Hotels must reimagine business models

SINGAPORE, 28 October 2020: Singapore’s mid-market hotel industry is being forced to reimagine business models, guest amenities and experiences, as well as space use due to challenges presented by Covid-19 and evolving consumer trends and lifestyle choices.

According to JLL Hotels & Hospitality Group, the mid-market segment has strong recovery prospects post-Covid-19, but owners must adapt platforms to meet changing traveller demands and exercise flexibility to differentiate offerings amidst an increasingly crowded hotel market.

“Covid-19 has raised existential questions about the future of the mid-market hotel space, both in Singapore and across the globe,” says  JLL Hotels & Hospitality Group executive vice president, investment sales, Asia Pacific, Adam Bury. “Increasingly, we will see social and economic implications framing the business model of this sector within Singapore’s hospitality scene. This will force the mid-market segment to reimagine their assets, their definition of flexibility and determine the urgency to adapt.”

Singapore’s mid-market hotel industry segment has grown substantially over the past decade, with current stock accounting for 51% of the total hotel supply.

Between 2010 and 2019, the sector consistently posted high occupancy rates of over 80%. However, occupancy rates dropped by over 13% and RevPAR declined by approximately 49% in the first nine months of 2020, year-on-year, due to the impact of Covid-19 and despite government-driven demand, according to JLL analysis.

“The mid-market segment has strong recovery prospects post-Covid, but regardless it will be a highly competitive environment. Smaller independent players cannot sit still, and competing on rates is not a viable solution, with the wider guest offering seen as the major differentiator going forward,” says Bury.

According to JLL, with limited new supply coming onto the market in the near-term and a massive growing middle-income population in the surrounding ASEAN region, the mid-market segment is poised to lead a recovery in the hospitality sector. JLL regardless recommends hotel owners to reimagine strategies and offerings to maximise revenues and returns.

Reimagine guidelines

Hotel owners should ensure all efforts are made to be COVID-ready and meet changing traveller demands.

With 87% of Asia Pacific consumers expecting to make changes to the way they travel and many evolving the way they live and work, hoteliers must constantly strive to be at the forefront of demand trends.

Owners are encouraged to invest in safety measures and procedures at properties, enhance cleaning and hygiene standards, and improve booking channels to reflect tailored requests from guests.

Invest now: If owners want to maintain their hotel business model, then this is an opportune time to invest in the property.

Getting flexible: Hotel owners should also consider alternative uses, such as converting hotels into co-living or student accommodation assets, as demand for residential leasing and student accommodation increases, potentially providing a more stable cash flow to owners.

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