Hospitality REITs to stay below pre-pandemic levels until 2023: Moody's

Moody's Investor Services said travel disruptions would keep hospitality REITs revenue weak for the near future.

Hospitality REITs will struggle to recover to pre-pandemic levels until at least 2023, according to credit rater Moody's Investors Service.

In its latest issue of Inside ASEAN, the firm's researchers said that revenue for hospitality REITs in the Lion City will remain subdued due to the ongoing travel disruptions.

This was based on two Moody's-rated Singapore REITs: Ascott Residence Trust and Frasers Hospitality Trust, both with a rating of Baa3 Negative.

"Prolonged coronavirus disruptions may prompt a structural decline in demand for hotels and serviced residences given the sharp fall in corporate travel," Moody's said.

Despite this, the REITs have sufficient cash and undrawn commited credit facility liquidity to cover basic needs for a year and a half.

Moody's expect that the REITs would still be able to cover loan requirements for EBITDA interest coverage for the a 12 month period.

"Master lease EBITDA alone willcover interest expense by around 1.5x. EBITDA interest coverage will be even stronger, at above 2.0x," the rater said.

Australia, China, Japan, the UK and the US are among the top sources of revenue for the above-mentioned rate back in 2019.

Moody's expects demand for hospitality assets in countries like Singapore, which are dependant on international travel, to recover as domestic movement restrictions ease.