Singapore Hotels Financial Analysis

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Analysis is based on the Hotel Industry Report Study 2007 by Singapore Hotel Association

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Singapore Hotels Financial Analysis

  1. 1. A joint effort of Wen Hui Toh, Yvonne Kwek & Zhi Ming Tay 2008 for Class: Introduction to Lodging Industry University of Nevada Las VegasIntroductionThis analysis is based on the Hotel Industry Report Study 2007 of 27 hotels in Singaporeby Singapore Hotel Association. This hotel financial analysis is based on the followingcriteria: • Location of the hotels • Number of rooms • The star rating of the hotels • The occupancy percentage • Average number of guests per rooms • Average daily room rate • RevPAR • Revenue per guest night • Total revenue per available rooms • Total expenses per available roomsAnalysis on Pg. 16
  2. 2. The 37 hotels in the report are classified according to its location, star rating and roomnumber. No of Hotel Rooms < 350 Rooms 350-500 Rooms >500 Rooms Allson Hotel Amara Hotel Singapore Carlton Hotel Copthorne Kings Hotel Changi Village Hotel Conrad Centennial Four Seasons Hotel Singapore Copthorne Orchid Furama Riverfront Grand Mercure Roxy Grand Plaza Park Hotel Hotel Grand Copthorne Waterfront Hotel Rendezvous Hilton Singapore Grand Hyatt New Park Hotel Hotel Phoenix Holiday Inn Atrium Paramount Hotel Intercontinental Hotel Marina Mandarin The Scarlet M Hotel Singapore Novotel Clarke Quay Sentosa Resort and Spa Marriot Singapore Orchard Hotel Regent Hotel Singapore Pan Pacific River View Hotel Peninsular Excelsior Sheraton Towers Raffles the Plaza Swissotel Merchant Court Royal Plaza on Scotts Shangri-la Hotel Swissotel the Stamford Hotel Star Rating 3 star 4 star 5 star Four Seasons Hotel Copthorne Orchid Allson Hotel Singapore Paramount Hotel Amara Hotel Singapore Grand Copthorne Waterfront Penisular Excelsior Carlton Hotel Grand Hyatt River View Hotel Changi Village Hotel Hilton Singapore Conrad Centennial Intercontinental Hotel Copthorne Kings Hotel Marina Mandarin Furama Riverfront Marriot Singapore Grand Mercure Roxy Hotel Pan Pacific Grand Plaza Park Hotel Raffles the Plaza Holiday Inn Atrium Regent Hotel Singapore Hotel Phoenix Shangri-la Hotel Hotel Rendezvous Sheraton Towers M Hotel Singapore The Scarlet New Park Hotel Sentosa Resort and Spa Novotel Clarke Quay Orchard Hotel Swissotel Merchant Court Swissotel the Stamford Location
  3. 3. Marina Bay/City Hall Riverside Orchard Four Seasons Hotel Allson Hotel Copthorne Kings Hotel Singapore Amara Hotel Singapore Furama Riverfront Grand Hyatt Grand Copthorne Carlton Hotel Waterfront Hilton Singapore Conrad Centennial Grand Plaza Park Hotel Hotel Phoenix Intercontinental Hotel Holiday Inn Atrium Hotel Rendezvous Marina Mandarin Novotel Clarke Quay Marriot Singapore Pan Pacific River View Hotel New Park Hotel Penisular Excelsior Swissotel Merchant Court Orchard Hotel Raffles the Plaza Regent Hotel Singapore Swissotel the Stamford Royal Plaza on Scotts Shangri-la Hotel Sheraton Towers Tourist Area Other Area M Hotel Singapore Changi Village Hotel The Scarlet Copthorne Orchid Sentosa Resort and Grand Mercure Roxy Spa Hotel Paramount HotelSource: www.hotel.comReference: J. Siguaw., B.G. Wee., 2008. Exploring Best Practices in the HospitalityIndustry in AsiaDepartmental Revenues
  4. 4. Departmental Revenues $60,000 < 350 Rooms $50,000 350-500 Rooms $40,000 PAR $30,000 $20,000 $10,000 $0 ROOMS FOOD BEVERAGE OTHER F&B < 350 Rooms $49,054 $23,429 $6,034 $2,465 350-500 Rooms $49,467 $20,108 $4,306 $2,839 Departmental Revenues < 350 Rooms 350-500 Rooms $20,000 $15,000 PAR $10,000 $5,000 $0 SPA/HEALTH MINOR RENTALS & TELEPHONE CLUB OPERATIONED OTHER INCOME < 350 Rooms $500 $5,720 $3,296 $16,252 350-500 Rooms $421 $581 $1,648 $10,596Departmental Revenues
  5. 5. 350-500 rooms to >500 rooms Departmental REvenues $60,000 350-500 Rooms $50,000 >500 Rooms $40,000 PAR $30,000 $20,000 $10,000 $0 ROOMS FOOD BEVERAGE OTHER F&B 350-500 Rooms $49,467 $20,108 $4,306 $2,839 >500 Rooms $52,495 $24,568 $6,560 $4,112 Departmental Revenue 350-500 Rooms >500 Rooms $14,000 $12,000 $10,000 $8,000 PAR $6,000 $4,000 $2,000 $0 SPA/HEALTH MINOR RENTALS & TELEPHONE CLUB OPERATIONED OTHER 350-500 Rooms $421 $581 $1,648 $10,596 >500 Rooms $502 $554 $1,343 $11,707
  6. 6. <350 - 500 350->500 Variance VarianceROOMS -$413 -$3,028FOOD $3,321 -$4,460BEVERAGE $1,728 -$2,254OTHER F&B -$374 -$1,273TELEPHONE $79 -$81SPA/HEALTH CLUB $5,139 $27MINOR OPERATIONED DEPARTMENT $1,648 $305RENTALS & OTHER INCOME (NET) $5,656 -$1,111TOTAL $16,785 -$11,876Departmental Revenue
  7. 7. Rooms<350 rooms to 350-500 rooms • The lower room revenues for hotels with <350 rooms is mainly due to the lower star rating of the hotels compared to hotels with 350-500 rooms. • Hotels with 350-500 rooms are of close approximate with the orchard, city and riverside this had contributed to the higher room rate compared to hotel with fewer rooms. • Due to the locations differences, hotels with 350-500 rooms are targeted their market at the business travelers while hotels with fewer rooms focused mainly in transient travelers. • There are more international hotel brand in the 350-500 rooms category compared to hotels with >350 rooms. There are more market penetration for international brand name compared to local branding, this had resulted in a higher room revenue in the 350-500 rooms category compare to hotels in the >350 category. • The higher room revenue in the 350-500 categories might be due to the better amenities and services in the hotels. • The room mix between hotels in the two categories can be very different due to the target group.350-500 rooms to >500 rooms • More five star hotels • Very near to major convention centers and infrastructure • Majority of the hotel with >500 rooms have big convention halls • These hotels held major international conferences • Major professional development programmes are held in these hotels • More regular customers who stay in the hotel for a longer time (e.g. 3 months), these regular customer raised the occupancy % thus making the rooms rate higher • More group and corporate contracts compare to 350-500 roomsDepartmental Revenue
  8. 8. Food<350 rooms to 350-500 rooms • Two <350 rooms hotels are in the tourist area: the scarlet and Sentosa resort and spa. • The contributing factor of the two hotels is 18% of the total hotels in this category. Since these two hotels are in the tourist area, food prices can be mark up significantly and the star rating of the two hotels is in the 5 star category. • There are 6 hotel in the <350 hotel category which are located in the city, orchard, and riverside area. These hotels might be situated in the location that is not the most accessible central area (e.g. Four Seasons and hotel rendezvous are situated away from the main orchard road area). • The locations might contributed the lack of food outlets surrounding the area, causing a higher mark up of food prices in the <350 hotel category compared to 350-500 hotel rooms category. Due to the mark up the POR is higher. • The poorer performance in the 350-500 hotel rooms category might due to the easy accessible to food outlets in the area. • The guest in the 350-500 rooms might consist of more traveler, with this, the chances of spending money in food is lower in this category.350-500 rooms to >500 rooms • >500 room hotel consist of only one 3 star property • The entire hotel in this category is situated in the city, orchard and riverside area. This had contributed to the higher pricing of the food. • Since hotels are situated in the main area, there is a higher possibility of walk in guest. • Hotel in this category had international conferences e.g. raffle the plaza and Shangri-la hotel. This had helped to mark up the food price and the guests in the hotels have more spending power.Departmental Revenue
  9. 9. Beverages<350 rooms to 350-500 rooms • In the <350 category, two hotels are in the tourist area, since these hotels are in the tourist area, there will be a higher mark up of price of beverage. There might be higher demand for alcoholic drinks in these areas. • Hotels in this category might have a higher percentage of banquet events, with the increased banquet events, more alcoholic drinks are sold. • There might be more beverage outlets in hotels in this category. The occupancy percentage is higher compared to hotels in the 350-500 category, with higher occupancy rate, there might be higher demand for beverages. • Since the denominator in the <350 is small, it makes the PAR higher. Hotels in the 350-500 rooms have lower PAR might be due to the close approximate to other beverages providers. • In the 350-500 rooms category, there might be lower in-room dinning orders so it reduces the chance of up-selling of alcoholic beverages. • There are lower occupancy rate and ADR in this category thus reduced revenues. Hotels with 350-500 rooms might have host less banquets. • Poor services and few outlets can be major contributing factors to the lower revenues.350-500 rooms to >500 rooms • In the >500 rooms category, hotels are in the central area, and some of the hotels host major international conferences, this will eventually raise the banquets frequency and the sale of alcoholic drinks are higher. • There might be more demand for in-room dinning and mini-bar. • With the higher percentage of four to five star rating hotels in this category, guests are draw to the good service • Being larger in size, hotels in this category have more outlets thus increased sale.Departmental Revenue
  10. 10. Spa / Health Club<350 rooms to 350-500 rooms • Due to the approximate to other spa • In room spa • More time can be spend on spa due to transient traveler • More demand for spa • The main business of hotel such as Sentosa resort are spa350-500 rooms to >500 rooms • Hotels in >500 rooms category might be close to other spa facilities, so the demand for in-house spa will decrease • There might be more business traveler in the >500 rooms category, so they might not have time to go for spaMinor Operation Department<350 rooms to 300-500 rooms • In <350 rooms there might be more demand for laundry and dry cleaning services, the laundry service might be done in-house. • Also in this category, the target group of this hotel had more demand for in-room entertainment such as pay-per view television programmes. • The guests in the might drive their own cars and shopped more in the hotels’ retail shops. • In the 300-500 rooms category, guests might be here for business trips so the demand for pay-per-view television programmes is lower. • The close approximate to the city centre means that there will be reduced chance of shopping in the hotels’ retail shops.Departmental Revenue
  11. 11. >500 rooms • The laundry service demand might be lower due to the shorter stay of hotel guests. • Hotels in the 500 category majority are here for business trip so the demand for pay-per-view is lower • These guests might be here for many times so the chances for shopping in the retail shop are lower.Rentals & other income<350 rooms to 350-500 rooms • Hotels in this category might have lower no-show • Higher day use • More early departure • More late check out and less allowance compared to hotels in the 350-500 rooms>500 rooms • In this category there are more hotels that are among the four to five star rating, with higher rating the level of service is higher, thus there might be more guests complaints, so there will be more allowances. • In this category, hotels tend to do function for regular corporate guests, giving them better discounts so this might be a contributing factor. • There might be more no-show, less early departure, late check out compared to hotels in the 350-500 rooms category.Departmental Expenses
  12. 12. Rooms<350 rooms to 350-500 rooms • Most hotels with less than 350 rooms are 4* hotels (with exception to Four Seasons Hotel, The Scarlet, Paramount and Sentosa Resort and Spa) which are located mainly at Orchard and Riverside (Clark Quay and Singapore River). • The hotels with 300 – 500 rooms mainly belong to the 4* and 5* categories and they are located in mainly Orchard and City Hall areas. • The variances in expenses can be traced to the difference in guests at the hotels. Mostly tourists will stay in hotels with less than 350 rooms due to the strategic locations they are in. These hotels are near shopping amenities which will prove convenient for tourists to visit. • Since the hotels are largely available for tourists, they are sold in bulk to travel agencies therefore having guaranteed room nights. With more tourists staying in hotels with less than 350 rooms, the expenses will rise. • In 2006, there were many trade shows that attracted tourists, largely made up by Asians and Europeans (statistics obtained from Singapore Tourism Board) • Since hotel rooms in this category are lesser, there will not be much discount given to these hotels. With less discounts, the expenses to maintain the rooms in these hotels is higher. • Hotels in this category might had provided more complimentary services and gift for guests e.g. newspaper. • With less rooms, and extension of infrastructures such as cable and satellite television can also be increased. • Since the target market for hotels in this category are family-based, changing of items such as linen can be frequent. • Increases damages in hotel property elevated the money spend on upgrading and maintenance of FF&E.350-500 to >500 • As for the hotels with 300 – 500 rooms, they are catered largely towards corporate travelers as the locations they are situated in are near conference centers and offices.Departmental Expenses
  13. 13. • Sources show that there are many in-house residents in hotels with 300 – 500 rooms. In 2006, Singapore hosted the IMF / WB event which 16,000 delegates visited Singapore. Most of them will stay in hotels near the City Hall area as the meeting was held in Suntec City Convention. Hence the expenses difference is not large for the two types of hotels being compared.Food & Beverage<350 rooms to 350-500 rooms • Since hotels in the <350 rooms category has lesser rooms, hotels do not get a very good bulk price when ordering beverages thus causing the expenses higher. • Further more the revenue in F&B is higher in the <350 rooms category compared to hotels in the 350-500 category. • The higher occupancy percentage and the average number of guests per room in the <350 rooms category did contribute to the higher expenses compare to 350-500 category. • <350 categories might spend more on alcoholic beverages compared to 350-500 categories.350-500 rooms to >500 rooms • Hotel in the >500 hotels category have higher revenue in the food and beverages category, so the expenses are higher compared to 350-500 categories. • The higher occupancy rate, average the number of guests per room and the total expenses per available room is higher the hotel in the 350-500 category.Telephone< 350 rooms to 350-500 rooms • The telephone expenditure on hotels with < 350 rooms is more than those hotels with 350 – 500 rooms as these hotels are normally patronized by tourists. • These tourists would normally use the hotel’s in house telephone to call back to their families or relatives in other countries. • There might be less public telephones readily found nearby, or that they do not own hand phone lines with auto roaming.Departmental Expenses
  14. 14. • At this category, with higher demand equal higher revenue, it will be vital for hoteliers to upgrade the system and there might be more damages. • With higher occupancy percentage and average number of guests per rooms compared to hotels in the 350-500 category, the expenses in the <350 category will be higher. • As guests of the 350 – 500 room hotels are mainly corporate travelers, they would more likely own a personal hand phone line with auto roam that they will use while overseas. • They would probably use the telephone line in the hotel to fax documents or surf the Internet. • Corporate travelers will spend most of his/her time in offices other then hotels rooms; there is a decreased chance of using the hotels’ phone. • Corporate travelers might be given a hand phone by the corporation that he/she is working for. Opportunity to call an oversea call is higher due to the hotel locations.350-500 rooms to >500 rooms • As the statistics show, there isn’t much of a difference in between the expenses of telephone usage in hotels with 350 – 500 rooms and hotels with > 500 rooms. • Reason being that these hotels are largely occupied by corporate travelers who mainly use the telephone line to fax documents or surf the Internet. They would most probably have their own auto roaming hand phone line.Spa & Health Club • As compared, the expenses for spa and health club for hotels with < 350 rooms differ greatly from hotels with 350 – 500 rooms. The locations of hotels in the <350 category have an impact on the expenses. • The Sentosa Resort and Spa belongs to the category of hotels with < 350 rooms, it contributes largely to the statistics as it is a business catering mainly to customers who have a demand for spas and health reasons. • With higher revenue in spa and health club, more expenses are invested so to increase guests satisfaction and maintain the hotel competiveness.Departmental Expenses
  15. 15. • The lack of other spa and health facilities around the area can be one contributing factor.350-500 rooms to >500 rooms • Hotels in the >500 category are situated in the heart of the city, guests are more accessible to other spa and health club e.g. California fitness. This is a contributing factor for lower revenue. • With lower revenue; hotels might not wish to put in many expenses in this segment of the hotel. • Guests staying in hotels in this category are often on business trips; hence they often do not have the extra time to visit these places of relaxationsMinor Operating Departments • Hotels with < 350 rooms are mainly occupied by tourists. These tourists will visit the (most of the time) duty free shops within the hotel to purchase souvenirs and other items available. • These hotels will more likely out-source the retail shops with brands that offer more products as there is a demand for them. • In the <500 rooms category, hotels might have outsources its laundry services and garage.Departmental Profit (Loss)
  16. 16. Rooms<350 rooms to 350-500 rooms • In the <350 rooms category most are 4* hotels (with exception to Four Seasons Hotel, The Scarlet, Paramount and Sentosa Resort and Spa) which are located mainly at Orchard and Riverside (Clark Quay and Singapore River). • The hotels with 300 – 500 rooms mainly belong to the 4* and 5* categories and they are located in mainly Orchard and City Hall areas. • The 350 – 500 rooms formed the majority of departmental profits (S$37,976). Due to the hotels’ target markets. • Hotels that fall under this category include M Hotel, Sheraton Towers, Swissotel Merchant Court and Amara Hotel. These hotels mainly cater to business travelers. This group enjoyed corporate rates, a lower rate (usually 5-20%) below the hotel’s rack rate which in turn led to decreased profits. • Hotels in the 350-500 rooms category are situated in the heart of the city, this helps the hotels in this category to have a higher rooms rate. • But the different between both categories is small, this is due to the higher occupancy percentage in the <350 category. • On the other hand, the same applies for the <350 rooms category. These hotels mainly attract the families who are here for a holiday.350-500 rooms to >500 rooms • The location of hotels of the >500 rooms might have severe impact on the income. The hotel’s central location with the Raffles City (Shopping Centre and Convention Centre) and Suntec City around facilitates the high demand of rooms • On the other hand, the events held in Singapore also played a crucial role. For instance, the IMF/WB meetings were held in Raffles City Singapore. • The higher occupancy percentage for the hotels in the >500 rooms are higher than that of the hotels in the 350-500 rooms • Hotels in the >500 rooms category have higher RevPAR compared to hotels in the 350-500 roomsDepartmental Profit (Loss)
  17. 17. Food & Beverage<350 rooms to 350-500 rooms • The profit is higher in the <350 category compared to 350-500 rooms category due to its higher occupancy percentage and average number of guests per room • In the <350 category, hotels have higher revenue so it might be a contributing factors for the higher profits • Due to the location of hotels in the <350 rooms, hotels are not situated in the heart of the city so guests might be more willing to stay in the hotel for food and beverages. • Two of the hotels in the <350 hotel category are situated in tourist spot and one of which is a resort. Guests in these hotels tend to stay in the hotel for their food and beverages needs.350-500 rooms to >500 rooms • The higher occupancy rate for the hotels in the >500 rooms categories is a contributing factor for the higher profit for this category compared to 350-500 rooms • There are more well-known brand in the >500 rooms category compared to 350-500 rooms category • Since most of the hotels in the >500 rooms category are in the heart of the city, they have a higher mark-up in price • With the close approximate of the hotels in the >500 rooms to convention centers, they are the choice for caterer. • Since business travel tend to stay in hotels in the >500 rooms, business functions are also held in these hotel frequently. This increase the cover and the spending power of these guests are highDepartmental Profit (Loss)
  18. 18. Telephone<350 rooms to 350-500 rooms • Hotels in the <350 rooms category might had overcharge their guests, an allowance is given. • Since the revenue for the telephone in the <350 rooms category is higher compared the 350-500 rooms category, the higher loss is justified. • Hotels are unable to track short international calls for individual traveler, this amount acuminated causing loses to happened350-500 rooms to >500 rooms • The reduced loss for hotels in the >500 rooms category might be due to the higher mark up of price.Spa/Health Club<350 rooms to 350-500 rooms • The higher profit in the <350 rooms hotels is due to the higher revenue350-500 rooms to >500 rooms • The higher profit in the 350-500 rooms hotels is due to its higher revenueMinor Operated Departments<350 rooms to 350-500 rooms • Despite the about twice the revenue for the <350 category compare to 350-500 room category, the profit taking is similar to 350-500 room. • This might due to the lower mark up cost fro the hotel in the <350 category due to the hotel location.350-500 rooms to >500 rooms • Lower revenue for hotel in the >500 rooms categoryDepartmental profit (Loss)
  19. 19. Rental & Other Operated Income<350 rooms to 350-500 rooms • <350 rooms category has higher revenue compared to 350-500 room category350-500 rooms to >500 rooms • >500 rooms category had higher revenue compared to >500 room categoryUndistributed operating expenses
  20. 20. Administrative & General<350 rooms to 350-500 rooms • The higher cost for <350 rooms might be due to more paper work, lesser usage of high end technology. • Smaller hotels are easily maneuvered so there is few demands for effective way to delivery messages.350-500 rooms to >500 rooms • Employees in the >500 rooms category might have job expansion and more IT savvy.Marketing<350 rooms to 350-500 rooms • The hotels with < 350 rooms have lesser marketing expenses as compared to 350 – 500 rooms as they sell their rooms to travel agents in bulk. • Hotels in this category have individual characterize such as the scarlet hotel and the Sentosa resort, the scarlet hotel is a boutique hotel while the Sentosa resort is a resort and spa hotel. • These hotels tend to have more publicity due to its individualism and tourism board will help to promote these hotels. • There are also more hotels in this category compare to <350 category.350-500 rooms to >500 rooms • 300 – 500 room hotels already have a brand; they continue to advertise to maintain reputation and image. • Hence, with better marketing strategies, they will require higher expenditure. Hotels in this category might want to advertise on their individual’s differences such as Hilton’s heavenly bed. • Hotels in the >500 rooms category face much the same problems as hotel in the 300-500 rooms category, so there are not much different in expenses in marketing.Undistributed operating expenses
  21. 21. • Hotels in the 350-500 rooms and the >500 rooms have similar target market, so they need to market aggressively.Utilities<350 rooms to 350-500 rooms • For hotels with < 350 rooms, which caters mostly to tourists and vacationing families, in room TV entertainment will make up mostly for the utilities usage. • With a higher occupancy percentage, average number of guests per room, higher demand for spa and in-room entertainment. Expenditure in utility can be higher. • There might be a higher number of banquets, 24 hours buffets and higher operation can be contributing factors of the higher expenditure in the <350 category than 350-500 category. • As compared to hotels with 350 – 500 rooms, which caters mostly to corporate travelers and in house guests, who requires more laundry services than in room TV entertainment. • As statistics from Singapore Tourism Board shows that the average stay is 3.4 days, the need for laundry service is not as huge as compared to tourists watching in room television. • In the 350-500 rooms category, there is less demand for spa service compared to <350 category.350-500 rooms to >500 rooms • Hotels with > 500 rooms cater more towards corporate travelers and business delegates. These guests normally stay more than the average (3.4 days) hence will require almost all the utilities offered. • Delegates would most probably rent a car to move around conveniently hence the garage / parking services are required. • The higher occupancy percentage, average number of guest per room might be a contributing factor for higher expenditure compared to the hotels in the 350-500 categories.Undistributed operating expenses
  22. 22. Property Operations & Maintenance • Hotels with < 350 rooms have a higher expense on property operations and maintenance as there are more turnover rates in the hotels as compared to hotels with 300 – 500 rooms. • Vacationing families will normally bring their children. With children around, things tend to damages; hence there is a higher need for maintenance fees. • In the <350 category there are higher rental service; the higher occupancy percentage and average number of guests per rooms • And there is a higher usage of phone services in the <350 category350-500 rooms to >500 rooms • The higher expenses for hotels in the >500 rooms might due to the star rating of the hotels. There are more five star hotels compared to hotels In the 350-500 rooms category. • The > 500 roomed hotels have to maintain curb appeal. These hotels due to its strategy location are to follow the tourism guideline. • Maintain of curb appeal is important to build brand awareness and confident.

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