The demand for short and long-term accommodation in Singapore is high and has steadily increased over the past 12 months. Experts feel that it is primarily propelled by an overall increase in travellers to Singapore, leading to a pent-up demand for both hotel and serviced residence accommodation options. Besides, expatriates are more inclined to stay at serviced residences to save them the hassles of house hunting, especially in the present buoyant property market environment and where en-bloc deals have increased.
Positive trends
“As property values increase, the result would be an increase in rentals. The property prices in Singapore have been on the rise for sometime now. As reported, the price increase has mostly been in the top-tier properties. This feeling has also been fuelled by the expectation that the construction of the two IRs will drive property prices up further,” observes Henrietta Chong, general manager, Great World Serviced Apartments. As a result, she says, Great World Serviced Apartments has been a beneficiary both in terms of increased occupancy and better rental rates. “Based on our on-going survey and contacts with other serviced apartment operators, most have reported healthy increases in rentals and occupancies.”
Tonya Khong, general manager, Fraser Suites and Fraser Place Singapore confirms: “In Singapore and our overseas serviced residences, we have registered strong occupancies in the high 90%. We believe this may be attributed to the overall international demand for serviced residences and our investment in people (systematic HR practices) and services.”
Similarly, for Oakwood, Frank Foster, vice president, marketing and sales, Oakwood Asia Pacific, notes that the past year has been good. “Oakwood’s occupancy rates throughout Asia averages 90%. The past year has been very fruitful for Oakwood, seeing an increase in the brand’s awareness and demand for our product in Asia.”
Existing limitations are not far and few
However, there are limitations and issues of concern that these major players are worried about. “Many serviced apartment owners have in the past been quite glad to lock in their income stream by leasing their apartments for as long as they can so that income won’t unnecessarily be affected by occupancy swings. Because of this some may have their rentals locked in during this time when there’s a surge in demand for serviced apartments, thus putting themselves in a position where they’re unable to achieve higher rental rates,” Khong points out.
Also, as this industry is labour intensive, not being able to recruit foreign workers from other parts of Asia other than Malaysia, Hong Kong, South Korea and Taiwan has made it challenging to fill up the vacancies because many locals shun taking up these positions, he adds.
Most importantly, in Singapore, serviced apartments compete with luxury apartments especially for long leases. “These apartments, because of their location and their facilities would be in direct competition due to the provision of services such as housekeeping, cleaning, maintenance, etc. However some apartment owners are prepared to provide housekeeping services to their tenant,” Foster says.
Coping up with challenges
Coping with these challenges is difficult but not impossible. “Like in most businesses it is always managing changes. Changes can be good and can be bad, and if one is caught flat footed, one will miss out. We try not to place all our eggs in one basket. So as a matter of policy we spread our occupancies into various lease terms,” Chong shares. “We have important clients who have been with us through good and bad times and these are the ones we value and don’t take advantage of them even though markets conditions have changed. The underlying strength we have is our location and our facilities which our clients love. We also don’t compromise on our standard of service and our clients appreciate that,” she says.
Khong takes a slightly different approach and says, “It’s more of how we’re poised to tap the opportunities in this industry in Singapore rather than being held back by limitations.” She stresses on initiatives that allow for more accommodation flexibility for medical and family tourism as one such opportunity for the industry in Singapore. “Serviced residences are ideal for inbound foreigners on medical treatment, affording them the amenities, facilities and comforts of a home while they concentrate on treatments here. As we aim to attract more of such travellers, it would be wise to safeguard the interests of our visitors with credible ratings of serviced residences, aimed at raising the awareness of reputable players versus private owners,” she says.
Foster foresees yet another challenging dimension. “With foreign talent arriving in Singapore, there’s a demand for serviced apartments, and the limitations of this industry would be in being able to provide the supply to meet this demand.”
Anita Kwan, vice president, Park Suites adds: “Limitations include not being able to secure a ‘less than a week’ lease due to not having the license to do so, especially with a high demand of rooms going on in the market and not being able to fulfill them. We encourage our clients to take up a week lease although their lease is for a few days, by offering attractive rates to them. The past year has been a very challenging year for us, as we were trying to meet the overwhelming demand for serviced apartments whilst running full occupancy. We were able to command higher rental and operate at a very healthy occupancy of over 90%.”
Khong feels that with expatriates coming to Singapore on short- to mid-term project teams, it is a trend that is very likely to stay and increase. “As such, companies are more and more inclined to taking up corporate accounts with branded serviced residence management companies than to sign long-term leases with private residences.”
In the end
The demand for serviced apartments in Singapore has remained strong with limited supply of rooms. With few more serviced apartments expecting to launch between this year and next year, keen competition is expected, but will help ease the imminent increase in demand. Most serviced apartments are operating at over 90% and room rates have also increased tremendously across all serviced apartments. As the improving economy attracts more expatriates and firms to set up their companies in Singapore, the accommodation sector in Singapore will continue to do well for the immediate years. And as Chong says, “Good times will always bring on new players and competition in terms of additional properties from existing players. Water will always find its own level and one has to anticipate all these developments, manage change and handle the challenges that come with it.