Far East H-Trust may reduce rents amidst slowing demand: report

RevPAR is expected to be lowered to -12% over slower occupancies in 1H20.

Far East Hospitality Trust’s (Far East H-Trust) assets could trade down to their minimum rents, if demand declines by 25-30% as suggested by Singapore’s Tourism Board (STB), according to a report by Maybank Kim Eng.

The company’s revenue per available room (RevPAR) for its hotels fell 0.6% YoY on weaker corporate demand for Q4, whilst Revenue per available unit (RevPAU) for its Serviced Residences (SRs) rose 1.9% YoY with growth in shorter-stay bookings at higher average daily rates (ADRs).

 “Singapore’s initially busy 2020 event calendar has seen cancellations and postponements into 2H20, and near-term demand visibility remains weak,” said Maybank Kim Eng.

Maybank expects RevPAR to be lowered from 3-5% to -12% with slower occupancies in H1 2020. However, the downside in RevPAR could be cushioned to some extent by the easing supply, noted Maybank.

Savills estimates new hotel rooms to slow to 1-1.2% pa in 2020-2021, from +5.1% pa between 2013-2017.

Maybank also sights that asset enhancement initiatives (AEIs) by the company may mitigate the RevPAR slowdown.

AEI for its Orchard Rendezvous hotel is currently on going after a rebranding effort. The company may also bring forward AEIs to its older hotel assets, such as the Elizabeth Hotel, with the goal to dovetail the government’s longer term CBD rejuvenation plans, noted the report.