SINGAPORE TOURIST PROMOTION BOARD (Effectiveness of tourist promotion programmes)

Dr Wang Kai Yuen asked the Minister for Trade and Industry how effective the Singapore Tourist Promotion Board's tourist promotion programmes will be in view of the escalating hotel room rates in Singapore.

The Minister of State for Trade and Industry (Mr Mah Bow Tan) (for the Minister for Trade and Industry): Sir, may I have your permission to take Questions 17 and 18 together as they are related and due to time constraint?

Mr Speaker: Yes.

Mr Mah Bow Tan: Thank you. Sir, the current average occupancy rate of gazetted hotels is about 90%. The occupancy rate is expected to remain around this level of 90% over the next two to three years, based on the projected 8% annual growth in visitor arrivals and an expected 4.5% annual growth in the supply of gazetted hotel rooms. At peak periods, especially when large conventions or exhibitions are held in Singapore, we expect a shortage of rooms.

The low room rates over the last few years have helped to boost demand for hotel rooms. In view of the heavy demand for rooms, room rates have started to rise over the last few months. This will help to match supply and demand, and also spur more investments to meet the increased demand.

The URA has been steadily releasing parcels of land in the city for commercial developments. Hotel developers can bid to build hotels on these sites.

To help the hotel industry to plan ahead, the STPB regularly publishes tourist arrival statistics, and information on the supply of hotel rooms being planned or under construction. Hotel investors can use this information to decide more knowledgeably on their projects.

How will the rise in rates affect STPB's promotion efforts? The higher rates reflect the recovery of the hotel sector which has experienced six years of low demand from 1983 to 1988. But despite the rate increases, major surveys conducted in 1989 show that Singapore hotel rates are still amongst the lowest in the region. In other words, Singapore continues to offer good value-for-money compared to other countries in the region.

With an expanding economy and with labour costs going up, it is not surprising that hotel room rates have also gone up. The higher room rates will spur more hotel developments. The Government should not interfere in the operation of the free market. The quality of our hotel services is high. If we maintain this standard of service or better still upgrade it, and we continue to provide value for money, the tourism sector can continue to prosper. So STPB's promotion will stress that Singapore is a value-for-money destination. Its target will be the higher yield tourist segment, in other words, the convention visitors and the incentive tour visitors.

Dr Wang Kai Yuen: Sir, the Minister of State has said that indeed the hotel room rates will remain very high. In view of this, may I ask him why is there a need to increase the cess on hotels and restaurants?

Mr Mah Bow Tan: Mr Speaker, Sir, the raising of the cess, as I have explained at one of the STPB's functions, is a means of providing additional promotion moneys for STPB to continue to make sure that the message that Singapore is a value-for-money destination is well heard around the world. We are competing in the area of tourism arrivals with many other countries, and it is very important that we continue to get this message across in a most effective manner. If we do not do that, then the continued growth in tourism arrivals will not be able to be sustained.

Dr Wang Kai Yuen: Will the Minister of State agree that the increased promotion effort will be better done after the occupancy rate in Singapore hotels has been reduced when more new hotels come on line rather than doing it now, thereby just overheating the already very hot market?

Mr Mah Bow Tan: Mr Speaker, Sir, I think it is prudent for STPB to continue to keep on its marketing efforts without letting up, because it is in the nature of such programmes that if you are away from the public eye or notice for a while, it is very difficult to pick up the momentum again.