It's not all gloom and doom for struggling hospitality REITs

Mercurial prices could mean good deals for investors.

Things may look bleak for the Singapore hospitality REIT market, but analysts believe there potential for value buys amid the price volatility.

According to a report by OCBC, the generally weak RevPAR (revenue per available room) performance by hospitality REITs this past quarter is especially stark, considering the comparison is of an even numbered year over an odd-numbered one.

Notably, the boost from biannual MICE events like the Singapore Airshow 2016 was unable to offset industry challenges.

OCBC further notes that hospitality REITs under its coverage are currently trading at yields of 7.3-8%.

Meanwhile, the total room stock climbed 6.5% in 2015, and is expected to climb another 6.5% to 64,800 rooms in 2016. Last year’s uptick in supply outstripped the muted growth in tourist arrivals in 2015, and OCBC expects this supply overhang to worsen this year.

Against the room stock of 61,723 at the end of 1Q16, 1,624 rooms are expected to enter in 2Q16; 140 in 3Q16; and 1,351 in 4Q16. For the year, 1,270 luxury/upscale rooms; 1,873 mid-tier rooms; and 787 economy rooms are seen to enter the market.

“In our opinion, the hospitality industry outlook for the year looks to be a slight negative given oversupply and ongoing global economic uncertainties,” OCBC states.

“Nonetheless, given the continuance of the same sector themes from last year, the negatives have had time to be been priced in and current yields look largely reasonable,” adds OCBC.