Singapore Tourism Report Q3 2008

Core Forecasts Arrivals data for the first quarter of 2008 were very encouraging, with Singapore welcoming some 2.604mn tourists. March data of 908,000 visitors represented a 5.7% increase year on year (y-o-y) and was a new record for the month.

Given the continued strong performance of Singapore's tourism sector, we are happy to maintain our tourist arrivals forecasts at present. By the end of our forecast period, in 2012, we predict that annual visitor arrivals will be running at 13.9mn. Foreign exchange receipts are expected to register US$14.9bn in 2012. We expect annual departures of 5.9mn by 2012, with a steady growth rate of around 5%.

Improving Customer Care In Singapore Speaking at the recent FHA/AHRA Hotel GM Forum held in late April 2008, the STB's deputy chairman and chief executive Lim Neo Chian outlined some of the challenges facing Singapore's tourism industry at the present time, citing the primacy of customer care and the fact that today's travellers seek high levels of service.

To help the country meet these challenges, the government has embarked on a range of initiatives, including a SGD360mn Tourism Travel Plan aimed at training some 74,000 workers over the coming three years, alongside the launching of a new accreditation scheme, the Singapore Service STAR.

Lim believes that, with a continued emphasis on service quality and nurturing a well-motivated workforce, the Singaporean hospitality industry should continue to grow from strength to strength. BMI shares this view, already ranking the nation's tourism industry in the top position on a regional basis.

Grand Prix To Boost Visitor Numbers The Federation Internationale de l'Automobile (FIA) has given approval for Singapore to host Asia's first ever night race in 2008. Construction on new pit facilities and modifications to existing road layouts are well underway, with the city state's massive lighting system for the race being successfully tested at the end of March 2008. The STB has organised a range of upscale tourist events to coincide with the Grand Prix, which should provide a significant boost to tourism revenues this year.

BMI believes that the hosting of a Singaporean grand prix will be a clear boon in attracting new visitors to the city state. The television coverage of the event will provide institutions like Raffles with a clear shop window to the world and the entire city state will be the focus of the world's media over the grand prix weekend. Supporters of grand prix racing tend to be reasonably affluent, so shopping centres and nightlife venues should receive extra revenue from incoming travellers.

Opening Up The Lucrative KL-Singapore Route The long-awaited liberalisation of the lucrative Singapore-Kuala Lumpur route commenced on 1 February 2008. Malaysia's Air Asia now operates two daily flights, with Singapore-based Tiger Airways and Jetstar Airways having one daily flight each. To celebrate the launch, the budget carriers were even offering some seats free of charge (before taxes).

This opening up of a route that was previously the sole domain of Malaysia Airlines (MAS) and Singapore Airlines (SIA) should have great benefits to the travelling public, as more flights are allowed and prices are lowered. Full liberalisation of the KL-Singapore route is expected by December 2008 in accordance with an ASEAN agreement. Singapore and Malaysia have very well-developed bilateral tourist ties and the new competition on the KL-Singapore route can only benefit the tourism industries of both countries. The Sydney-based Centre for Asia Pacific Aviation believes that traffic on the KLSingapore route could triple within two years of full liberalisation.

Of interest now will be the reaction of the two flag carriers, MAS and SIA. Will they use their deep pockets to fuel a price war, trying to knock the budget carriers out of the market? Or will they prefer to concentrate on business travellers, who are happy to pay higher prices for the direct centre-to-centre links provided by the major airlines? Oil Prices Starting To Hurt Singapore Airlines High oil prices are going to impact on the bottom line of all global airlines in 2008. BMI recently upped its average 2008 forecast for front Brent to US$100.00/bbl, from US$91.00/bbl previously, and its 2009 average forecast to US$85.00/bbl, from US$80.00/bbl. Needless to say, risks are very much to the upside.

To help combat this, Singapore Airlines recently announced a further increase in its fuel surcharges. The fuel surcharge for ASEAN countries has gone up to US$35 from US$30 and for flights to North American gateway hubs up to US$150, from US$130 effective May 12 2008. However, the company still stresses that these adjustments will only offer 'partial relief' to the higher price of jet fuel and that it may well review its surcharge policy if prices continue to rise.