Will SingapoRediscovers Vouchers Boost the Sector?

The COVID-19 pandemic has caused widespread economic disruption to Singapore and the global economy. In the Straits Times article dated 4 January 2021, Singapore’s Gross domestic product (“GDP”) contracted by 5.8 per cent for the whole of 2020 amid the disruption to economic activities caused by the coronavirus pandemic, according to the Ministry of Trade and Industry’s (“MTI”) advanced estimates.

One industry that has been heavily impacted by the pandemic would be Hospitality Sector. With the collapse in tourist arrivals, Singapore’s hotel Average Occupancy Rate (“AOR”) for November 2020 declined to 53.8%, as compared to 88.9% a year ago. Room Revenue also dropped by more than 80% year-on-year.

To tackle the low tourist arrival figures and occupancy rate, The Singapore Tourism Board ("STB") has announced that every Singaporean aged 18 and above in 2020 will receive S$100 worth of SingapoRediscovers vouchers, which can be used on staycations, attraction tickets and tours. This move is expected to promote domestic tourism and lend a boost to Singapore’s tourism industry.

In this article, we will be looking at 3 Listed Hospitality Trust who can potentially benefit from this program, mainly, CDL Hospitality Trust (SGX: J85), Far East Hospitality Trust (SGX: Q5T), Fraser Hospitality Trust (SGX: ACV).

1) CDL Hospitality Trust (SGX: J85)

CDL Hospitality Trust (“CDLHT”) is one of Asia’s leading hospitality trusts with assets under management of about S$3.1 billion as of 30 September 2020.

CDLHT was established with the principal investment strategy of investing in a portfolio of hospitality and/or hospitality-related real estate assets. As of 30 October 2020, CDLHT owns 15 hotels and two resorts comprising a total of 4,630 rooms as well as a retail mall.

For its Singapore portfolio, it comprises of Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel and Studio M Hotel.

Price Chart for CDLHT

Based on the 1 Year Chart, CDLHT’s share price has fallen more than 50% to a low of S$0.685 in March 2020, when the COVID-19 pandemic first started.

After the huge selldown, CDLHT’s share price rebounded more than 80% in just 3 months and hit a high of S$1.20 by June 2020. Across the next few months, its share price has been trading sideways.

In November 2020, the positive vaccine news and the announcement on the redemption date of the vouchers have spurred a run-up in its share price. With its share price hovering around S$1.00 in November 2020, it has since risen by close to 30% as the market is expecting a recovery for the Hospitality sector.

Latest 9M FY2020 Business Update

For CDLHT’s 9M FY2020, the average occupancy rate for its Singapore Portfolio was at 77.2%, which is 9.7 percentage lower year-on-year. In terms of the Average Room Rate (“ARR”), it stands at S$92, which has dipped by 47% from a year ago of S$175.

The above declines were due to border closure, which resulted in a sharp fall in total tourist arrivals. However, these declines were partially mitigated from the demand for staycations, dedicated isolation facilities and foreign workers affected by border closure.

Overall, CDLHT’s Net Property Income (“NPI”) suffered a decline of 52.5% year-on-year to just S$30.05 million in 9M FY2020.

2) Far East Hospitality Trust (SGX: Q5T)

Far East Hospitality Trust (“FEHT”) is a Singapore-Focused Hotel and Serviced Residence Hospitality Trust, with a portfolio of 13 properties totalling 3,143 hotel rooms and serviced residence units.

The portfolio of properties was valued at approximately S$2.65 billion as of 31 December 2019. Some of the properties include Oasis Hotel Downtown, Rendezvous Hotel Singapore, The Quincy Hotel, Oasis Hotel Novena and Village Hotel Bugis.

Price Chart for FEHT

Similar to CDLHT, FEHT’s 1 Year Chart also showed a dip of more than 50% of its share price in March 2020. It has touched low of S$0.36 before rebounding more than 50% and hit a high of S$0.57 in June 2020.

For the next few months, its share price has been consolidating and moving on a slight uptrend.

In November 2020, FEHT’s share price has gapped up to a high of S$0.64 on the back of the positive vaccine news and the redemption of the vouchers. Since then, its share price has been trading sideways between S$0.60 and S$0.62.

Latest 9M FY2020 Business Update

For 9M FY2020, FEHT’s Gross Revenue stands at S$64.89 million, which is a decline of 25.1% year-on-year. This was mainly due to a decline in master lease rental for the hotels arising from the impact of the COVID-19 outbreak.

The average occupancy of FEHT’s hotel has suffered in the initial phase of the COVID-19 pandemic but picked up in subsequent months as the hotels secured business from the Government for isolation purposes. The Average Occupancy rate of 84.2% for 9M FY2020 was 5.7 percentage points below the same period last year. Average Daily Rate ("ADR") decreased 44.0% to S$89 as travel restrictions curtailed higher-rated business for the hotels.

Overall, FEHT’s 9M FY2020 Income Available for Distribution was at S$37.70 million, which is a 31.9% year-on-year decline.

3) Fraser Hospitality Trust (SGX: ACV)

Fraser Hospitality Trust (“FHT”) is established with the principal strategy of investing globally, on a long-term basis, in income-producing real estate assets used primarily for hospitality purposes. FHT’s geographically diversified portfolio of 15 quality assets is in prime locations across 9 key cities in Asia, Australia and Europe.

With a combined appraised value of S$2.25 billion (as at 30 September 2020), these 9 hotels and 6 serviced residences are Novotel Melbourne on Collins, Novotel Sydney Darling Square, Sofitel Sydney Wentworth, Fraser Suites Sydney, InterContinental Singapore, Fraser Suites Singapore, ibis Styles London Gloucester Road, Park International London, Fraser Suites Edinburgh, Fraser Suites Glasgow, Fraser Suites Queens Gate, Fraser Place Canary Wharf, ANA Crowne Plaza Kobe, The Westin Kuala Lumpur and Maritim Hotel Dresden.

Collectively, the portfolio consists of 3,913 rooms comprising 3,071 hotel rooms and 842 serviced residence units.

Price Chart for FHT

Similar to both CDLHT and FEHT, FHT’s share price also suffered a steep fall due to the COVID-19 pandemic, which triggers a selldown in the global equities market. After hitting a low of S$0.315 in March 2020, its share price has rebounded strongly and hit a high of S$0.555 in June 2020.

Over the next few months, its share price has been on a steady downtrend and has hit a low of S$0.385 by the end of October 2020.

In November 2020, FHT’s share price has rebounded strongly and hit a high of S$0.555 in Mid-December due to the positive vaccine news and the redemption of the vouchers. Since then, FHT’s share price has been consolidating between S$0.52 and S$0.54.

Latest FY2020 Result

For FY2020, FHT’s Gross Revenue was at S$88.6 million, which was a year-on-year decline of 40.9%. This was mainly due to the detrimental impact of the COVID-19 outbreak on the Hospitality Sector.

For the 4Q FY2020, FHT’s Average Daily Rate (“ADR”) for its Singapore portfolio was at S$141, which was a year-on-year decline of 52.2%. The lower ADR was due mainly to the low rates committed for the stay home notice business. With the stay home notice business, FHT’s occupancy rate was stable at 79.0%, as compared to 92.5% a year ago.

Overall, with the lower ADR, Revenue per Available Room (“RevPAR”) has dipped significantly to just S$112 in 4Q FY2020, as compared to the rate of S$273 a year ago.

Conclusion

The Accommodation service industry, which consists of hotel operators, expect the business situation to be less favourable for the period of Oct 2020 – Mar 2021, with a net weighted balance of -51%. Despite the negative outlook, the business sentiments have improved slightly from a low of -71% in the previous quarter’s survey for the period of Jul-Dec 2020.

The slight improvement could be attributed to the Phase 2 reopening, which allows hotels to reopen for staycations. Coupled with the SingapoRediscovers vouchers, many hotels have seen higher demand for staycations and Singaporeans are more inclined to use their vouchers for staycation activities.

On the other hand, hotel operators expect a drop in turnover as the majority of them anticipate a lower number of guests serving Stay-Home Notice at their respective hotels coupled with continued low tourist arrivals in the coming months ahead.

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