Impact of Tighter Manpower Supply on Hotels and Food Services Companies

The Minister of State for Trade and Industry (Mr Teo Ser Luck)(for the Minister for Trade and Industry): Mdm Speaker, the Job Vacancy Rate (JVR) for the accommodation and food services sector rose to 6% in the second quarter of 2014, compared to 4.4% a year ago. We expect the sectors to continue to face labour constraints as they restructure, especially as the previously announced foreign manpower tightening measures take effect.

Notwithstanding this, hotels continued to maintain a steady Average Occupancy Rate and Revenue per Available Room (RevPar) of 86% and S$219 respectively for January to July 2014. Hotel occupancy rates also held steady during the recent F1 Singapore Grand Prix, compared to the 2013 race.

While economic restructuring has been painful for companies, such as hotels and restaurants, there has been some initial success. Real productivity for accommodation and food services grew by 0.9% per year between 2010 and 2013. Labour productivity for the accommodation sector has picked up with the opening of new tourism offerings since 2010, improving by 2.8% per year from 2010 to 2013, as compared to a historical 0.6% per year from 2004 to 2009. Likewise, labour productivity for the food services sector improved to -0.6% per year from 2010 to 2013, against a historical rate of -3.4% per year from 2004 to 2009.

We are also seeing good adoption of productivity initiatives by businesses within the food services sector. For example, SPRING has supported 644 projects to date under the food services roadmap including key initiatives like workflow re-design, adoption of technology, kitchen automation and service excellence.

One company that has successfully incorporated digital service in its existing concepts is Gloria Foods. Gloria Foods installed digital service ordering and payment kiosk in its Baja Fresh Mexican Grill outlet at Rendezvous Gallery. Customers can now place their orders through the interactive touch-screen menu and make payment through digital service kiosk. Besides cutting the average waiting time by three to five minutes, the system also reduces wrong orders and minimises mismanagement of cash.

Let me give Members another example from the hotel industry: Shangri-La's Rasa Sentosa and Spa Singapore. They have consolidated their kitchen teams into one central kitchen for greater productivity. The hotel is also sharing common functions such as payroll, credit, purchasing, laundry, pastry and so on, with its sister hotels within the Shangri-La

Page: 30

Group. Furthermore, the hotel reviewed and re-designed its menu and dining concepts to reduce the number of cooks and chefs in the kitchen. In all, the hotel reduced its overall staff strength by about 10% from 2012 to 2014. And you can also find other examples of such productivity and innovation case studies on Singapore Tourism Board's (STB's) website under the Hotel Industry Story-Bank.

While we have made progress in our restructuring efforts, there is more that we need to do. The Government will continue to closely monitor how businesses adjust to the tight labour market situation. We will continue to help businesses within the accommodation and food services sector to grow and succeed in Singapore to create quality jobs for Singaporeans.

I would like to thank the Minister of State for his very comprehensive reply. I am also very encouraged by the reassurance that our productivity record is slowly but surely improving. I would like to ask a supplementary question specifically about the large-scale Singapore Grand Prix night race that we have been successfully hosting for about seven years now, if I recall correctly.

Given the size and scale of such a prominent event, the performance of our service sector in being able to host such a significant event should provide us with further information about how it is reacting to the tightening of the labour market constraints. One of the reasons I think this is important is because the tightening of the labour market constraints is going to be worse for some time to come.

If I recall the statistics correctly, the tightening in the job vacancy ratio for the accommodation and food sector actually spiked in the September quarter last year. What that means is that we will have seen two of the more recent F1 races operating under the tighter manpower constraints. I know the manpower constraints have been tight for quite some time now. But it appears that the job vacancy rates have already spiked for the last two races. Is there any specific reaction from such a major event to this particular phenomenon?

The latest numbers I have got, as I have mentioned earlier, was 6% in the second quarter of 2014, compared to 4.4% a year ago. From the ground sentiments and from talks with the trade associations, we also understand that some of the businesses, small and medium enterprises (SMEs) and so on are facing some challenges. Definitely, it is a journey and it is a long-haul journey to actually transform and make changes to become more productive and automate the processes. It is not going to be easy.

Page: 31

As we monitor the situation, we know that some of the companies will do it better than others. We will continue to encourage by providing some of the schemes and grants to help them make the change. It is up to the companies themselves to be able to do so.

The general sentiment is that they are still facing some manpower challenges because it takes time to make the change. But for events like F1 and some of these large-scale events, we are still able to manage them; we are still able to host them with a good quality service level. So far, the latest one that was held, we have got very positive feedback in terms of services, in terms of companies providing contract work, food and beverage and hosting the whole event. Progressively, we are making leaps and bounds in terms of productivity as well as the kind of quality service that we provide throughout the F1 event.

We will monitor and, definitely, the Ministry of Manpower and ourselves are also working hard and looking at the numbers. We also look at the companies and are working with trade associations to do so.