Overall Outlook

Demand

A moderation year for Singapore hotels extends into 1Q25. After a modest 4.1% y/y RevPAR increase in 4Q24, the latest 1Q25 data shows a slight sequential uptick to S$220.2 but a -4.3% y/y decline, reinforcing the trend of normalisation post-pandemic recovery highs. Visitor arrivals reached 4.31 million in the quarter (+0.1% y/y), largely flat due to a high base, with growth momentum easing from previous quarters and heightened cautiousness to spend by consumers as global tariff tensions escalate. Occupancy dipped to 80.6% (-1.1 percentage points y/y), despite a smaller y/y increase in room inventory to 5.79 million rooms (+0.7%), suggesting softening room demand relative to available supply.

Room rates ease as competitive pressures emerge. Average daily rates moderated to S$273.4 (-3.1% y/y), reflecting more cautious discretionary spending and heightened price competition, particularly amid the entry of newer hotels such as Mercure Hotel on Club Street. The pricing pressure comes even as room supply growth has slowed, pointing to a more balanced but fragile market environment in the near term.

Luxury-tier S-REITs remain under pressure amid shifting demand trends. In 1Q25, gross lettings for the luxury segment averaged approximately 228.7k room nights per month, down slightly y/y from the same period in 1Q24, reflecting continued softness in premium travel demand. In contrast, the mid-tier segment maintained strong performance with average lettings of 567.7k room nights, while the economy segment held steady at 419.3k—both reflecting resilient demand from cost-conscious and value-driven travelers. Upscale hotels saw a moderate average of 303.3k lettings, suggesting a more balanced demand profile. The underperformance of the luxury tier—relative to the more robust midscale and economy segments—highlights the headwinds faced by premium hotel S-REITs, especially amid cautious discretionary spending and continued consumer downtrading trend

Outlook

Singapore tourism board increases forecast for full year tourist arrivals. Looking forward, the Singapore Tourism Board (STB) forecasts 2025 international visitor arrivals at 17 million to 18.5 million, with expected tourism receipts of SGD29bn to SGD30.5bn. While this signals continued recovery, it remains below 2019’s pre-pandemic peak of 19.1 million visitors, even after a five-year recovery period. A key factor limiting full recovery is the strength of the Singapore dollar, which continues to act as a deterrent for selected inbound markets, particularly the Japanese market, which has dropped out of Singapore’s top five source markets.

Demand squeeze should see sweet spot for mid-tier to upscale hotels. We see the sweet spot for hotels with daily rates within the pocket-friendlier range of SGD200 to SGD300+ per night which will continue its appeal to the mass market travellers and consumption-cautious Chinese travellers. Travel sentiment survey by Dragon Trial Research has also showed that Chinese travellers are opting for cheaper accommodation options in consideration of their travels, and in the face of unfavourable foreign exchange rates. Approximately two-thirds of Chinese surveyed will be choosing economy to mid-range accommodation options to ease travel budgets, which further adds to our thesis for a preference for upscale to mid-tier offering.

Supply

Supply influx for two consecutive years. The sector will see more chunky supply come onstream in the next two years, with more than 2% of total supply pipeline expected in both FY25 and FY26. This includes 700 rooms as part of Resort World Sentosa’s expansion and more than 1k additional rooms with the completion of Liang Court site redevelopment. Approximate half of room demand are within the luxury to upscale room category and half is situated within the Central Business District of Singapore.

Strategy to scale up occupancy an uphill battle to climb. Strategy across the S-REIT hoteliers would still be an occupancy-focused approach in FY25. All S-REIT hotels have yet to see a full recovery in their respective hotel occupancy, in line with industry performance, although visitor arrivals have almost fully closed its gap against pre-pandemic levels. New supply launch will pose as stiff competition in price, especially within the upscale to luxury segment, where bulk of supply will come to compete.  

 
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