Frasers Hospitality Trust NPI slipped 1.2% to $31.06m in Q1

The firm blamed the weak showing of its hotels in Malaysia and Japan.

Frasers Hospitality Trust (FHT) saw its net property income (NPI) dip 1.2% YoY to $31.06m in Q1 which ended 31 December 2018 from $31.45m in 2017, extending the downward trend seen in Q4, an announcement revealed. Revenue also dropped 2% YoY to $40.62m from $41.45m.

Distributable income also slipped 3% YoY to $23.71m from $24.45m, whilst distribution per stapled security (DPS) fell 4.3% YoY to $0.0125 from $0.0131.

Also read: Frasers Hospitality Trust NPI down 6.7% to $29.4m in Q4

The declines were attributed to weaker performance of the firm’s Malaysia and Japan portfolios as both the Westin Kuala Lumpur and ANA Crowne Plaza Kobe turned in lower room, and food and beverage (F&B) revenue in Q1.

“Ana Crowne Plaza Kobe’s gross operating revenue (GOR) decreased 4.4% YoY due to mainly lower F&B revenue,” FHT explained. “ A reduction in wedding and year-end social events saw the hotel’s general banquet and wedding revenue declining 10% YoY. Its gross operating profit (GOP) declined more than its GOR mainly due to the timing of staff bonus write-back.”

Likewise, the Westin Kuala Lumpur’s GOR and GOP continued to drop significantly YoY by 11.7% and 31.1% respectively, as corporate demand in the city remained weak and affected both room and F&B revenue. The hotel’s revenue per available room (RevPAR) declined 11.6% YoY, on the back of lower average daily rate (ADR) and occupancy.

In Singapore, the firm’s portfolio performance remained stable in Q1, with GOR increasing marginally 0.3% YoY due to higher F&B revenue from InterContinental Singapore whilst GOP declined 0.4% mainly due to higher utilities costs. FHT noted how increased competition from new entrants in the Bugis precinct and a softness in corporate long stay demand continued to exert downward pressure on the portfolio’s ADR.

On the other hand, FHT’s Australia and UK portfolios performed better YoY as RevPAR of these portfolios improved 2.7% and 9.2% respectively, on the back of higher ADR and occupancy rates.

“Moving ahead, we remain focused on creating value for our stapled securityholders,” Fraser Hospitality Asset Management’s CEO Eu Chin Fen said in a statement. “We will continue to proactively pursue opportunities to optimise our portfolio which may include portfolio rebalancing.”

Also read: Frasers Hospitality expands Japan portfolio by $250m

Notwithstanding the decline in RevPAR, the Westin Kuala Lumpur reportedly continued to maintain its market share vis-à-vis its peers. With the weaker economic climate, corporations have been renewing their contracts at lower rates, the firm explained. It will also remain focused on expanding its customer base as increased competition due to a large income room supply is expected to further put downward pressure on the hotel.

In 2019, an anticipated surge in visitor arrivals is expected to offset any potential supply-side pressures in Singapore, whilst Japan’s marketing initiatives to increase tourism from outside Asia could potentially yield a positive impact for FHT in terms of diversification and profitability.

On the other hand, FHT’s portfolio in the UK is set to continue facing headwinds following the outcome of the Brexit negotiations and rising payroll costs. And whilst Sydney remains a popular destination, the room supply outlook could weigh on the firm’s future performance, FHT noted. “In Melbourne, delays in hotel developments have pushed completion dates out to 2021,” the firm added. “Whilst this has helped in part to alleviate the pressure on hotel performance in the short-term, future declines are expected when these projects come to fruition.”