Competitive pressures to hound CDLHT until 2017

RevPar already dropped 9.2% in Q2.

Competitive pressures will continue to haunt CDL Hospitality Trusts (CDLHT), as analysts only see a turnaround for the hospitality sector in the latter half of 2017.

According to a report by RHB, while visitor arrivals to Singapore climbed 13.3% YoY year to date in May, median stay length inched up 4.8% YoY, signalling shorter visitor stay.

Moreover, CDLHT’s revenue per available room (RevPar) tumbled 9.2% YoY in Q2 despite increased visitor arrivals. RHB notes that key reasons for this are continued competitive pressures on back of new supply, as well as the softening corporate market.

Further, CDLHT’s ongoing asset enhancement initiatives (AEIs) in two of its hotels as well as missing demand from the Southeast Asian Games impacted the business’ Q2 performance.

RHB asserts that looking forward, weak performance is expected to hound CDLHT—incoming hotel supply as well as flagging corporate market (which stands for 50% of demand) are likely to exert pressure on RevPAr.

As hotel supply is seen to ease by 2018, RHB expects a rebound for the sector in the second half of 2017.