the moment is the return of larger numbers of expats than we have seen in the past five years. The largest number are coming from the USA. But there is also a big leap in those coming from Japan with the Japanese economy growing more strongly than in past years,” Kwan says.
Robert Philips, director – sales and marketing, Oakwood Asia Pacific, says, “We are definitely seeing a lift in the number of Singapore companies establishing throughout the region. This is most notably the case in China and India and this entails a greater number of Singaporeans requiring serviced apartments at the overseas destination.
“But the greater numbers are not just coming from Singapore companies establishing in the region. There is an increasing flow of expat personnel based in the Singapore hub of multi national companies who are also traveling to support the growing economic activity in the whole region. Many of these movements are not necessarily of people from Singapore to other parts of Asia, they are movements between two other cities such as Manila and Bangkok. The key thing about the role of Singapore is that these movements are often organised in Singapore.
“One of the important roles our company plays is to cater for the increasing number of Singapore outbound business trips.
“In this light it can be seen how important it is for serviced apartment companies to have a wide network of properties and offices,” he says.
With the growing number of visitors, occupancy rates have lifted when compared with the position two years ago. Concourse Serviced Apartment’s residence manager, Karen Lim, says, “Last quarter of past year saw us with occupancy rates between 85% and 90% at all times and the start of this year witnessed a further rise in that level.
“We have seen a sudden increase in the number of expats and the interesting feature, I have noted, is that when a company sends a team to Singapore on a temporary assignment, the number in the team is higher. It maybe three or four people, whereas just 12 months ago it may have just been one or two. Maximum inflow is from the USA but there is also significant growth in the numbers from India and China,” Lim states.
Park Avenue’s Kwan notes that the developing economic pattern also involves outbound movement. “Singaporeans are travelling overseas more,” she says, “both as tourists, business people and, in many cases, they remain at the foreign destination for projects that last for weeks or months. Some Singaporean managers are posted to foreign cities for a period of years.”
Victor Wong, regional sales and marketing manager, Sedona Hotels International which owns the Caribbean Residences in Singapore, says that the need for Singaporean companies to cater for outbound Singapore expats is significant. This is underpinning the occupancy rates in different parts of Asia.
Wong states, “Using our two properties in Vietnam as an example, both actually house substantial Singaporean expats and the needs and demands of this expat community is really high up on our agenda. Even our two hotel properties in Myanmar which have some apartment units as well also have substantial Singaporean business as well as leisure travelers.”
Health of accommodation sector
The Association’s Tan states, “In the last financial year – 2005 – the industry saw an average occupancy rate of around 90% over the full year. Prices and rates also went up for the sector by around 10% last year. This is a very good result.”
Park Avenue’s Kwan confirms the general picture of high occupancy rates. “This year our occupancy rates have been above 90% all year round and this is very positive,” she says.
Sedona’s Wong says, “In our Singapore operations, we are a newly opened corporate residences project that has benefited from this influx of people due to the positive business climate around.
“Our regional occupancy rates in Asia is also very healthy. The two serviced residences properties in Vietnam (Sedona Suites HCMC and Sedona Suites Hanoi), they are also enjoying the same boom if not stronger than in Singapore. Our occupancies there average between 93-97% with very strong average rates and good yields,” Wong says.
But it’s not just the growth of the accommodation market as a whole that is encouraging. It is the growth of the public perception that the serviced apartments sector is a vibrant and stand-alone accommodation sector. The Ascott’s Shields says, “We are no longer an appendage to the hotel business.”
“In fact it’s encouraging to see the hotels setting up their own serviced apartment arms. This reinforces the success of the sector,” she says.
Flow-on effect for relo companies
The increasing expat numbers trips speak of an increase in the level of inbound relocation activity. But outbound activity is also growing.
“Due to Singapore’s hub role, we are now seeing a significant Singaporean expat community developing in regional countries, notably China. Some interesting situations occurs where a Singaporean of Chinese descent is sent to China on an assignment. Many manners and ways of doing business are quite different in Shanghai, for example, than they are in Singapore. A large new area of service is therefore opening up in Singapore-based relocation companies and that is to handle the relo needs of Singaporeans in other parts of Asia,’ Andrew Soon, senior manager, business development, at Crown Relocations, says.
“To many foreigners, Singapore is a sort of half-way house. On the surface many of the aspects about the culture and the what-we-do business are similar to what the expats have experienced in their home locations. But scratch the surface a little, even in Singapore, and there are often deeper differences in cultures than what might at first appear to be the case. There is still a strong need for an effective relocation service in Singapore,” Soon says.
All this involves the serviced apartment sector both in Singapore and overseas as an important resource for the relocations. The higher the satandard offered by the serviced apartment companies, the higher the probability that we will make successful relocations.
Conclusion
Far East Organisation’s Shaw concludes: “With increasing foreign direct investment in Asia and more economies opening up to foreign business participation, there is a global trend of an increasingly mobile workforce with companies sending more staff on short to medium-term business assignments. This dynamic trend augurs well for serviced residence industry in Singapore to accommodate this increasingly mobile global workforce.”