ARA H-Trust shutters two-thirds of hotels, slashes workforce, cuts pay amid pandemic
The operator of 41 hotels in the US saw its portfolio occupancy dive to 39.6% in March from 66.5% in February
Singapore
ARA US Hospitality Trust (ARA H-Trust) has temporarily closed about two-thirds of its hotels, slashed its workforce and cut the pay of senior managers in response to the worsening novel coronavirus pandemic.
The stapled group shut 15 hotels in the last week of March and 13 other hotels in the first week of April due to low occupancy rates, its managers said on Thursday night in an investor update.
ARA H-Trust's portfolio comprises 41 upscale select-service hotels, with a total of 5,340 rooms across 22 states in the US, according to its latest annual report filed on April 13.
Meanwhile, the trust has also "consolidated operations" at three hotels to other owned assets in the market, the managers said on Thursday.
They added that they have developed a recovery analysis tool to monitor key market indicators to establish re-opening dates for the hotels.
As for property management, "comprehensive" cost-cutting measures in this area include slashing the workforce by 70 per cent and a "drastic" reduction in the working hours for the remaining staff.
All contract labour in property management will also be eliminated, senior managers' salaries will be lowered by 20 per cent and managers are required to cover four shifts within 50 hours per week over six days.
ARA H-Trust has shut down courtesy shuttles, fitness centres and pools. Accounts payable will be extended to 90 days.
In terms of asset management, the cost-cutting measures include a review of all service contracts and a reduction in services or schedules.
Property managers and franchisors are providing fee concessions and waivers.
The trust managers have also requested deferrals and waivers for ground rent and tax payment.
All property improvement plans, asset enhancement initiatives and other non-essential capital expenditures will be deferred for a year.
These moves come amid the plunge in hotel demand and a halt to travel, following the surge in Covid-19 cases in the US and more drastic restrictions by the authorities.
ARA H-Trust's portfolio performance dived in March 2020, in line with the overall US market trend, the trust managers said.
Occupancy shrank to 39.6 per cent last month, compared to 66.5 per cent in February and 60.1 per cent in January. Revenue per available room fell to US$46, versus US$78 in February and US$68 in January.
"We expect market conditions and performance to worsen before getting better in the coming months," the trust managers said on Thursday.
The managers first announced in March that they had initiated cost controls by cutting labour cost hours and staffing, shutting certain facilities and amenities and reviewing all operating contracts.
ARA H-Trust stapled securities fell US$0.01 or 2.2 per cent to US$0.45 on Friday.
