No sight of recovery for hospitality REITs until end-2017: analyst

Even the rebound in visitor arrivals didn’t help the flailing sector.

While the industrial and retail real estate investment trust (REIT) stood resilient, the hospitality sector continues to suffer drawbacks, with a recorded average 12.9% slip on a year on year basis for 2QCY16 DPU.

According to CIMB analyst Yeo Zhi Bin, the revenue per available room (RevPAR) has declined again, with an average of 7.8% decrease in RevPAR for the second quarter this year.

"In light of shortening length of stays and poorer corporate demand, we reiterate that the rebound in visitor arrivals will not benefit the hospitality REITs," the analyst said.

He cited some of the common culprits which may have affected the sector’s weak performance, including the supply pressures and poor corporate demand.

He also noted that the absence of Southeast Asian Games and the shift in Ramadan this year may have contributed to the awful performance of the sector for the month of June.

"For the remainder of the year, we now forecast hospitality REITs to post an average DPU decline of 10.3% yoy for 2016. Barring another bad month, we expect 2H16 to be slightly better than 1H16," he said.

Yeo underscored caution for all hospitality REITs, saying recovery might be elusive until the end of 2017. He explained that only the OUE Hospitality Trust has remained resilient, with an expected DPU growth of 16% by FY 2017.

“This is also the strongest DPU growth while its 2017 dividend yield of 7.9% is the highest among the hospitality REITs,” the analyst stated.