|21 July 2017|
|Recent Trends & Moves in Singapore’s Hospitality Trusts|
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:
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
Previous Market Updates on the Real Estate Sector
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