Economics Project TI04 Group 1 by Lu Shen

1. Market Structure of the Hospitality Industry: Monopolistic Competition

s10218871 — 2021-05-13 07:19:33 UTC

Support from key resources:

Product Differentiation; Developing new products or services such as better accommodation facilities, bar, and restaurant facilities in terms of quality and branding in order to look different from other competitors. Due to brand loyalty, the hotel gains a certain level of market power and may raise prices without losing most of its customers.
Number of Buyers and Sellers; The Hospitality Industry market includes many different types of hotels like Days Inn, Hampton Inn, Holiday Inn Express, Baymont Inn and so on. When there are numerous hotels, it is impossible to persuade them to behave as one; hence, monopolistically competitive hotels are believed to behave separately.
Ease of Entry and Exit; long run barriers of entry must be relatively easy, there must be no significant entry barriers.
E.g. Marina Bay Sands differentiated its quality and branding through its ability to host large-scale Mice events and getting featured in movies like Crazy Rich Asians.

STEP 1: MICROECONOMICS PRELIM ANALYSIS

s10218871 — 2021-05-13 07:26:48 UTC

HOSPITALITY INDUSTRY IN SINGAPORE 🏨

2. Demand and/or supply determinants that are applicable to the product/service/industry.

s10219671 — 2021-05-13 07:29:43 UTC

Support from key sources:

The number of travelers to Singapore has been rising over the decades. This shows us the high demand for Singapore’s hospitality and visitor arrivals to Singapore has always been a market strength.
Visitor arriving to Singapore have grown significantly over the past 10 years, reaching an estimated 18.5 million visitor arrivals in 2018.
From 2004 to 2018, the demand changes have caused a structural shift in Singapore's market line-up. China officially make up 19 percent of the demand whilst Indonesia fell to 16 percent.
Due to newly introduced technologically-advanced aircrafts which shorten the flight duration from US to Singapore, US have raised 2 positions to get in the top ten source market in 2018.
Vietnam also ranked 9th position in the source market due to their economic development as well as expansion of its national career which allow them to travel abroad more frequent.
The top ten source market continue to contribute 74 percent of total demand. However, demand now relies more heavily on emerging economies, contributing to a new issue: lower per capita spending.

s10219671 — 2021-05-13 07:30:48 UTC

2.1 Changes in Consumer's income affects demand for hotels.
Support from key sources:

With rising wealth, consumers are changing their preferences from budget hotels to luxury hotels.
In 2019, 53 percent of tourists choose to stay in hotels. The tourism industry plays an important part in Singapore, accounting for roughly 4% of its gross domestic product in 2019.
In addition, Singapore recorded the highest number of international tourist arrivals with 19.1 million visitors in 2019.
To support local businesses affected by the impact of the covid19 pandemic, the Singapore government invested 320 million Singapore dollars to promote domestic tourism through the initiative of the SingapoRediscovers campaign.
Every Singaporean citizen was given $100 worth of vouchers that can be used for hotel bookings, activities, and tours
As a result, as consumer confidence increases, so will the demand for hotel rooms. Hotel demand will shift to the right.

2.2 Changes in the Number of Buyers affects the demand for hotels.

Support from key sources:

Singapore is seen as a holiday destination with a high number of leisure travels throughout the years.
In 2009, the number of international arrivals hit 9.6 million which doubled in 2019 to approximately 19.1 million.
The increasing number of international tourists' arrival in Singapore from 2012 to 2018, corresponds to the revenue generated by hotels in Singapore shown in the chart.
Singapore is anticipated to increase the number of hotel rooms. More than 90% of new hotel rooms, both upper-midscale and luxury, are expected to open by 2021-2023.
As a result, as the number of travelers grows, so will the demand for hotel rooms. Hotel demand will shift to the right.

3. The likely price elasticity of demand/service of the produce and/or its determinant(s) based on your research.

s10219671 — 2021-05-13 07:32:17 UTC

Support from key sources:

The price elasticity of the hospitality industry is very elastic as hotels are a luxury and not a necessity.
The demand for necessities is price inelastic and the demand for luxury is price elastic.
Lower prices of room rates will increase the quantity demanded and higher prices will decrease the quantity demanded.
One of the main determinants affecting the price of elasticity of demand is the availability of substitutes. Many consumers will usually compare hotels of the same category to find the cheapest and best options of the same classification ratings.
This is shown in the article as they mentioned that "At the individual property level, revenue managers have more control, as price drops can attract demand from competing hotels in their market".

2.2: Key Source

s10219671 — 2021-05-13 07:37:29 UTC

2: Key Source

s10219671 — 2021-05-13 07:39:52 UTC

2.1: Key Source

s10219671 — 2021-05-13 07:40:28 UTC

3: Key Source

s10219671 — 2021-05-13 07:41:33 UTC

TEAM MEMBERS REFLECTION

s10219671 — 2021-05-13 07:43:04 UTC

STEP 1: MICROECONOMICS PRELIM ANALYSIS

SHAWN 🧑

s10219671 — 2021-05-13 07:44:22 UTC

I cannot ask for a better group and I am thankful to be part of this team.
Although It took me more time to process and research, everyone was patience and kind towards me. Let's keep up the good work and continue to strive for even better.

One area our team could improve on would be to maintain this level of productivity and work ethic throughout this module.
I believe everyone is able to achieve good grades when we work put in the hard work.

ALICE 👧

s10219671 — 2021-05-13 07:44:54 UTC

It was my pleasure to be a part of this team. I like how we equally contributed, how productive we were throughout the process and what I'm most impressed was how respectful we were towards each other as I believe respect is one of the key factors in group project. This is our first time working with each other but I was so proud of how we overcome the challenges together and I would love to work with you guys again for the upcoming projects :)

The one and only improvement I would suggest is we should take a break in between while doing the project so that we won't be overloaded or stressed out and thus give better quality work.

MARGERET 👩

s10219671 — 2021-05-13 07:45:14 UTC

Having given the opportunity to be able to work with these amazing people, it gave me a chance to learn a great deal about the topics being discussed and in addition, helping to illuminate my weaknesses when working with new people. The process of our project had many uncertainty due to the nature of us being unfamiliar to this new environment. Nevertheless we were able to overcome this obstacle as a team with everyone being so patient and understanding. I would definitely love to collaborate with you guys again!!

One suggestion for improvement would be that we should have seek for our lecturer advise first about the industry we chose before having done all the research.

I believe that with everyone hard work and dedications towards this project, getting good grades will certainly not be a problem.

SHEN LU 👧

s10219671 — 2021-05-13 07:45:44 UTC

The whole team contributed equally in this group project and I am thankful to have them as my teammates.

One improvement: We should have clarify with our lecturer on the industry we chose before jumping into our research.

In all, I have to say we managed to overcome our first obstacle professionally and hopefully we can score well for this module. <3 <3 <3

CYRUS 👦

s10219671 — 2021-05-13 07:45:59 UTC

Thank you guys for being wonderful teammates and it is my pleasure to be in this team!!! We faced many challenges but we made it and that is what is most important!

One point of improvement is we should stop rushing and give ourselves more time to relax instead of finishing the project so fast.

Our beloved Mr Nathan's Remarks: ✨

s10219671 — 2021-05-13 07:47:14 UTC

Tutor's Comments:

NAJ1 — 2021-05-30 08:24:29 UTC

Thank you for your analysis and findings. I found the articles to be interesting and informative for your microanalysis. The first article, however, is incomplete.
A good attempt has been made to analyze the hotel industry.
I appreciate your candid reflections.

Areas for Improvements:
1. More analysis could have been done in discussing about the determinants of demand and supply of hotel rooms, such as the type of customers (locals, tourists, business visitors, etc, the price elasticity of demand will vary according to the profile of the visitors)
2. Bigger hotels compete with factors like location, F & B, and convention & conferences, and suitable meeting facilities.
3. Although research material covered the impact of Covid-19, it was not covered in your analysis. More recent articles could have been added to this as part of your research.

Wishing you all the best for your next stage of analysis.

Cheers!

Josh Nathan

STEP 2: MACROECONOMICS PRELIM ANALYSIS

s10227820 — 2021-06-14 04:59:00 UTC

HOSPITALITY INDUSTRY IN SINGAPORE 🏨

1: Key Source

s10208165 — 2021-06-14 05:07:46 UTC

1: Key Sources

s10208165 — 2021-06-14 05:44:03 UTC

1. GDP

s10208165 — 2021-06-14 05:58:01 UTC

- The accommodation industry contributed 0.4% of Singapore's nominal GDP in 2020, according to the Department of Statistics Singapore.
- Real GDP actual growth contracted by 5.4% in 2020, however, recovery is expected in 2021 with an expansion of 5.1% as economic activities slowly resume when a city-wide immunization program is implemented which may result in increased consumer sentiment.

- Fall in Singapore's overall economy due to the impact of the Covid-19 pandemic which has resulted in stricter transactions of goods and services, traveling restrictions, and work-from-home.
- Due to the circuit breaker being launched, industries such as the hospitality industry had to face temporary closure as it was deemed as a non-essential workplace. This has led to a setback in domestic consumption as Singaporeans were not able to organize staycations.
E.g. On 7 April 2020; the government of Singapore implemented circuit breaker measures which was a stay-at-home order and cordon sanitaire as a preventive measure in response to the Covid-19 pandemic in the country.
- There was a notable fall in domestic consumption due to a domestic outbreak which has led to a lockdown.
- Based on the article written by the Ministry of Trade and Industry, it was shown that industries that relied heavily on international travel were the ones that were the most affected.
-To infer based on the article, many other services residing in the hotels also suffer huge losses such as the fnb in the hotels and the private hire sector as well.
-Due to the underwhelming amount of visitors, FnBs which offers banquet services, fine dining or dining within the hotel were forced to shut down as there was no foreign visitors and there were no weddings or mice events as well.
-The private hire sector suffered a huge loss as well as there was only domestic demand and there were no foreign demand from the airports to the various hotels.

- According to the Singapore Tourism Board (STB), international visitor arrivals increased for four consecutive years, hitting a peak of 19.1 million in 2019, before dropping by 85.7 % to 2.7 million in 2020 as a result of Covid-19 travel restrictions.
- The majority of international visitors travel to Singapore for vacations, making for 58% of all visitors in 2019. Following that are visits to friends and relatives 15% and general business purposes 9% and MICE 4%.
More over half of all visitors to the island state 51% are returning visitors.
- The performance of Singapore's hotel market is expected to decline in 2020. This can be attributed to Covid-19's lockdowns and travel disruptions. The market's overall occupancy fell by 30.1 percentage points, while the average room rate fell by 30.2 percent.
- Due to worldwide travel limitations, Singapore has pushed domestic tourism inside the island state through a variety of programs, including SingapoRediscovers coupons and other marketing efforts.
- Singapore has maintained a healthy pipeline of events in recent years, ranging from international congresses to regional conferences, as a key corporate events destination in Asia Pacific. Singapore has been chosen to host many high-profile events in 2021, despite the Covid-19 epidemic. This includes The ATP World Tour 250 events in February, the IISS Shangri-La Dialogue, and the World Economic Forum in August.
- This demonstrates event organizers' confidence and faith in Singapore's handling of the Covid-19 outbreak; moreover, Singapore is one of the fastest-growing countries in the Asia Pacific area in terms of vaccines administered per dosage.
- In terms of supply, HVS estimates that by 2022, there will be 10 branded hotels and serviced apartments in the pipeline, adding 2,276 rooms to the market. The hotel industry in Singapore is expected to benefit from robust supply and demand fundamentals, as well as a limited injection of supply, as the travel market recovers over the next several years.

3. General price trends in Singapore

s10223851 — 2021-06-14 06:16:10 UTC

- Falling price observed with the negative figure in the latest quarter as Singapore’s inflation has turned negative of -0.4 percent for the first time since end-2016.
- The consumer price index for all items = -0.4%
- Domestically, economic downcast and weak labor market conditions will decrease consumer demand, therefore limit price increases for discretionary goods and services.
- Demand-pull inflation pressures should remain soft through the rest of this year.
- Services cost also eased in July, at negative 0.8 percent compared with minus one percent the month before, as holiday expenses and airfares fell at a slower pace while the cost of telecommunication services rose more rapidly.

3: Key Sources

s10223851 — 2021-06-14 06:28:45 UTC

4. Key Sources

s10218871 — 2021-06-14 06:29:31 UTC

4. Government support: Singapore Resilience Budget

s10218871 — 2021-06-14 06:32:16 UTC

Below are some of the supports given by the Singapore government under Singapore Resilience Budget which directly benefit the hospitality industry and help them to survive during the pandemic.

a) Property Tax Rebate:
- Certain qualifying commercial properties which includes hotels, restaurants, recreation centers, serviced apartments, will pay no property tax throughout 2020.
- Landlords are to pass on the full rebate to tenants by reducing rentals, ease the pressure faced by the tenants.
- This is considerably increase Property Tax Rebate.

b) Defraying of Enhanced Cleaning Cost of Qualifying Hotels with suspected or positive COVID-19 cases:
- Singapore Tourism Board cover up to 50% of third-party professional cleaning fees for Singapore-licensed hotels that provided accommodation to suspected and confirmed COVID-19 cases.
-There will be an amount of S$20,000 for each hotel with confirmed cases, and S$10,000 for each hotel with suspected cases.

c) Enhanced Jobs Support Schemes:
- Singapore Government will provide further JSS to cover 75% of the first SGD4,600 of wages paid to local employees.
- 25% of gross monthly wages for all local employees, with higher threshold of 75% only for licensed hotels, travel agents, MICE operators, airlines and 50% for licensed F&B venues.

d) Enhanced Training Support Scheme:
- STB has enhanced support under the Training Industry Professionals in Tourism program for certified courses and courses for tourism-related skills, by increasing the support to a 90% cost-reimbursement for courses that commence between 1 March 2020 to 31 December 2020.
- This is to encourage companies to continue to innovate and train to upgrade their skills even though they are significantly affected by the pandemic.

1: Key Sources

s10227820 — 2021-06-14 06:53:43 UTC

2. Labour Market Situation

s10219671 — 2021-06-14 07:03:02 UTC

- When covid has not hit Singapore, there were just under 75,000 unemployed Singaporeans and Permanent Residents at the start of 2020.
- In 2020, the number of layoffs reached 20,450, more than tripling from 3000 in the first quarter of 2020 to more than 9000 in the third year.
- By September 2020, the figure had risen to more than 110,000 as a result of unemployment. The unemployment rate in Singapore increased to 3.6 percent in September, up from 3.4 percent in August 2020.
- In August, They found that 26 percent of Singaporeans and permanent residents aged between 25 and 70 saw their incomes fall by at least 10 percent in May 2020. Among the income earned by 1.2 million DBS retail customers.

- Employers will be cautious in the face of the ongoing pandemic, and will only begin to increase headcounts/employees when they see more pronounced improvements in their business earnings. Mr. Seah, a senior economist at DBS, stated. This is especially true for industries that have taken the brunt of the pandemic's toll. For instance, consider the hospitality and aviation industries.
- According to DBS, economic growth in the hotel and restaurant sector fall by 34% in 2020.
- In May, 76 percent of customers in the hospitality sector saw their incomes cut, compared to an average of 24 percent of customers in other sectors, according to DBS bank.
- According to Ministry of Manpower data from the second quarter of 2020, the accommodation industry saw a 4.5 percent decrease in employment.
- Based on these statistics, we can conclude that the COVID-19 pandemic had a significant impact in such sectors especially the hospitality industry, resulting in employment laid off and pay cut.

- Despite the ongoing pandemic, the technology and electronics sectors have outperformed the economy due to increased demand for work-from-home tools and services. Such sectors will result in an increase in the GDP of the respective sectors.
- However, because these industries are less labor-intensive, they may be unable to absorb as many workers who have lost their jobs. "Mr. Nagutha," he said.
- If labour market were to recover in a disparate manner with covid-19 worsen, This may result in greater income equality.
-According to analysts, the labor market will recover unevenly, resulting in a "K-shaped" recovery. Sectors that have proven to be resilient will continue to employ, while others will reduce their workforce.
- People earning S$2,999 or less made up 49 percent - the largest percentage - of those whose income dropped by at least 10%. One in every two people in this group saw their income fall by more than half.
- Despite the fact that lower-wage income residents in Singapore grew at a faster rate than the average Singaporean from 2014 to 2019. However, because this group of workers is more likely to work in front-facing jobs with lower pay in affected industries, covid-19 will have a greater impact on them. Income equality will reflect this.

To summarize, Covid-19 has caused a significant economic downturn, resulting in cyclical unemployment. With a lack of jobs during the lockdown due to businesses closing, jobs disappearing, and fewer jobs were available during the pandemic, the business cycle is at a recession state with the unemployment rate rising in 2020 after the pandemic hit Singapore, particularly in the hospitality industry.

Part-time, discouraged, and underemployed workers, on the other hand, would be unaccounted for in the unemployment figures. As a result, the number of unemployed individuals may have been higher. Hence, the government is implementing measures in order to assist the citizens who are unemployed in Singapore.

2. Key Sources

s10219671 — 2021-06-14 07:13:09 UTC

Our beloved Mr Nathan's Remarks: ✨

s10219671 — 2021-06-29 07:59:37 UTC

Comments from the Tutor:

NAJ1 — 2021-07-12 12:29:36 UTC

1. The group has described adequately the impact of the Pandemic on the economy.
2. Supporting statistics on the major economic indicators were highlighted well.
3. However, the group may have to discuss further the direct implications on the hospitality industry sales, employment.
4. The incentives provided by the government were highlighted well too.
5. You may also want to discuss the contribution of the hospitality industry to the economy during pandemic outbreaks.
6. You may condense the key points from micro and macro and prepare your PowerPoint Slides.
Cheers!
Josh