3 Hospitality REITs with Exposure to Singapore’s Growing Tourism Industry
According to a recent report by Singapore Exchange, Singapore’s visitor arrival reached record highs in the first half of the year, increasing 7.4% to 10.9 million. Tourism receipts, likewise, increased 4.7% to S$6.7 billion.
Over the longer term, there has also been an upward trend of visitor arrivals and average revenue per available room in Singapore, as shown by the chart below:
Source: Singapore Tourism Board
With China, India and Indonesia making up 43% of all visitors to Singapore, and the rising affluence in each of those countries, Singapore’s tourism industry should continue to flourish.
Investors who want to benefit from this growth could look at real estate investment trusts (REITs) or stapled trusts that have exposure to the growing tourism industry in Singapore, such as those discussed below.
Ascendas Hospitality Trust (SGX: Q1P) owns Park Hotel Clark Quay in Singapore, along with nine other hotels located in Australia, Japan and Korea. In the latest quarter ended 30 June 2018, Park Hotel Clark Quay did well, as gross revenue and net property income (NPI) increased by 5.7% and 6.0% respectively. However, lower contribution from the trust’s Australia portfolio due to weaker Australian dollar and the divestment of one of its China properties resulted in overall lower revenue and net property income for the trust.
At the time of writing, Ascendas Hospitality Trust’s units are going at S$0.80 per piece, which translates to a price-to-book ratio of 0.8 and a distribution yield of 7.3%.
CDL Hospitality Trusts (SGX: J85) owns a portfolio of 15 hotels and two resorts, including seven hotels in Singapore. The trust did well in the first half of 2018, as NPI rose 0.9%, while distribution per security increased by 5.1% due to growth in portfolio NPI and distribution of proceeds from the divestment of Mercure Brisbane and Ibis Brisbane on 11 January. Year-on-year, its Singapore hotels brought in 2% more NPI over the first six months of the year. As its Singapore portfolio makes up 58.8% of total NPI, the trust is very dependent on Singapore’s tourism industry.
CDL Hospitality Trusts currently trades at S$1.55 per piece, which gives an annualised distribution yield of 5.5% and a price-to-book ratio of 1.02.
OUE Hospitality Trust (SGX: SK7) owns the Crowne Plaza Changi Airport hotel, Mandarin Orchard Singapore and Mandarin Gallery. As all three of its properties are located in Singapore, OUE Hospitality Trust is also largely dependent on tourism in Singapore. Its hospitality sector (through Crowne Plaza and Mandarin Orchard) delivered growth of 1.8% in the second quarter of 2018. However, challenging retail environment contributed to lower revenue from its retail segment. Consequently, distribution per security was down 3.3%. Nevertheless, OUE Hospitality Trust did report higher occupancy and positive rental reversions in Mandarin Gallery, which might suggest a rebound is on the cards for its retail segment.
OUE Hospitality Trust’s units are currently changing hands at S$0.695 per piece. This translates to a price-to-book ratio of 0.91 and a distribution yield of 7.3%.