Expect mild growth in leisure demand this year

Whilst corporate demand remains a challenge.

After the hospitality sector reported revenue per available room (RevPAR) declines in line with slow tourism numbers in Q1, OCBC Investment Research believes that there will only be mild to flattish growth in leisure demand the whole year round.

However, OCBC Investment Research said that the expected supply injection is seen to spread declines.

"We note that several of the hotels that were previously expected to come on-stream in 2Q17 have since pushed back their opening till late 2H17. With a better spaced out supply injection, we expect more evenly spread mid-single digit YoY declines in hotel RevPAR for the remaining three-quarters of the year," the brokerage firm said.

Even so, it noted that corporate demand is expected to remain a challenge.

Here's more from OCBC Investment Research

1Q17 results for all the hospitality REITs under our coverage were within expectations. 1Q17 YoY DPU growth was -13.7% for Ascott Residence Trust (ART), +9.0% for CDL Hospitality Trusts (CDLHT), -13.9% for Far East Hospitality Trust (FEHT) and +18.2% for OUE Hospitality Trust (OUEHT).

OUEHT saw greater NPI contributions from Mandarin Gallery and the enlarged Crowne Plaza Changi Airport, while CDLHT’s results was boosted by its NZ NPI contributions, which increased by 90% YoY.

ART’s DPU was impacted by the dilution from its rights issue earlier this year, as well as a one-off net realized exchange gain that contributed to a -8.0% decline in DI; stripping out the equity financing and realized exchange gain, 1Q17 DPU would have increased 4.5% YoY.

FEHT’s DPU was affected by a 13.1ppt drop in its Serviced Residences (SR) occupancy, though we note that the occupancy has recovered since the end of 1Q.