Vanishing Chinese tourists drag Far East Hospitality Trust’s income in Q2

Net property income slips 1.3%.

Far East Hospitality Trust is bearing the brunt of fewer leisure travellers in Q2. Dragged by the recent slump in leisure travel demand in the region, the company revealed that its net property income for the quarter decreased 1.3% y-o-y to $26.6 million.

The company’s stockholders should also expect smaller cheques, as its income available for distribution declined 4.9% y-o-y to $22.1 million. Its distribution per stapled security (DPS) for 2Q 2014 was 1.24
cents.

In a release, Far East H-Trust claimed that the y-o-y decline in its hotel occupancy rates mirrored the trend in the Singapore market, where companies continued to restrain their travel spending as a result of the lingering macroeconomic uncertainties. It was also impacted by the 27.4% drop in Chinese tourist arrivals.

According to Gerald Lee, CEO of the REIT Manager, “The occupancies at our hotels and serviced residences were affected by the weak macroeconomic environment and adverse factors impacting leisure travel in 2Q 2014. Our overall performance was partly mitigated by the improved income from our retail and office spaces.”

Here’s more:

Against a challenging operating environment, Far East Hospitality Trust (“Far East H-Trust”) registered a 1.0% year-on-year (“y-o-y”) increase in gross revenue to $29.6 million for the quarter ended 30 June 2014 (“2Q 2014”), mainly due to the contribution from Rendezvous Hotel Singapore which was acquired in August
2013. Net property income for the quarter decreased 1.3% y-o-y to $26.6 million and

The average occupancy of the hotel portfolio was 80.1% and 81.7% in 2Q 2014 and for the half year ended 30 June 2014 (“1H 2014”) respectively.

The average daily rate (“ADR”) of the hotel portfolio was $188 in 2Q 2014, 2.0% lower than the preceding year. Room rates for the quarter were generally lower as the market continued to experience the effects of price competition, which arose from the enlarged hotel room inventory as well as the slower demand for travel.

On a half year basis, the ADR was $189, compared to $190 achieved in the same period last year. The stronger demand in 1Q 2014 offered the opportunity to optimize room rates. This partially offset the lower rates in the second quarter.As a result of the confluence of factors outlined above, the revenue per available room (“RevPAR”) was $150 and $154 in 2Q 2014 and 1H 2014 respectively.