One of the original four Asian Tigers, Singapore has an exemplary tourism market buoyed by its free market policies that attract a great amount of foreign direct investment. What this small island lacks in land, it makes up for with the world’s third highest industrial production growth rate, keeping Singapore’s infrastructural capacities a step ahead of rising tourist demand.
- Population: 5 million
- Surface Area: 710 km2
- Number of Hotels: 350
- Number of Rooms: 43,000Tourism revenues: USD 23 billion
- Visitors: 14.4 million
The city-state of Singapore, or "Lion City", holds its ground as a unique destination; its multiple ethnicities intertwine on the island that merges East and West. However, the island's uniqueness is not the only kind of capital that the city-state possesses. Singapore has a gross domestic product of nearly 277 billion dollars, which is growing at a yearly rate of 3.4%. Singapore is one of the four Asian Tigers, along with Hong Kong, South Korea, and Taiwan, known for rapid industrialization especialy in the 1960s and 1970s. Singapore has continued on this path to this day, and according to the 2011 Index of Economic Freedom, Singapore is perhaps the most industry-friendly country in the world with the second freest economy. This industrial environment allows Singapore to attract numerous Multi-National Companies and Foreign Direct Investment into the country, creating a strong base for economic development in the future. The cornerstones to Singapore's economic development today are industry and service, especially in finance and tourism. In 2010, industry was responsible for 27.2 percent of Singapore's GDP, through electronics manufacturing in particular. In fact, Singapore's industrial production growth rate for 2010 was the third highest in the world at 25 percent (after Qatar and Taiwan).
Services though remain the largest contributor to Singapore's GDP, the key components of which being the banking and finance industry as well as tourism. Singapore is an important global financial center, largely due to its diversity. As such, Singapore's finance industry has attained numerous international accolades. Its banking system is considered to be among the strongest in the world. Singapore also has the fourth largest foreign exchange market in the world (after London, New York and Tokyo). Tourism is the other major service industry in Singapore, tightly woven into the fabric of Singapore's affairs. The tourism industry accounts for 4% of the city-state's GDP and provides 160,000 denizens with work. It is for this reason that as early as 1964, the government recognized the sector's importance for the city-state's growth prospects by creating a unique tourism body that is fully dedicated to the promotion of tourism. Through a focus on infrastructural investment in order to support the industry's growth in a more material way than simply attracting higher attendance. Thanks to government initiatives, tourism is also diversifying into niche markets such as medical tourism, the gaming industry and the MICE (Meetings, Incentives, Conferencing and Exhibitions) industry. With the advent of two new integrated resorts in 2010, tourism expenditure in sightseeing and entertainment grew by a 1.8 percent in that year. Through creating an favourable investment environment, Singapore has nurtured the top-rate facilities and transport that lead it to attract world events, and in so doing, an ever-increasing influx of tourists and tourism revenues.
Becoming a destination
The government's primary strategy in developing tourism was to reposition the city-state from a lay-over to a destination, working to siphon off travelers who where otherwise traveling elsewhere in Asia. This was achieved through positioning the city-state as a unique meeting of the worlds and blending of cultures. Its current campaign, YourSingapore, touts an easily and highly customizable experience, which should serve the sector well in this time of increasing individualization. The main trends that the board notes for its local sector are the discerning traveler, competition from Macau and South Korea, and a need for workforce. All of these woes can be combated with an accent on customizability, whether to attract the discerning client or differentiate Singapore from other destinations.
Infrastructure was boosted again in 2012 with new attractions, including the River Safari theme park which opened in the Mandai Nature Reserve area. The city-state also unveiled the International Cruise Terminal, which doubled the port's berth capacity to accommodate the world's largest cruise ships. These never-ending developments are no accident. According to a report released at the 2012 Travel, Trade & Tourism Summit, Singapore offers the most attractive environment among ASEAN countries for developing the travel and tourism sector. Worldwide, Singapore is still in a leading position as the 10th best tourism investment environment.
An olympic boost
A large spike in tourist arrivals occurred between 2009 and 2010 as Singapore hosted the inaugural Youth Asian Games in 2009 and the inaugural Youth Olympic Games. Alone, it was estimated to have drawn 530,000 guests between the athletes, officials, volunteers, spectators, and the media. However, its history and experience in hosting events goes back much further, to form Singapore's significant base in sports tourism. In this way, the city-state had been working on capacity-building for welcoming tourists for quite some time. For example, Singapore has been on the Formula 1 circuit since 1966. This was closed in 1977, but was reopened in 2007. Singapore has been making this event more attractive since its return to the city-state. Singapore's tourism board made a goal of establishing the city-state as a premier business and leisure destination as of 2003, specifically to grow its tourism revenues per annum by 8%. Today, tourism activity in Singapore has surpassed this goal. From 2012 to 2013, Singapore's attendance increased by 9.5%, from 13.2 to 14.4 million tourists. The increase in tourist arrivals has necessarily led to increases in revenue from the sector. Although this year revenue has only risen 3% from $22.3 to $23 billion, the compounded annual growth rate is at 10%. Singapore's top markets for tourists are exclusively Asian, with Indonesia providing 19.4% of tourists, 12% from China, 8.6% from Malaysia, and 6.6% from India. Combined, these markets provide for nearly half of tourist arrivals and 40% of tourist revenues.
The most extreme rise was between the years 2009 and 2010 when revenue rose from 12.6 to 18.9 billion, a 33% spike. This was largely due to the lead-up to the 2010 Youth Olympics. The heavy impetus to a tourist influx with the Youth Olympic Games continued to be a tourism growth point, as the government made heavy infrastructure investments to sustain future growth in the industry. This included anything from restaurants and entertainment to lodgings and resorts. Another contributing factor was the addition of low-cost flights to the city-state by most major Asian airlines, combined with a growing middle class in the region which frees up more money for travel. Whereas Singapore had largely been just a layover before, it has been marked as a destination.
With attendance growing at a compounded annual rate of 6.6%, it is necessary to supplement tourism infrastructure as well. The supply of hotel rooms in Singapore is expected to grow by more than 20 percent, to about 53,000 rooms, by 2015. Hotels in the midscale segment should dominate this new supply, at a predicted 50% of the total. Despite steady growth in attendance, this influx of new supply is expected to cause a slight drop in occupancy rates, but they are expected to still remain above the 80 percent mark. As a point of reference, the average occupancy rate stayed firm at 86 percent in 2012, even though 1,200 new rooms came on the market. On the other hand, average daily rates increased 5.7 percent on year to 261 Singapore dollars in 2012 for a positive RevPAR growth. Although this is a likely scenario going into the supply increase of the near future, it is also possible that average daily rates drop slightly to compensate for a slight drop in occupancy. In any case, the long-term prospectus of the tourism market in the country is still bright, with rising attendance expected to soon catch up to the supply increase.
The expected hotel supply growth in Singapore by 20% from now to 2015 undoubtedly translates to an active schedule of hotel openings. One group expressing significant interest in the city-state is InterContinental Hotels Group, in combination with the expansion of its Holiday Inn Express brand. The brand in fact made its country debut earlier this year with the 221-room Holiday Inn Express Singapore Orchard Road. The Holiday Inn Express Singapore Clarke Quay will join the country's portfolio in late 2014. Clarence Tan, Chief Operating Officer, South East Asia & Resorts of InterContinental Hotels Group explained to Hospitality-ON the pull that Singapore has to this group in particular, hinting at the features that bring other groups to the city as well: "Singapore is modern - It is well-developed in terms of infrastructure, and its air and rail networks are considered to be amongst the finest in Asia. The country is a major shipping hub for Europe, the Americas and the rest of the Asia-Pacific and this makes it an obvious attraction to our hotel partners. In recent years, Singapore has also become a hotbed for international events like the annual Singapore Grand Prix, and it is also a dynamic centre for the MICE industry with the quality of world-class facilities, accommodation and service providers that are available here".
But Singapore is not just a place for hotel chains to grow through quantity. The location of the world's third designer Sofitel So establishment in the city-state also defines it as having the allure to grow brand identity through quality. The Sofitel So Singapore will open in March 2014. 134 rooms including 16 suites blend French elegance and Asian culture in the city's central business district. The Westin Singapore Marina Bay Sands, opened in November 2013, shows the same theme as a 5-star hotel in Singapore's financial district as well. The hotel offers 301 guestrooms and suites with views of Marina Bay. All three recent openings highlight the booming nature of business travel in Singapore, showing a virtuous circle upwards on all fronts.
Singapore hosts opportunities for development in nearly all aspects of the tourism industry. It has a strong hold on business travel as well as sports, and capitalizes on an image of mixed communities of all ethnicities at the same time as an industrial pioner. Above all, Singapore is alive: the map of its streets and guide to its attractions changes yearly. With a landscape that is always in flux, there is a long-term investment prospect, in whatever new project arises. But with this in mind, there is the question of how much Singapore can sustain. A small island, there may be a physical limit to its ability to morph yearly. Further, as Southeast Asia becomes more and more of an economic giant, there is the question of whether budget sensitive tourists will be swayed to other destinations with weaker currencies.
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