Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/221920
Title: STRUCTURAL DYNAMICS OF HOTEL REAL ESTATE MARKET : HOTEL SAFEGUARDING POLICY
Authors: SEAH HAN KEONG
Keywords: Real Estate
Policy
Simultaneous equations
Singapore
Two-stage least squares
Issue Date: 4-Jan-2010
Citation: SEAH HAN KEONG (2010-01-04T08:14:56Z). STRUCTURAL DYNAMICS OF HOTEL REAL ESTATE MARKET : HOTEL SAFEGUARDING POLICY. ScholarBank@NUS Repository.
Abstract: This study develops a simultaneous-equation econometric model using two-stage least squares estimators to analyze how market fundamentals influence the Singapore hotel market in terms of three key dependent variables – the hotel room demand, supply and rent. It incorporates the effect of the relaxation of the hotel safeguarding policy on the dynamics of hotel room supply, a policy variable that was omitted in other work. The relaxation of the policy induced a leftward shift of the long-term supply curve. This exogenous shock has the hypothesized effect of increasing the average room rate owing to the demolition of hotels outside the hotel core region. The tender price lagged by five periods is statistically significant and has a low negative coefficient, indicating that construction cost is not a major concern to hotel developers. On the other hand, the supply of hotel rooms is highly inelastic with respect to both contemporaneous and one year prior room rates as hotels are less attractive when compared to other property sectors when competing for scarce (re)development land. Given that hotels are less profitable real estate ventures, a delicate balancing of needs and a complementary concoction of land uses are critical to ensure that hotels in the key tourist and convention belts are kept for continued vibrancy. Contrary to the law of demand, the hotel room rate has a positive relationship with the quantity of rooms demanded. A plausible explanation lies in the Veblen demand curve. As expected, tourist arrivals are the most significant variable to the hotel room demanded because of the high dependency to the performance of tourism market. For the hotel room rate function, labor cost is the only significant variable that has a marginal positive impact on the room rate. The implication is that only a small proportion of the room rate hike due to the pay increment is passed on to the ultimate users. This observation is beneficial to the hoteliers in terms of lower variable cost in the hotel operation thanks to the opened foreign labor policy which moderates Singapore’s average room rate and thus maintains its competitiveness with respect to the hotel accommodations when compared to other major cities. Keywords: policy, simultaneous equations, two-stage least squares, Singapore
URI: https://scholarbank.nus.edu.sg/handle/10635/221920
Appears in Collections:Bachelor's Theses

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