Yahoo Finance Hospitality Trusts Have Reported Good Results: Is There More DPU Upside for the Segment?
The REIT sector has gone through tough times in the past two years because of surging inflation and rising interest rates.
As a result, distributions have been under pressure as both finance, staff, and utility costs rose sharply.
However, hospitality trusts have bucked this trend by posting better financial numbers and higher DPUs as air travel and tourism returned with a bang.
This REIT sub-segment is riding high on the coattails of a surge in demand for holidays after people were cooped up for close to three years.
Let’s find out if there could be further upside for hospitality trusts as the year goes by.
Robust results for the quarter
Several of the hospitality trusts have reported their results and business updates for the latest quarter.
Both financial and operating numbers were robust as these trusts rode on the wave of higher demand for air travel and hotel stays.
CDL Hospitality Trusts (SGX: J85), or CDLHT, saw its total revenue for the first quarter of 2024 (1Q 2024) rise 7.3% year on year to S$65.3 million.
Net property income (NPI) improved by 6.8% year on year to S$34.9 million.
Over at CapitaLand Ascott Trust (SGX: HMN), or CLAR, 1Q 2024 gross profit increased by 15% year on year because of stronger operating performance coupled with contributions from new properties.
Far East Hospitality Trust (SGX: Q5T), or FEHT, also reported healthy financial numbers.
Its gross revenue for 1Q 2024 rose 7.5% year on year to S$27.1 million while NPI increased by 6% year on year to S$25.1 million.
Operating metrics for these trusts came in strong, too.
CDLHT’s Singapore hotels saw the average occupancy rate hit 82.1% for 1Q 2024, up from 67.9% a year ago.
Revenue per available room (RevPAR) also rose 16.6% year on year to S$205.
CLAR’s revenue per available unit (RevPAU) rose 6% year on year to S$135 for 1Q 2024.
As for FEHT, its hotels division’s RevPAR improved by 6.7% year on year to S$144 but its serviced residences division saw RevPAR slip by 1.5% year on year over the same period.
Overall, these three hospitality trusts reported healthy increases in their top lines and gross profit or NPI, along with year-on-year increases in occupancy and RevPAR.
Tourism and air travel reach post-COVID highs
There could be better days in store for this REIT sub-sector.
The International Civil Aviation Organisation (ICAO) projected that passenger air traffic will be around 2% higher than pre-pandemic levels for 1Q 2024.
Demand for 2024 could reach 4% above 2019 levels if demand strengthens in the routes that have yet to reach pre-pandemic levels.
Over in Singapore, international tourist arrivals climbed to a new post-pandemic high, according to the Singapore Tourism Board (STB).
This rise can be attributed to the arrival of high-profile artists such as Taylor Swift and Coldplay which attracted tourists from the region to fly to Singapore.
Visitor arrivals are forecast to hit 15 million to 16 million for 2024 bringing in approximately S$26 billion to S$27.5 billion in tourism receipts.
More attractions and events
New attractions are responsible for drawing in a higher number of tourists.
Last year, Singapore saw the world’s first surf-snow-skate action sports facility Trifecta begin operations along with the new Bird Paradise.
Visitors can also look forward to the expansion of Resorts World Sentosa by Genting Singapore (SGX: G13) with new attractions such as Minion Land and the expansion and rebranding of the SEA Aquarium into the Singapore Oceanarium.
Meanwhile, the Mandai Nature Precinct is developing Rainforest Wild while Jurong Lake District has seven hectares zoned for integrated tourism development.
There is also a healthy pipeline of events in the meetings, incentives, conventions, and exhibitions (MICE) arena that should attract business travellers.
The World Architectural Festival will arrive in November this year while CommunicAsia and World Cities Summit will be held in May and June 2024, respectively.
There are plans to upgrade Marina Bay Sands to include more event, entertainment, and retail offerings by 2028 and a new arena will be built to replace the Singapore Indoor Stadium for larger concerts and sports events.
These plans are multi-year ones that should continue to make Singapore an attractive destination and boost tourism numbers, thereby benefitting hospitality trusts such as FEHT, CLAR, CDLHT and Frasers Hospitality Trust (SGX: ACV).
Get Smart: Encouraging statistics
The numbers are looking good for all the hospitality trusts.
Coupled with encouraging news on air travel and the surge in tourist arrivals, investors should see higher DPU in the coming months, barring unforeseen circumstances.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
The post Hospitality Trusts Have Reported Good Results: Is There More DPU Upside for the Segment? appeared first on The Smart Investor.
