IT’s a sign of how bruising it’s been for Singapore’s inbound industry that when news appeared in local media that visitor arrivals in 2021 had dropped more than 80% over 2020, one immediate comment was “it felt more than that”.
This week, the Singapore Tourism Board released preliminary data which showed that about 330,000 international visitors arrived last year, a historic low (in 2019, it was 17 million), and visitor spending plunged by more than half to an estimated $1.9 billion. In 2020, visitor arrivals to Singapore stood at 2.7 million, and tourism receipts came in at $4.8 billion.
The STB pointed to encouraging signs of recovery, with year-on-year growth in the last three quarters of 2021. “The introduction of various travel arrangements, such as Vaccinated Travel Lanes (VTLs) has encouraged the gradual return of international travellers. Domestic consumption has also been strong, as the tourism sector pivoted to develop new and innovative experiences for locals.”
Nevertheless, the inbound sector is bracing itself for a gruelling year ahead.
Arthur Kiong, CEO of Far East Hospitality Group, said, “We think it will be more complicated than 2021. The manpower crunch, inflation, less government contract business, and fiscal job support schemes will make things more challenging.”
On the tours and activities front, Chan Chee Chong, CEO and co-founder of GlobalTix, believes the first half of 2022 “will be very challenging indeed”.
“The industry has relied on domestic for the last two years and there is only so much you can do for a small market. International travel is only slowly recovering in the first half hence sales numbers aren’t going to be great. On the cost side, without the Job Support Scheme (JSS) to cushion the expenses, the travel trade will probably face the toughest challenge this year. Hopefully they have prepared themselves well for the last two years to get through first half of 2022.”
Inbound’s return will depend on “significant shift” in conditions of entry
Kerry Healy, Singapore-based chief commercial officer, Accor South-east Asia, Japan & South Korea, said, “Our forecast for 2022 remains conservative, and will continue to be so until there is a significant shift in the conditions associated with entry into Singapore, such as capacity limitations.
“As the region will continue to compete with many other global destinations that are also reopening, it is vital that travellers are not deterred by complicated travel conditions. A restrictive model will hinder the recovery of the tourism sector, whereas a more flexible model presents great opportunities for the industry. The biggest threat to hotel recovery is if entry restrictions, processes and costs are too constraining.”
Last week, the government announced it would continue to maintain a 50% limit on VTL flight and bus tickets for entry into Singapore – a limit set with the onset of the Omricon variant. It did simplify entry requirements by requiring travellers to do unsupervised self-administered antigen rapid tests (ART) if they need to leave their accommodation from days 2 to 7 of their arrival.
Healy said she did not see business generated from MICE events and transiting leisure travellers, two historical segments, returning anytime soon in the current environment. “Furthermore, we don’t foresee any revenue coming in from traditional inbound markets such as Mainland China, as well as limited inbound business expected through VTLs with Australia, Europe, USA, Canada, South Korea, India and Indonesia or other SEA countries at least for the first half of 2022. Overall, we anticipate a slow and progressive recovery.”
Choe Peng Sum, CEO of Pan Pacific Hotels Group, said, “For the first half of 2022, we will continue to focus on domestic demand in Singapore, Australia and London, which contribute to 85% of our business.
“The majority of demand is still driven by the domestic markets, and we will continue to build on our packages and products to drive local demand through different channels – not just for stays, but also for our restaurants, bars, and experiences. In the second half of the year, we will turn our focus to drive more international arrivals in the region.”
Kiong said, “I am hopeful borders will re-open, albeit slowly, after March and start gaining momentum as vaccination rates improve in key viable markets and therapeutics are distributed more equally worldwide. The uptick will be for essential business primarily, and leisure is not expected to rebound until the region recovers palpably.”
Added Chan, “I believe there will be a gradual return of inbound into Singapore albeit a much slower pace for the first half of 2022. I hope that the second half of 2022 will see much better recovery and we end up with decent numbers in November-December.”
Limited impact of VTLs so far, “a good start but process needs refining”
VTLs, while welcomed, have had limited impact. Said Chan, “There is movement but it’s mainly corporate business and VFR. In terms of leisure inbound, I think it’s negligible. For VTL to have a more significant impact, it has to open up to more flights as well as cheaper Covid tests.
“Otherwise, the high airfares of VTL flights and the expensive PCR tests are going to turn off many tourists. They would rather visit other countries like Dubai and skip Singapore. If we are not careful, we as a nation might completely miss out on the revenge travel expected to take place in 2022-2023.”
Said Healy, whose group has 27 properties in Singapore, “Overall, VTLs did not bring the amount of business anticipated. These travel lanes were favoured essentially by travellers visiting friends and family in Singapore, hence mostly not requiring hotel accommodation.
“As an industry we need to work together and be coordinated with clear messaging, building confidence on the opening of Singapore overall, and not only selected to specific VTLs. VTLs are a good start towards opening Singapore. It just requires refining the process to cater to the sheer scale involved in supporting the hotel industry and associated services.”
Pan Pacific’s Choe said the VTLs did bring Pan Pacific a gradual increase in bookings. “In Q4 2021, international travellers from the VTL markets contributed about 10% of our total bookings in Singapore – this may not seem like a large portion, but compared to December 2020 before the VTLs opened, we were seeing more than triple the number of non-domestic guest nights.
“This was especially beneficial for our Serviced Suites, which has seen good demand coming from US, Japan and Korea. These mostly comprise project groups and business travellers booking long stays with us.
“We see tangible pick-ups, though they remain low compared to pre-Covid levels.”
Sarah Wan, general manager, Singapore, Klook said that globally, the company has observed promising signs for cross-border tourism worldwide during the year-end holiday season. “We saw a 4.5x surge in inbound bookings from November to December to Western markets (US, Australia, New Zealand, Europe), while inbound bookings to Asia saw about a 3x surge during the same period”.
She added, “With the world at our fingertips, tourists can afford to choose where they want to travel. There are various factors a tourist will take into account, such as their personal preference and even the destination’s overall appeal. Particularly for Singapore, a major consideration would be the market’s overall attractiveness as a destination compared to its neighbours in the region or across the globe. Singapore’s appeal as a destination is contingent on a few factors, including COVID social restrictions, testing, and even the types of experiences.”
Local stays prop up hotels but “staycations may take a back seat” in Singapore
For the short term, the reality is Singapore hotels will still have to rely on the domestic market. However, Kiong, whose group operates 25 properties in the city state, believes that staycations “will take a back seat as we expect Singaporeans to holiday abroad when borders re-open rather than stay at home. I think they had enough of staycations over the last two years”.
Wan said, “From our perspective, domestic travel is here to stay. Long gone are the days when merchants could rely on one or two inbound markets. Having a baseline of domestic demand will help safeguard businesses from cross-border fluctuations.
“We’ve seen local players continuously innovate and develop their offerings to tap into the domestic market, and this will have to continue in 2022. We will also continue to see an accelerated shift towards digitalisation with many merchants going digital, using contactless technologies, and even implementing API integration with partners.”
At Accor, the overall shift to domestic across the region has been significant. Said Healy, “We’ve seen our domestic business grow from 37% of our overall business in 2019 to now 84% of the hub’s business in 2021. This is an incredible shift in our business focus.
“Our total room revenue last year mostly came from staycation business as inbound volume was very limited. We expect this demand to remain strong this year as we will still rely heavily on domestic demand. However, we are cognisant that this segment may drop significantly as borders re-open and VTLs increase with South-east Asian countries.”
She said Accor would continue to innovate staycation offerings to engage local markets.
Pan Pacific will pursue a similar strategy. Said Choe, “We have been fortunate to remain EBITDA positive last year, with the majority of our hotel business contributed by domestic bookings – on average more than 90% of our room nights came from local stays. For the fourth quarter of 2021, our properties took in up to 90% occupancy, spiking during the December holidays. We also received bumper weekend bookings for weddings throughout the year.
“With domestic continuing to be a focus while skies are closed, we are rolling out more creative partnerships and promotions this year. It is now more important than before to create immersive, experiential stays that extend beyond just the room nights.”
“Survival of fittest” when it comes to manpower shortage
Most worrying of all though is the manpower shortage which Kiong described as acute and “most worrying”. “It will simply be the survival of the fittest as we compete for staff. There may be some unintended positive effects in that hotels will not be so quick to discount as competing on occupancy is not sustainable.”
Healy said the restrictive labour market in Singapore had been a challenge long before the pandemic but “as we look forward to the gradual business resumption with more VTLs opening up in time, manpower shortage will need to be addressed”.
“We value our employees hugely but the severity of the situation in our industry, and the fact that the pandemic is still ongoing, led to the necessity to downsize and cut costs. As a result, hotels are running on low on manpower to see them through the current and upcoming levels of business.”
Many of its hotels have tapped on technology, and implemented management traineeship to attract new talent. Said Healy, “We intend to further explore other Job Redesigning opportunities within the operations to enhance and improve productivity, whilst at the same time training and hiring talent with special needs, and continuing to attract seniors with permanent part-time work, back-to-work mothers with flexi-reduced hours to promote work life and wellbeing to make our industry more appealing and compelling.”
Choe said, “The VTLs slightly alleviated this (challenge) as staff were able to enter Singapore for work, but this is one of the pain points that has no easy solution as long as the skies remain shut.
“Covid-19 has compelled us to rethink and reset our approach, taking the best practices from other industries and adapting them to our needs. By investing in constant training and building internal capabilities, we will be ready to leap back into action when recovery arrives.
“For example, we introduced job redesign training through upskilling and reskilling – such as combining security and concierge services – and improved our central reservations system. We achieved cluster arrangements for resources such as engineering, sales and marketing and finance. We have also leveraged technology and innovation, rolling out our digital concierge at our properties to streamline the guest experience and alleviate the strain on manpower.”
To address manpower issues, the STB, together with various agencies, will launch the Tourism Careers Hub in 2022 to provide training and skills upgrading for tourism workers and businesses, as well as support for individuals interested in pursuing tourism careers.
The Tourism Careers Hub will focus on three areas: job matching within the tourism sector; developing industry-specific capabilities to prepare the tourism workforce for recovery; and encouraging technology transformation and business innovation to seize new growth opportunities.