IMPACT OF REGIONAL FINANCIAL CRISIS ON HOTEL DEMAND

Abstract

This dissertation examines the variables for hotel demand, in response to the observed decline in Singapore's hotel occupancy levels with the onset of the regional financial crisis. The hypothesis is that relative exchange rates, relative consumer prices and real per capita income affect hotel demand, which is measured by gross lettings in the analysis. Different weights are derived from a basket of fourteen major tourist originating countries which reflect their varying contribution to hotel demand in Singapore. Each of the three variables hypothesised are constructed from the weights to form weighted averages of the top fourteen markets. The three variables specified in the regression model have been able to explain more than 97% of the variation in gross lettings for both the explanatory and forecasting models. The forecasting model's estimation for 1998's gross lettings was a 6.3% contraction which proves to be quite accurate as the figure is well below the actual gross lettings for 1994. Among the three variables, real per capita income turns out to be most significant. The study also analyses income profiles of Singapore's top three markets over the years (Japan, Malaysia and Indonesia) as well as growing markets of China, the United Kingdom and Germany, and provides an assessment of future prospects.