Key Southeast Asian cities face hotel glut amid slowdown

Key Southeast Asian cities will suffer a glut of hotel rooms for the next three years as the economic slowdown hits the travel sector, a global real estate consultancy said Monday. A CB Richard Ellis (CBRE) survey of five cities including Singapore, Bangkok, Hanoi, Ho Chi Minh City and Kuala Lumpur showed 23,000 four- and five-star hotel rooms will be potentially available from 2009 until the end of 2012.
"Despite the likelihood that some projects will be delayed or even cancelled, a significant number of hotel properties will open across the region in the next two to three years," said Robert McIntosh, CBRE Hotels regional executive director. "The additional supply, combined with declining demand, will present a challenging period for hotels in the short to medium term," he said in a CBRE statement on the study.
In Singapore, which is already in recession and hit by falling tourist arrivals, almost 10,000 new rooms in the category will come onstream by the end of 2012 on top of the 25,700 in supply now, the consultancy said. "Until recently, there was general consensus that Singapore could not only absorb the increase in supply, but that additional rooms were essential to accommodate the future growth in visitor arrivals," said Alison Poore, CBRE Hotels senior consultant for Southeast Asia.
"However, with declining occupancy... the addition of new supply will likely result in a further softening of the market in the short term," she said. Looking beyond the downturn, Singapores tourist sector stands to benefit from the rise in hotel rooms when the global economy returns back to health, CBRE said.
"Singapores underlying market fundamentals remain strong," said Poore. "The ongoing success of branding and destination marketing initiatives combined with excellent infrastructure and a steady stream of attractions will ensure Singapore can respond quickly when the economy shows signs of recovery." In Bangkok, the number of four- and five-star hotel rooms will rise by more than 6,000 by the end of 2012 - a concern that is increased partly because of the ongoing political unrest in the Thai capital, said CBRE.
"Supply has increased substantially over the past two years, and the addition of further supply in the future is a cause of concern," the consultancy said. "The performance of hotels in Bangkok will be further impacted by declining demand driven by the economic crisis and recent political unrest." In Hanoi, new rooms will increase by 75 percent to about 7,000 while in Ho Chi Minh City, it will rise by 38 percent to more than 7,000, said the CBRE. The consultancy said new rooms in Kuala Lumpur will increase by 10 percent to 20,400 for the same period.