CDL Hospitality Trust's rates rocket 36%

It's dodging the industry's challenges.

According to OCBC, Singapore’s hospitality industry posted excellent performance in 1Q12, clocking RevPAR growth of ~15% YoY in 1Q12, according to the STB.

Here's more from OCBC:

Being both a dividend play and one of the most liquid hospitality counters with good exposure to Singapore, CDLHT saw its unit price climb 36% end-2011 to a one-year high of S$2.10 as of 18 Oct 12.

However, moderation in the industry’s pace of growth, first seen in 2Q12, increased further in 3Q12. 3Q12 RevPAR for CDLHT declined 0.9% (versus +7.5% YoY in 1H12), and its unit price has fallen 9% from the recent high.

With information from multiple sources, we estimate that RevPAR for most Singapore hotels in 3Q12 was generally flat YoY. Our outlook for the hospitality industry remains cautious for the early part of 2013, especially since odd numbered years tend to see fewer MICE events.

We estimate that for 2012-2014, overall hotel room stock will grow at 4.8% p.a. while hotel demand will grow faster at 6.4% p.a. We remain positive on the long term growth prospects of CDLHT.

We note that hotel sites have been sold at high prices inthe past several months. Earlier in Nov, a record price of S$1,167 psf ppr was set for hotel land in Singapore; Resorts World Sentosa’s subsidiary made the top offer for the GLS Jurong Town Hall Road site.

In 2Q12, RB Capital’s winning bid for a 99-year leasehold, GLS hotel site at Rangoon Road/Farrer Park Station Road was at $1,079 psf ppr. Due to these high prices the size of future hotel rooms may shrink to ensure a reasonable profit margin.

Such a phenomenon would favor existing hotel assets as these would be preferred by business travelers. Incumbents such as CDLHT will have an advantage.