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Despite a strong year-to-date rally, hospitality REITs are expected to register a soft first quarter this year in terms of revenue per available room (RevPAR), revealed OCBC Investment Research.
The research house noted that recent data from the Singapore Tourism Board (STB) showed that visitor arrivals increased 3.83 percent year-on-year in January and 0.05 percent year-on-year in February, with visitor days up 5.3 percent and 3.3 percent, respectively.
However, the data also reflected poor RevPar performance from mid-tier and upscale hotels during the first two months of the year.
“Upscale hotels posted -3.8 percent and -6.5 percent year-on-year RevPAR growth for January and February respectively, while mid-tier hotels posted 1.0 percent and -4.3 percent year-on-year RevPAR growth,” said Deborah Ong, analyst at OCBC Investment Research.
Channel checks also showed that March was a subdued month for the industry.
And since the supply situation continued to be favourable, the softness in RevPAR could be attributed to the absence of events held last year, such as the biennial Singapore Airshow.
“Relative to 2017 figures, upscale RevPAR was up 0.5 percent and 0.7 percent in January and February respectively, while mid-tier RevPAR was up 9.4 percent in January but down 0.8 percent in February,” noted Ong.
“As most of the local assets owned by hospitality S-REITs are either upscale or mid-tier, we expect a weak set of results for Singapore-heavy REITs like Far East Hospitality Trust (FEHT) and CDL Hospitality Trusts (CDLHT) for Q1 2019.”
In fact, OCBC expects CDLHT’s Q1 2019 results to be further dragged down by Dhevanafushi Maldives Luxury Resort’s closure and the asset enhancement initiatives at Orchard Hotel.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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