The number of new F&B establishments was unmatched by the growth of tourists and locals.

F&B players' profitability has "eroded" amidst growing competition that was not matched by the pool of customers.

The number of F&B company formations per annum has been on a rising trend since 2014, according to data from Singapore Statistics and Savills Research & Consultancy.

However, this expansion had not been matched by a growth of tourists and local population– not even post-COVID times. A comparison of tourism receipts between Q4 2023 and Q4 2019 showed that Q4 2023 is still 2% off compared to four years earlier.

Tourist arrivals are still below 2019 levels. There were 3.87 million tourists who arrived in Singapore in Q2 2024, according to Singstat. In contrast, there were 4.64 million visitors who visisted the Lion City in Q2 2019; and 4.79 million visitors in Q4 2019.

Savills did note that on an itemised basis, F&B expenditure by tourists was 59% higher– although this was more due to inflation than real spending increase.

This implies that the profit margins of retail and F&B operators, in general, have compressed further between 2019 and 2023, according to Alan Cheong, Savills executive director for research & consultancy, Singapore; and Simon Smith, regional head of research & consultancy, APAC.

"The end of the COVID pandemic did not bring about a return to normal for those involved in the retail and F&B trades," Cheong and Smith said in a report.

Cheong and Smith said that just because borders have reopened, it does not mean that more tourists are returning or that more workers are returning to offices.

"For the past ten years, for the new shop and retail space added to stock, more F&B establishments supplanted retailers. This observation tallies with market feedback from marketing and asset management professionals in the retail space industry," the analysts said.

With higher chance of failure, Savills recommends that retailers and F&B operators do their due diligence to reduce frisk in their business.

"Try at best to acquire some understanding of the profile of foot traffic to see if there is a match between the product and services
offered. A simple pen and paper survey will do the job," Cheong and Smith said.

Cheong and Smith also suggested searching the web to look for similar trades which compete with or complement your business.

They should also check on whether similar businesses that are not located in malls or shopping complexes were able to survive.

"Check on the sustainability of businesses in the mall or shops located not in shopping complexes. This may be a long-drawn process, taking a few months. For those starting off in the trade for the first time, one cannot simply rush into the business based on a hunch and a feel," the analysts said.

F&B operators should also check on the number of staff needed daily to man the outlet; check the costs and the daily sales needed to break even, and gauge if this is realistic; and adopt technology to enhance customer experience, as well as have an online platform as a fallback if the physical store does not work out.