Ascott Residence Trust sees long stays, domestic markets leading recovery

LONG-STAY properties and domestic markets are expected to continue to drive Ascott Residence Trust's (ART) gradual recovery, the stapled hospitality group's managers said on Friday.

This comes as its portfolio revenue per available unit (RevPAU) improved by 27 per cent on the quarter to S$47 for the July-September period, even though it was still down 70 per cent year on year.

Occupancy averaged about 40 per cent for its portfolio assets in the third quarter, up from 30 per cent in the second quarter, the managers said in a Q3 business update.

"Countries with long stays continued to be resilient, performing above market (for occupancy rates), while those traditionally dependent on transient travellers pursued alternative sources of business," the managers said.

Meanwhile, the recovery of large domestic markets such as China was supported by domestic demand.

RevPAU in China for the third quarter dropped by 30 per cent on the year to 321 yuan (S$65.30), although its 60 per cent portfolio occupancy was above market levels. ART has received "healthy enquiries for long stays and strong demand for leisure travel on weekends and holidays", the managers said.

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Singapore - which accounts for 16 per cent of ART's total assets - saw its occupancies supported by government-contracted business.

Block bookings by the Singapore government mitigated the absence of international travellers, but RevPAU still halved to S$85 in the third quarter from a year ago, mainly due to lower room rates.

Ascott Orchard Singapore, which is now serving staycation, long-stay and self-isolation guests, could receive a boost from the city-state's domestic tourism drive, ART's managers said.

Japan - making up a fifth of total assets - recorded a 91 per cent year-on-year plunge in RevPAU to 1,068 yen (S$13.96) for the latest quarter, dragged by the absence of transient travel demand.

Its Australian operations, meanwhile, turned to alternative business in the absence of traditional demand. About 14 per cent of ART's assets are located in the country.

Block bookings from Australia's government, military and healthcare workers provided some support, and such bookings are expected to continue into the fourth quarter of this year.

About 93 per cent of ART's properties are now operational, as more reopened when market conditions stabilised.

Six properties are still closed - two in Japan and one each in Belgium, France, South Korea and the US.

ART's portfolio continued to generate positive gross profit and cash flow.

It has sufficient liquidity to cover more than two years of fixed costs under the worst-case, zero-income scenario, the managers said.

More than S$1 billion in financing is available, including some S$305 million cash on hand and about S$550 million in credit facilities. ART will also receive about S$180 million in net divestment proceeds from its ongoing sales of Ascott Guangzhou, Citadines Didot Montparnasse Paris, Citadines Xinghai Suzhou and Citadines Zhuankou Wuhan.

The managers have provided mandated rent abatement to qualifying lessees, and other rent negotiations are still ongoing. Further rental relief may need to be extended.

They added that property valuations will likely be depressed amid soft operating performance and outlook.

The managers will review ART's distribution payout "holistically", taking into account the market outlook and past divestment gains unlocked.

ART has been pivoting to the new norm to prepare for the post-Covid-19 era's hospitality landscape, said the managers.

For instance, it is exploring new uses of its spaces, speeding up digitalisation, and putting in place leaner cost and operating structures.

The group is also catering more to self-guided trips, fewer groups, flexible bookings, road trips and staycations, to meet guests' evolving needs.

Stapled securities of ART ended Thursday at 82.5 Singapore cents, losing 2.5 cents or 2.9 per cent.