SINGAPORE (Apr 17): Since March 23, when the FTSE ST REIT Index made its low, ARA US Hospitality Trust has recovered the most within its stressed hospitality sector. However, since the start of the year, the US trust is the worst performer (see Charts 1 and 2). There can be no sugar coating how challenging its prospects appear to be. Even before the Covid-19 pandemic hit, ARA US Hospitality Trust missed its FY2019 forecast by 7.7%, and announced distribution per stapled security (DPS) of 4.21 US cents (5.99 cents). In 4QFY2020, ARA US Hospitality Trust missed its DPS by 12.9%, reporting 1.08 US cents. ARA US Hospitality Trust’s manager says the miss was due to a combination of supply in its markets, Hurricane Dorian and the Gen-eral Motors Strike.

In its outlook, the manager warns, “As government authorities and corporations adopt containment mitigants to restrict travel and social contact in the US, hotels around the country are grappling with an extraordinary contraction in demand and occupancies. Similarly, our port-folio is facing increasing booking cancellations and declining new reservations.”

ARA US Hospitality Trust’s manager says it has initiated a series of proactive cost mitigation and capital preservation measures which include cost controls through reduction in labour hours and staffing, closure of certain facilities and amenities and review of all operating contracts. “We have also taken further steps to proactively protect and conserve cash flow by postponing non-essential capital expenditures and actively managing working capital,” it adds. The one good thing about ARA US Hospitality Trust is that it paid out its DPS on Feb 19 this year.

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