ARA US Hospitality Trust Rides Recovery in Travel

Date: September 14, 2022

ARA US Hospitality Trust Rides Recovery in Travel


Even after spending more than three decades of his career in hotel management and investment, Lee Jin Yong remains fascinated by the multi-faceted and dynamic nature of the hospitality industry.

“As hotels typically stand at the forefront of design and space innovation trends that later get adapted by other asset classes, there’s a perpetual learning aspect about the hotel industry,” said the Chief Executive Officer of the Managers of SGX-listed ARA US Hospitality Trust (ARA H-Trust).

“More recently, it’s been about integrating technology to enhance productivity, improve accountability, engage guests, optimise demand capture, and streamline service delivery.”

In Lee’s view, hotels provide unique business challenges, ranging from daily pricing or rents, staffing and hiring, guest requirements and expectations, to brand compliance and initiatives, as well as local government regulations and taxes.

“Devising an effective business plan requires drawing upon a wide spectrum of disciplines and knowledge. However, coming up with a business plan is only half the story – execution of that business plan completes it.”

Last but not least, there’s also the human equation to creating experiences, he pointed out.

“We all remember great hotel stays – senses evoked include rest, well-being, comfort, care, and rejuvenation. Behind the scenes, there is an orchestration of many talented, caring people working to deliver results. Such experienced, smart and hardworking people are vital to the execution of a memorable vacation, as well as a fantastic investment return.”

For this South Korean-born American, it’s always about the human element.

“The highlights and challenges over my past 30 years have to do with human beings,” he recalled. “Although real estate is about land and buildings, it’s also about people. People are involved in the multiple facets of a transaction. People are needed to execute the business plan. People are both your employees and customers in a hotel.”

People-Centred Leadership

Not surprisingly, the defining elements of his leadership style – integrity and humility – reflect this people-centred focus.

“Integrity means doing what’s right, honest and just in every aspect of my job. In my career, I’ve admired those who share this principle and feel graced by those encounters,” he noted.

“On the other hand, I’ve also dealt with people who were unscrupulous or selfish. There’s a saying in real estate: you can’t make a good deal with a bad person – I believe that. A reputation can make or break how partners or buyers are chosen. Capital is a commodity, reputation is a differentiator.”

The second principle is humility. “A posture of humility allows me to be a constant learner. Despite the number of years in my profession, all my education and practical learnings, the day I think I know everything is the day I stop growing,” he pointed out.

“Humility also allows me to appreciate the strength and character of others. By not focusing on myself, I’m able to enjoy and appreciate the incredible, talented people around me.”

Being humble has also taught Lee that he cannot do it all by himself. “No matter how thoughtful and clever a plan, I make it a practice to check with others to gain their perspective and insights. Therefore, it’s important to surround oneself with those who think differently, possess different expertise, and come from different backgrounds and cultures. In essence, I try to be the boss I always wanted to work for.”

Listed on SGX in May 2019, ARA H-Trust is a hospitality stapled group comprising ARA US Hospitality Property Trust (ARA H-REIT) and ARA US Hospitality Management Trust (ARA H-BT).

ARA H-Trust invests in income-producing real estate assets used primarily for hospitality and/or hospitality-related purposes located in the United States. Its portfolio currently comprises 40 upscale select-service hotels with a total of 5,214 rooms across 21 states in the U.S.

The portfolio – branded under two of the world’s largest hotel chains Hyatt Hotels Corporation and Marriott International – was valued by an independent valuer at US$722.6 million as at 31 December 2021, up 5.2% from US$686.9 million a year ago.

ARA H-Trust is managed by ARA Trust Management (USH) Pte Ltd (REIT Manager) and ARA Business Trust Management (USH) Pte Ltd (Trustee-Manager), collectively known as the Managers, which are wholly owned subsidiaries of ARA Asset Management.

The Sponsor, ARA Real Estate Investors 23 Pte Ltd, is an indirect, wholly owned subsidiary of ARA Asset Management, part of the ESR Group. ESR is Asia Pacific’s largest real asset manager powered by the New Economy, and the third-largest listed real estate investment manager globally.

Portfolio Optimisation

One of the key strategies that will have a significant impact on ARA H-Trust’s growth trajectory is the continued sale of non-core assets. On 30 June 2022, the Trust said it had entered into a conditional agreement to sell a portfolio of four Hyatt Place hotels for US$32.5 million. On 8 July 2022, it announced it had completed the sale of Hyatt Place Chicago Itasca for US$7.75 million.

“Portfolio optimisation is critical for the long-term growth and income objectives of the Trust. Real estate is dynamic – not all markets rise over the long term, and not all assets appreciate. As such we are continually evaluating each asset in our portfolio for its long-term prospects, current competitive challenges, performance trends, profitability, and capital expenditure requirements,” he said.

“This practice of culling our portfolio is challenging, given we’re still a young public company with a relatively small portfolio. Nevertheless, we wouldn’t be fulfilling our fiduciary responsibilities to our stapled security holders if we didn’t actively manage and optimise our portfolio. Thus, we may, at times, take a step back in order to move two steps forward.”

Over the medium term, ARA H-Trust will focus on leveraging on the industry’s recovery. With the resurgence in travel, the strong pent-up demand in the U.S. has fuelled a dramatic rebound in hotel room demand, which in turn has opened up several opportunities, Lee noted.

“Strong demand allows us to yield-manage our daily rents. Indeed, average daily rates and RevPAR – a metric of daily room rental revenue – have risen at such robust rates that, in many cases, they have exceeded pre-COVID levels in in some of our hotels,” he added.

“Optimising revenues by partnering with our hotel operators is a key aspect of our asset management efforts. With the effects of operating leverage, gross operating profits for our hotels can surge by triple the amount of the revenue increase. Increased profits equal increased cash available for distributions. We anticipate that as cash flows recover, our DPS will also improve.”

With the continued recovery in operating performance, ARA H-Trust reported a 131% year-on-year growth in net property income to US$21.1 million for 1H 2022 and a substantial increase in DPS to 1.427 US cents from 0.355 US cents in 2H 2021.

Lee remains optimistic about the future performance of ARA H-Trust. “The strengthening revenues, combined with the highly efficient cost structure for select-service hotels, are expected to enhance returns and deliver value for investors over the long run,” he noted.

“Therefore, ARA H-Trust’s high quality, premium-branded, diversified upscale select-service portfolio provides our stapled securityholders with an optimal long-term U.S. lodging strategy.”

Resilient Demand

Overall, the future of hospitality also remains bright, he pointed out. “Travel and tourism are growth industries. As more countries develop and people get richer, travel is the next step. In the U.S., travel is an entitlement – Americans see travel not as an indulgence, but as a necessity to well-being, both personally and socially.”

Moreover, demand for travel has remained relatively resilient. “As witnessed over the past year, once COVID-19 pandemic restrictions were lifted, travel demand surged. And once international travel restrictions eased, demand popped to another level,” he added.

“The next legs include the gradually emerging recovery in both corporate business travel, as well as meetings and conventions. Adding those other segments to the already robust leisure travel segment will smooth out seasonal travel patterns and expand overall demand, allowing for further pricing increases, resulting in greater profits and distributions.”

While there’s much to keep Lee busy in terms of the day-to-day operations of the Trust, the industry veteran plays as hard as he works. A fitness and cooking enthusiast, he enjoys collecting wines, a by-product of working in restaurants. “As the saying goes, a meal without wine is like a day without sunshine,” he quipped.

As is par for the course in his profession, Lee is also passionate about travel. “I love exploring and learning about new places, history, people, food, and culture. Being a hotel person, I tend to stop in random hotels to check out what’s new and different.”

And when it comes to tips for his team, Lee’s golden rule is: Be uncompromising in excellence, no matter what you do.

“I have a framed drawing in my office. All the people who have worked for me over my career have read it: ‘Beware the lollipop of mediocrity. Lick it once and you suck forever.’”

ARA US Hospitality Trust

Listed on SGX in May 2019, ARA US Hospitality Trust is a hospitality stapled group comprising ARA US Hospitality Property Trust (ARA H-REIT) and ARA US Hospitality Management Trust (ARA H-BT). ARA US Hospitality Trust invests in income-producing real estate assets used primarily for hospitality purposes located in the U.S. ARA US Hospitality Trust’s portfolio currently comprises 40 select-service hotels with a total of 5,214 rooms across 21 states in the U.S. ARA US Hospitality Trust is managed by ARA Trust Management (USH) Pte Ltd and ARA Business Trust Management (USH) Pte Ltd, (collectively known as the Managers). The Managers are indirect wholly owned subsidiaries of ARA Asset Management Ltd.

The company website is:

Click here for the company’s StockFacts page.

For the half-year ended 30 June 2022 financial results, click here.


First published on SGX website on 9 September 2022

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic
Photo: Company file

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