Hospitality S-Reits record 21% DPU growth in FY2023

Hospitality trusts recently took the spotlight as the S-Reit sub-segment reported year-on-year (yoy) growth in distribution per unit (DPU) for FY2023, bolstered by a base effect and a strong recovery in international travel. The five hospitality trusts recorded, on average, 21 per cent yoy growth in FY2023 DPU.

Four of the trusts – ARA US Hospitality Trust : XZL 0% (ARA H-Trust), CapitaLand Ascott Trust : HMN 0% (Clas), CDL Hospitality Trusts : J85 0% (CDLHT) and Far East Hospitality Trust : Q5T 0% (FEHT) – reported full-year FY2023 earnings ending Dec 31, 2023. Frasers Hospitality Trust : ACV 0% (FHT) reported full-year FY2023 (ending Sep 30, 2023) in November 2023, and recently unveiled its Q1 FY2024 business updates.

ARA H-Trust declared a distribution per stapled security (DPS) of 3.43 US cents for FY2023, a 12.3 per cent increase from FY2022. This was attributed to improved revenues and a robust operational performance. Portfolio occupancy, while still below pre-pandemic levels, improved 4 percentage points yoy to 69.3 per cent. Average daily room rate grew 5.3 per cent and boosted revenue per available room (RevPAR) to US$96, representing 12.9 per cent growth yoy.

Clas increased FY2023 DPS by 16 per cent yoy to 6.57 Singapore cents. The increase was due to contributions from 18 new acquisitions and stronger operating performance as international travel continued to recover. Its H2 2023 revenue per available unit (RevPAU) hit 103 per cent of pre-pandemic levels in H2 2019 on a pro forma basis. In particular, Clas noted that RevPAU for its Japan assets increased 90 per cent yoy.

CDLHT announced a DPS of 5.70 Singapore cents for FY2023, representing an increase of 1.2 per cent yoy. While net property income improved 11.8 per cent, DPS growth was weakened on the back of higher interest expenses. CDLHT recorded all-time highest full year RevPAR for five of its hotels across Singapore, Japan, the UK and Italy.

The DPS for FEHT grew 25.1 per cent, surpassing DPS in FY2019, before the pandemic. RevPAR of its hotel portfolio and RevPAU of its serviced residence portfolio increased 47.8 per cent and 17 per cent, respectively, yoy.

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FHT’s DPS for FY2023 (ended Sep 30, 2023), grew 49.3 per cent yoy due to sustained recovery in global tourism and an improved operating environment. In FHT’s latest Q1 FY2024 business update, it noted that RevPARs of all country portfolios were higher yoy in Q1 FY2024, except for Singapore and the UK, because of the easing of pent-up travel demand in these markets.

Most of the five trusts noted that while strong operational performance was partially offset by higher interest expenses, the trusts were prudent in capital management.

The cost of borrowings for the five trusts grew, on average, by 80 basis points between Dec 31, 2022 and Dec 31, 2023. However, the average gearing ratio of the five trusts rose only marginally – from 36.2 per cent as of Dec 31, 2022, to 36.4 per cent as of Dec 31, 2023. The gearing ratio at CLAR, FEHT and FHT dipped 0.1 per cent, 0.7 per cent and 0.7 per cent, respectively, during the period. SGX RESEARCH

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

Source: SGX Research S-Reits & Property Trusts Chartbook