21 July 2017
Recent Trends & Moves in Singapore’s Hospitality Trusts
  • Hotel RevPar in 2016 fell 4.7% YoY despite an increase of 7.7% in tourist arrivals, with a slower rate of decline since 2017. Hotel occupancy rates remain at an 8 year average of 86%.
  • New hotel room supply in 2017 stands at 3,400 rooms (URA 1Q17 data), 60% higher YoY, but supply is expected to ease in 2018 due to lack of supply of new land for hotel development.
  • SGX lists one Hospitality REIT and five Hospitality Stapled Trusts with a combined market capitalisation of S$9.1 billion. These six trusts have generated a market cap weighted average total return of 19.0% in the YTD and have an average dividend yield of 6.5%.

Real Estate Sector Sub-Segment: Hospitality Market

 

Hotel RevPar remains low despite increase in tourist arrivals

 

According to the Singapore Tourism Board (STB), hotel revenue per available room (RevPar) in 2016 fell 4.7% YoY despite an increase in tourist arrivals (+7.7% tourist arrivals YoY). In the first four months of 2017, hotel RevPar continued to decline at -0.7% YoY with tourist arrivals increasing 5.3% YoY as of end Apr data, mainly supported by an outperformance in the luxury segment which recorded a 6.0% YoY increase. Hotel occupancy rates remain at an 8 year average level of 86%. CIMB Research expects hotel RevPar to remain low and recover only from 2H 2018 onwards due to lower tourist arrivals and an increase in hotel room supply in 2017.

 

Source: STB (data at 21 Jun 2017)

 

Increasing pressure from new hotel rooms in 2017 but potential turnaround in 2018

 

Hotel room supply for 2017 currently stands at over 3,400 rooms, 60% higher YoY, according to data provided by the Urban Redevelopment Authority (URA) in 1Q17, with several hotel openings originally scheduled for 2016 shifted to 2017 (e.g. Intercontinental Robertson Quay and Sofitel at Tanjong Pagar Centre). However, new hotel room supply is expected to ease in 2018 as DBS Vickers Securities notes that the Singapore government has not released any new land for hotel development in the last three years. In addition, DBS Vickers Securities believes investors may position for a recovery in 2018 as valuations for hospitality trusts remain low.

 

Source: URA (data up to end 1Q2017)

 

For more, please refer to the SGX Real Estate sector presentation.

 

SGX’s Cluster of Hospitality Trusts

 

SGX lists six actively traded trusts that represent the Hospitality Trusts within the Hotel & Resort REITs and Residential REITs GICS® sub-industries with a combined market capitalisation of S$9.1 billion. These are trusts that typically hold hospitality-related properties such as hotels and serviced apartments. It is one of SGX’s smallest REIT sub-segment by market capitalisation as compared to Retail, Industrial and Office REITs.

 

These six trusts have generated a market cap weighted average total return of 19.0% in the year-to-date and have an average dividend yield of 6.5%. The five best performers in the year-to-date are CDL Hospitality Trusts (+28.3%), Ascendas Hospitality Trust (+23.1%), OUE Hospitality Trust (+18.8%), Frasers Hospitality Trust (+16.4%) and Far East Hospitality Trust (+15.6%).

 

The table below details the Hospitality Trusts sorted by market capitalisation:

Name

SGX Code

Market Cap S$M

Price S$

Total Return YTD %

Total Return 1 Yr %

P/B

P/B 5 Yr Avg

Gearing %

Dvd Ind Yld %

Ascott Residence Trust

A68U

2,563

1.200

14.6

15.3

1.0

0.9

31.1

6.92

CDL Hospitality Trusts

J85

1,645

1.590

28.3

20.2

1.1

0.9

36.7

6.29

OUE Hospitality Trust

SK7

1,361

0.750

18.8

10.9

1.0

0.8

37.9

6.37

Frasers Hospitality Trust

ACV

1,347

0.730

16.4

5.8

1.0

0.9

33.2

6.67

Far East Hospitality Trust

Q5T

1,228

0.670

15.6

11.4

0.7

0.7

33.2

6.24

Ascendas Hospitality Trust

Q1P

941

0.830

23.1

25.2

0.9

0.8

32.2

6.8

Average

 

 

 

19.5

14.8

0.9

0.8

34.0

6.5

Market Cap Weighted Average

 

19.0

14.6

1.0

0.8

33.8

 

Note 1: Saizen REIT is not listed in the table above as the stock is suspended

Note 2: CDL Hospitality Trusts, OUE Hospitality Trust, Frasers Hospitality Trust, Far East Hospitality Trust, Ascendas Hospitality Trust are stapled securities governed by the Business Trust Act, while Ascott Residence Trust is a REIT governed by the Collective Investment Scheme. Source: SGX, Bloomberg & SGX StockFacts (data as of 20 July 2017)

 

Of the six trusts, only Ascott Residence Trust has reported recent earnings this week. Some key highlights are listed below:

 

Ascott Residence Trust 

  • Distribution per Unit (DPU) of 1.84 cents (S$) declared for 2Q 2017, bringing 1H 2017 DPU to 3.36 cents (S$) or 3.74 cents (S$) if one-off items, effects of rights issue and equity placement, and contribution from Sheraton Tribeca New York Hotel for 1Q 2017 were excluded.
  • Unitholders’ distribution for 1H 2017 was at S$72 million, higher YoY mainly due to a one-off realised exchange gain of S$11.9 million arising from the repayment of foreign currency bank loans in 2Q 2017.
  • Portfolio revenue per available unit (RevPAU) increased 3% YoY, in particular, posting double-digit increase in RevPAU in Belgium, Philippines and Vietnam. Click here to read more.

 

Previous Market Updates on the Real Estate Sector

  • 6 July 2017: SGX Real Estate Index Returned 19.5% YTD on Positive Indicators – Click here
  • 13 July 2017: Singapore Private Property Market Shows Signs of Stabilising – Click here
  • 14 July 2017: Green Shoots Emerge Despite Challenging Industrial Property Market – Click here
  • 20 July 2017: Singapore Office Property Market Stabilising Despite Headwinds – Click here

 


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