OUEHT's revenues under threat as supply glut looms

Mandarin Orchard's RevPAR dip 8% in 3Q.

OUE's hospitality segment is not out of the woods yet as hotel revenue per available room (RevPAR) is expected to be hit by weakening corporate demand amid competitive pressures stemming from incoming hotel supply, said RHB.

"With the outlook for demand weakening and 3,857 new hotel rooms (~6% of inventory) anticipated to be open in 2017, we expect revenue per available room (RevPAR) to continue declining until end-2017," it said.

RevPAR for Mandarin Orchard Singapore (MOS), which accounted for 63% of total NPI in 3Q16, declined 8% YoY on the back of weak corporate demand and supply pressures.

On a positive note, the research house said that the impact to OUE Hospitality Trust’s (OUEHT) earnings, would be mitigated by master leases and minimum rent guarantees in place.

In August, it completed the acquisition of the Crowne Plaza Changi Airport extension (CPEX) which comprises 243 rooms, and full contributions are scheduled to kick in from 4Q16 onwards.