During the pandemic, private healthcare providers like IHH Healthcare and Raffles Medical Group (RMG) suffered due to the absence of medical tourists. As borders reopen, they are experiencing a boost to their businesses and supporting growth in other sectors.
RMG executive chairman Dr Loo Choon Yong says that most medical tourists in Singapore are not price-sensitive, which can boost the consumer and services sectors.
FJ Benjamin’s CEO Douglas Benjamin says that Avenue on 3 at Paragon Mall on Orchard Road draws visitors from nearby Paragon Medical Suites and Mount Elizabeth Hospital Orchard. These patrons dine and shop while waiting for medical treatments or imaging results.
Co-living operator LHN recently launched Coliwoo Orchard, near Mount Elizabeth Orchard Hospital. Lim & Tan Securities analysts Nicholas Yon and Chan En Jie say Coliwoo Orchard will cater to medical tourists, students, and expats finding short- to medium-term accommodations.
In its 1QFY2023 ended March, IHH’s Singapore operations reported revenue increased by 13% y-o-y to RM1.3 billion ($381 million). Ebitda in the same period was up by 6% y-o-y to RM390 million as margins dropped by 200 basis points. The occupancy percentage in the same quarter was 60%, up from 55% in 1QFY2022. In its earnings presentation, IHH attributes the growth to the return of medical travel and a recovery in domestic patients doing elective procedures.
IHH’s main medical tourism units are Mount Elizabeth Hospital and Gleneagles Hospital on Napier Road. These facilities have created a related ecosystem, boosting demand for accommodation and F&B.
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IHH also operates Eastshore Hospital at Joo Chiat Place and Mount Elizabeth Novena on Irrawaddy Road, which houses Southeast Asia’s first state-of-the-art proton therapy centre. This facility offers advanced precision cancer treatments, benefiting patients in the region.
For 1QFY2023, IHH, as a whole group, reported record revenue of RM5.1 billion, up 24% y-o-y, and earnings of RM1.4 billion, up 182% y-o-y, which was partly lifted by a one-off gain of RM862.1 million from the sale of its medical education arm, IMU. The company reported an improvement in its return on equity, achieving 9.1% as of March this year versus 8.8% as of March 2022.
Joe Sim, IHH’s group chief operating officer, says in the earnings commentary: “We kicked off the year with a stellar set of results, recording our highest ever quarterly revenue and nearly tripling net income. While this was boosted by one-off gains from our strategic divestment of IMU, we had also seen stellar operational growth as we took in more patients across our key markets.”
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Healthcare hub
Mainboard-listed RMG is showing a similar trend. The group attributed the improving financials to the return of foreign patients to its hospitals and clinics in the city-state for medical treatment.
During its results briefing, RMG executive chairman Dr Loo said: “Our operating and labour costs are expensive, and the strong Singapore dollar does not help. But we believe our quality of care is higher (compared to the other countries in the region). Hence the premium is justifiable.”
The group’s 1HFY2023 results did not show a similar growth trajectory, as fewer Covid-19-related activities resulted in earnings increasing by 0.5% y-o-y to $59.9 million, while revenue declined by 9.5% y-o-y to $370.9 million. Loo says that while growth has slowed, this is still higher than pre-Covid-19 levels.
The group did note that revenue from its hospital services division grew by 5.7% y-o-y to $160.4 million due to the return of foreign patients. In Singapore, the healthcare industry attracts high-net-worth individuals (HNWIs) who have confidence in its quality and are less price-sensitive due to their need for higher levels of care. “You cannot compete on being cheaper while providing high-quality care and service. It’s impossible,” he says.
Revenue is up from pre-pandemic times, but Loo says the patient count has not fully recovered (about 70% of pre-Covid-19 levels). “Singapore is now more expensive, with the stronger Singapore dollar,” says Loo, who notes that most medical tourists face increasing hotel room rates and food costs, and seeking healthcare in the city-state is more expensive.
Loo says only time will tell if the group can recover its patient count to 100% of pre-Covid-19 levels. “Some of the patients, due to cost constraints and convenience, may have gone to seek care from their domestic hospitals or doctors. But some may have moved to other destinations,” adds Loo, adding that Kuala Lumpur is increasingly becoming a hotspot for medical tourism.
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The group’s business in China is recovering, with its Chongqing hospital back to pre-Covid-19 levels. But the group’s main focus remains on medical tourism to the Republic. Loo says: “Singapore is becoming a healthcare hub, where people seek care for bigger problems and difficult access types of healthcare. We will keep attracting those who are not price-conscious to come and seek their healthcare needs here.”
