Serviced residence operations could shield ART from coronavirus' impact

The longer length of stay compared to hotels could provide a buffer to occupancy declines.

Ascott Residence Trust’s (ART) stronger focus on its service residence assets could likely provide insulation from the impact of novel coronavirus outbreak on the tourism-related industry, according to analyst reports.

Its management believes that its asset base across 15 countries, corporate focus and long average length of stay that serviced residences have compared to hotels will mitigate some short-term impact. According to OCBC Investment Research, these could provide buffer to declines in occupancy and room revenue.

However, the REIT’s management is expecting some cancellations, particularly from its China assets, which accounted for 6% of its gross profit for Q4 2019 and 7.2% of its asset base.

On the bright side, its exposure to China assets to fall further given the divestment of its properties Citadines Xinghai Suzhou and Citadines Zhuankou Wuhan, commented UOB Kay Hian. Chinese guests also only account for less than 10% across its portfolio.

ART recorded a 6% growth in gross profit at $252.6m in 2019, the company announced. In Q4, it climbed 3% YoY to $65.3m whilst revenue dipped 2% to $134.1m, dragged down by a decline in contributions from divesting Ascott Raffles Place Singapore and Somerset West Lake Hanoi.