SINGAPORE (May 30): A delay in the expected launch of several hotels in the second quarter could help give hospitality REITs some breathing room amid declining revenue per available room (RevPAR), OCBC Investment Research says.

The opening of the hotels have been pushed back to late 2H17.

“With a better spaced out supply injection, we expect more evenly spread mid-single digit year-on-year declines in hotel RevPAR for the remaining three quarters of the year,” says lead analyst Deborah Ong in a Monday report.

In 1Q17, the four hospitality REITs under OCBC’s coverage all reported declines in RevPAR.

RevPAR for the hotel portfolios of CDL Hospitality Trusts (CDLHT), OUE Hospitality Trust (OUEHT), and Far East Hospitality Trust (FEHT) fell 0.8%, 2.3%, and 4.6%, respectively.

Meanwhile, revenue per available unit (RevPAU) for the serviced residences portfolios of Ascott Residence Trust (ART) and FEHT fell 11.4% and 14.0%, respectively.

“We continue to expect mild to flattish growth in leisure demand for FY17 with 1Q17 visitor days clocking a 2.3% y-o-y increase,” says Ong. “Corporate demand is expected to remain a challenge.”

OCBC is keeping its “neutral” rating on the hospitality sector.

OCBC’s top pick among the hospitality REITs is OUEHT. The research house is keeping its “buy” call on OUEHT with a fair value estimate of 75 cents.

Ong says OUEHT saw greater net property income (NPI) in 1Q due to contributions from Mandarin Gallery and the enlarged Crowne Plaza Changi Airport. Distribution per unit (DPU) in the first quarter grew 18.2% y-o-y.

As at 4.50pm, units of OUEHT are trading flat at 71 cents.