Singapore grapples with affordability, as seen in drops in shopping, dining, and hotel spending by tourists, who are also staying a shorter time. Going for more high-yield tourists and giving them the value they'd expect from paying high prices is the solution, and Singapore must do it fast. Here's why.
More visitors are coming to Singapore. Problem is, they are not spending on shopping, dining, and accommodations.
An even bigger problem may be a higher number of day-trippers, stopovers and those who combine, say, Singapore and Batam in Indonesia, are all reducing the average length of stay.
Affordability could be an issue, but expensive is a word that the Singapore Tourism Board management avoided at a recent media briefing on Singapore’s 2018 tourism performance.
Figures point to the cost pressures that the tiny but rich island is facing and will no doubt help its new tourism chief, Keith Tan, formulate what next steps to take.
Tan took over from former Singapore Tourism Board CEO Lionel Yeo last October.
The Lion City, whose popularity worldwide was boosted last year by the “Crazy Rich Asians” movie, saw an estimated 20 percent decline in shopping, 5 percent in accommodation and 4 percent in dining expenditures. These comprise half of total tourism receipts.
Only sightseeing, entertainment and gaming receipts rose 6 percent in 2018 over 2017, the Board’s preliminary estimates show, in line with a 6 percent rise in arrivals to 18.5 million.
Yet, tourism receipts grew only marginally (1 percent) to an estimated S$27 billion ($20 billion). Moreover, a chunk of that was airfares expenditure on Singapore-based carriers, along with port charges, which are counted as visitor spend. Had it not been for this, receipts would be much smaller and growth more marginal or even, minus.
(It is not clear if airfares expenditures cover only inbound into Singapore tickets or also includes outbound from Singapore to other destinations. The board said this information is confidential.)
Tan blamed the strong Singapore dollar as a reason for the spending ennui. The new CEO also pointed out that globally people are traveling more but spending less, citing research by Horizon Consumer Science that shows despite a record number of more than 800 million air travelers in 2018, global travel retail spending dropped to a projected $382 billion last year, from $397 billion in 2016.
“In 2018, eight of 14 of our top source markets saw currency depreciation against the Singapore dollar, which affected their spending power. We know this ourselves when we travel to other countries,” Tan said.
“We also observe there is a trend of visitors who spend less time here in Singapore due to the way their itinerary is structured. These could be day-trippers; visitors who are twinning Singapore with other [Indonesian] destinations like Bintan, Batam or Bali; or cruise passengers, but we know that even if they spend less on accommodation, they still spend on food, retail, shopping, tours and experiences here,” he added.
But Tan acknowledged that shopping, which saw the biggest drop, has become “a bit homogenized” in Singapore, saying this is “a growing concern.”
“People are used to buying online now, and our own retailers have to get their game up, he said.
The Singapore Tourism Board has a retail strategy to help jazz up the retail sector, Tan added. This includes using its “levers” to promote forward-thinking malls that have new concepts, such as Suntec City with the recently opened SuperPark.
It will also encourage first-in-Asia brands to debut in Singapore by creating more pop-up spaces that allow new entrepreneurs to trial their products out before expanding with heavy brick-and-mortar fixed investments. As well, it will support local designers to in promotion, product and packaging and processes.
Tan also intends to promote Singapore and convert day-trippers, stopover tourists and cruise passengers to overnighters this year.
THE DIRTY ‘EXPENSIVE’ WORD
When asked by Skift after the briefing if the issue is that Singapore is expensive, Tan said, “There are parts of Singapore that are probably expensive. Ultimately, it is a question of whether or not we are providing value for visitors so that even if it’s expensive, is it worth the cost.
“This is why we work hard with agents and retailers to ensure experiences are of value to the visitors, in which case visitors will be willing to pay a premium, whether it’s for hotels, restaurants, tours.
“I can’t persuade people to lower their prices. But I can work with them to see if they are indeed providing value for the prices they are charging.”
“Singapore is undoubtedly an expensive destination for a lot of travelers,” said Loh Lik Peng, director, Unlisted Collection, which operates 16 concept restaurants such as Burnt Ends and the One Michelin-starred Cheek by Jowl. “Relative to our neighbors, our cost of accommodation, food and beverage, retail and attractions are expensive. The Singapore dollar’s strength has also added to the relative cost.”
Even for the richest Asians, dining out in Singapore has become more expensive, according to a Julius Baer’s Wealth Report Asia 2018. Last year, Singapore displaced Hong Kong as the most expensive city in Asia to enjoy a fine-dining meal, at $283 per meal per person.
“The reason behind the exorbitant price tag? Besides factoring in the cost of quality ingredients airfreighted around the world, rental cost is a major issue. Higher fixed costs such as labour pricing and foreign labour restrictions present challenges as well,” said the report.
Singapore also rose from third position to the second most expensive city in Asia last year, after Shanghai.
HIGH-END PIVOT CRITICAL
If nothing can be done about Singapore’s high costs compared to neighbors, which are also larger destinations that can handle mass arrivals, then the need to pivot to higher-end tourists has become even more critical, said some industry members.
“We will reach the limit of mass market tourism sooner rather than later,” said Loh, who also chairs both the hotel industry’s training institution SHATEC and the Singapore Cruise Center.
“In the future I think we will have to target travelers with bigger budgets because this volume game only works if we are prepared to compete on price and Singapore will not be able to do that in the longer term.
“The Singapore Tourism Board must calibrate its approach to attract higher-yield segments such as MICE [meetings, incentives, conferences and exhibitions] and cruises. I cannot imagine actual top line numbers of arrivals continuing to grow at high rates, so the worry for me is longer term pivoting to higher-end tourists. Not everyone will like this of course.”
Arthur Kiong, CEO of Far East Hospitality which has 23 hotels and service residences in Singapore, including three to open by the third-quarter on Sentosa Island, said Singapore must focus on developing products that are unique and add value to attract the affluent because it competes with London, Tokyo, Hong and New York — not Bangkok, Kuala Lumpur, Jakarta or Manila.
The higher number of day-trippers and multi-destination visitors is a significant concern for Kiong. “It propagates a vicious cycle. If Singapore is positioned as a transit point rather than a destination, it prompts decisions such as having more functional-type accommodations and facilities, which in turn drives people to stay shorter. Worse people may give it a miss.
“When people stay for a day in a place for just a day or two, they usually conclude that they have been there and done that. It will erode Singapore’s attractiveness as a global city and tourist destination in the long term,” he said.
Kiong added: ”We have to be serious about positioning Singapore as a global city with a diversity to attractions and accommodation concepts to appeal to more affluent visitors. The developments in the Southern gateway waterfront, reinventing the appeal of Orchard Road, development of Mandai for eco-tourism, are moves in the right direction.”
BLESSING IN DISGUISE?
The Singapore Tourism Board expects arrivals to grow further this year to up to 19 million, representing a slower rise of up to 4 percent because of headwinds such as the US-Sino trade war and China’s economic slowdown.
China is Singapore’s largest market, followed by Indonesia and India. But so far, China is still showing growth, said Chang Chee Pey, assistant chief executive.
China in the short term will slow down but in the long term it is “inexorable,” said Loh. “This market will only grow and grow unless something catastrophic happens to China,” he said.
Some analysts also expect a muted corporate travel market, but Roy Liang, general manager of Oakwood Premier OUE Singapore, does not believe this market will decline.
“Singapore is a regional hub with many regional and Asia-Pacific offices being based here. Corporate travel to Singapore will not reduce significantly especially in a regional human resource location,” he said.
Perhaps it’s just as well that 2019 forecasts by the Singapore Tourism Board are modest. That should give the city, and its new CEO, a breather to plan a sustainable tourism solution for the little red dot that many want to visit.
But not splurge.
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Photo credit: The Outpost Hotel, one of three properties by Far East Hospitality which will open on Sentosa Island in the third quarter. Skift's Asia Forum will be held on the island on May 27, 2019. Far East Hospitality