What Nov's higher visitor arrivals but low RevPAR mean for hospitality REITs

What Nov's higher visitor arrivals but low RevPAR mean for hospitality REITs

PC Lee
13/01/17, 04:22 pm

SINGAPORE (Jan 13): Singapore saw 1.2 million visitor arrivals in November, 2.5% higher compared to a year ago, according to the city-state’s tourism board.

In a Friday research note, UOB Kay Hian Research says this was likely due to the end of the Zika virus outbreak.

The research house attributes Oct’s negative growth in visitor arrivals -- a reversal of 9 straight months of growth -- to the outbreak which was first announced in Aug.

Since then, the number of new cases have tapered off, with all clusters now closed.

Supporting this visitor growth too was the higher number of visitors from China and Indonesia.

But overall RevPAR in Nov was down 5.5% on-year at $195.1, as all sub-segments registered declines.

Economy hotel RevPAR again witnessed the deepest dive of 11.1% to $74.4o, followed by a 2.3% fall in the luxury hotel segment to $361.20.

UOB says RevPAR weakness is likely to be reflected in 4Q16 results.

Hospitality REITs could likely report lacklustre operating numbers for their Singapore portfolio in the coming weeks.

Nov's overall RevPAR weakness came about despite overall occupancy holding up fairly well at 83.5%, just 1.3 percentage points lower y-o-y.

But room rates fell 4% to $233.7 which suggests supply-side pressure continues to plague hoteliers.

Nevertheless, UOB says signs of a potential turnaround could materialise in 2H17, as 2018 supply of hotel rooms is expected to slow to a trickle.

As of now, UOB is giving Ascott Residence Trust, the laggard play in the hospitality segment, a “buy”.

But UOB is maintaining its “hold” on CDL Hospitality as it expects the double whammy of supply digestion and the disruptive effects of renovations, with operating performance only improving in 2017.

Units of Ascott Residence Trust and CDL Hospitality are trading at $1.17 and $1.40 respectively.

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