By Elysia Tan
Published Dec 30, 2023
Even as flights between both countries resume, demand-sider risks could stifle recovery
SINGAPORE’S tourism recovery continued apace in 2023, with 12.37 million arrivals in the first 11 months – almost double the 6.31 million full-year 2022 figure.
Yet, this is far from the 19.12 million visitors in pre-pandemic 2019, and market watchers said that China is the missing piece.
Analysts expect continued recovery in 2024, but not to pre-pandemic levels. Peak months will not match the corresponding heights of 2019, said Jesper Palmqvist, area director for Asia-Pacific (Apac) at hotel industry research firm STR.
Research company Tourism Economics said Singapore's tourism numbers are unlikely to recover to 2019 levels until 2025, with broad-based delays in travel recovery regionally and elsewhere.
This is partly because Singapore is still waiting for the large-scale return of Chinese
travellers.
“The pace of improvement of outbound travel from China, one of Singapore’s top tourist source markets, is a crucial ingredient to Singapore’s tourism recovery,” said Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield.
Alan Cheong, executive director of research and consultancy at Savills, agreed that China has a major role in the recovery of inbound visitors. He expects about 1.7 million China visitors this year, based on annualised data for the first eight months.
"It would be a tall order for those numbers to reach 2019 levels," Cheong said, noting that even a doubling of this figure will fall short of the 3.63 million Chinese visitors seen in 2019. He expects Singapore's total visitor arrivals to match 2019 levels only in 2026.
Palmqvist noted that arrivals from Indonesia and India are "already pretty much back to historic levels", with Malaysia slightly behind; yet Chinese visitors form only about 10 per cent of arrivals now, down from almost 20 per cent in 2019.
Returning to the skies
While flight availability has limited the return of China travellers, this is set to change. Ahead of the next fight-approval window in February, Singapore and China are in talks to restore flights to pre-pandemic levels as quickly as possible, Acting Transport Minister Chee Hong Tat said during a recent official visit to China.
This is in line with the upcoming bilateral 30-day visa-exemption arrangement, targeted for early 2024. which should boost arrivals.
Chinese travellers have been hesitant to book international flights due to the uncertainty of passport and visa approvals, said Trip.com management director and vice-president of international markets Boon Sian Chai. With low take-up, airlines may not see the need to increase capacity.
But flight capacity has been improving. Citing International Air Transport Association data, Tourism Economics head of Apac tourism analysis Michael Shoory said that by mid-2024, China's international air capacity should return to 2019 levels.
STR's Palmqvist said "Singapore is the most recovered market in terms of flight capacity for outbound Chinese travellers.
Flights from China have been a "critical gap" in the growth of airline seat capacity into Changi Airport, said Garth Simmons, chief executive officer for Accor's premium, midscale and economy division in Asia. But there has been "Substantial growth", with this expected to reach 82 per cent of 2019 levels by year-end.
In 2023, Crowne Plaza Changi Airport has observed a gradual return from the Chinese market, which saw robust demand in 2019, said the hotel's general manager Bruno Cristol.
Staying home
However, even as supply and logistical issues fade, Chinese travellers' interest in Singapore may have cooled. The lack of choice during the pandemic encouraged domestic travel, noted STR's Palmqvist. Even in 2023, lingering caution supported a preference for staying home, said Suki Kin, principal director of client growth in Asia at digital marketing platform Nativex.
Carina Chorengel, senior vice-president of commercial, Apac at Hyatt, highlighted a "clear trend of Chinese travellers turning towards domestic exploration".
Beyond visa issues, cost is a more important obstacle – which is why the visa exemption may increase arrivals only slightly, said Savills’ Cheong.
"What is retarding arrivals from China are the expensive airfare, hotel accommodation and cost of services here, and also the slow economy there is inducing many to save," Cheong added. "If they have the capacity to travel, the Chinese today prefer to execute that domestically",
Subramania Bhatt, founder and CEO of digital marketing firm China Trading Desk, noted that while international travel is now more accessible for China's growing middle class, domestic travel often remains more economical.
China's outbound travel appetite could pick up in 2024, with travellers looking outwards after exploring domestic locations, said Cushman & Wakefield's Wong. But it may not recover fully, given China's property sector woes and sluggish external demand.
Cheong of Savills expects Chinese outbound travel to take more than "just one to two years" to reach pre-pandemic numbers.
In a China TRading Desk third-quarter survey, only 18 per cent of travellers intended to travel within three months, down from 52 per cent in Q1. Higher-than-anticipated costs were one reason.
Instead of pandemic-related safety, price became the main reason for choosing an airline. Discounts and "value for money" concerns were key considerations when shopping for luxury items overseas.
Cost-related worries may damage Singapore's appeal, Already a high-cost destination in the region, the Republic has become even more expensive with its strong currency and higher hotel rates, said Wong. "This could turn away budget-conscious travellers looking to stretch their dollar, or lead to a shorter stay in Singapore".
Tourism Economics' Shoory sees high costs as a downside risk, but not a strong obstacle to recover - though there have been signs of China visitors spending less per trip, compared to pre-pandemic.
Mixed picture of spending
For overall tourist spending, observations vary, with some hospitality players seeing a higher desire to spend.
High hotel room rates are partly due to high costs but also demand. Hotel groups such as Accor, Hyatt, Marriott and Hilton all performed better this year than in 2019.
On Trip.com, the average room rate (ARR) in Singapore as at October was about US$150, 7 per cent higher than pre-pandemic levels. By end-October, room nights booked were 20 to 30 per cent higher than 2019 levels.
According to Singapore Tourism Board data, the ARR for the first 10 months was S$282.81, up 29 per cent from the corresponding period in 2019. Average occupancy was 80.8 per cent, down 7.3 per cent from 2019.
Oriol Montal, Marriott's managing director for luxury in Apac excluding China, said that while revenge travel may soften, Singapore has been attracting visitors that stay longer. He expects hotels to keep seeing high rates and occupancy.
In the first 10 months of 2023, visitors stayed for an average of 3.85 days, up from 3.4 in 2019.
Wong of Cushman & Wakefield believes that in 2024, ARR should hold at around the 2023 average of about S$284, with potential spikes during marquee events or concerts.
China Trading Desk's Bhatt hopes that by Q1 or Q2, passenger bookings from China to Singapore will be on a par with 2019. He predicts a full recovery in Chinese tourist spending in Singapore by Q2 or Q3.
But Savills' Cheong noted that even before Covid-19, Singapore's retailers felt that the spending power of Chinese tourists had deteriorated. "Therefore, we may see tourism growth, but the quality of spend increases slower and in real spending power terms, it would not be something to shout about."
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