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DBS predicts Singapore to deliver, on average, a 3% RevPAR growth in 2020.
A lot of indicators are showing that Singapore’s hospitality sector is heading towards a cyclical upturn in 2020, to be fuelled by limited supply, key mergers and acquisitions (M&A), conferences and projected recovery of RevPAR, reported Singapore Business Review citing DBS Equity Research.
DBS predicts Singapore to deliver, on average, a 3% RevPAR growth in 2020.
Returning conferences such as the Air Show, along with new conferences, gives opportunities for hotel REITs to capture in 2020. The high portfolio occupancy will also give hoteliers the chance to raise room rates as the demand grows.
“We note that portfolio occupancy rates have remained high at >90% which we believe is at the upper bound of what hotels can operate at; which means that if demand remains strong, most hoteliers are expected to start to inch up room rates, this means that the next leg of growth will come from expected hikes in average daily rate (ADR),” said Derek Tan, DBS Equity Research analyst.
The muted supply growth in 2020 is seen to help with the sector’s overall recovery, while the potential boost coming from the leisure market in Q4 2019 will be a near-term stimulant to higher-than-expected RevPAR growth, the analyst noted.
Aside from the limited supply and stronger demand, he emphasised selected mergers and acquisitions (M&A) occurring inside the hospitality space as impending stimulants of growth for the sector.
“The merger between Ascott Residence Trust (Ascott REIT) and Ascendas Hospitality Trust (Ascendas REIT) will bring forth Asia’s largest hospitality REIT with potential indexation a catalyst for further yield compression in the medium term,” noted Tan.
“In addition, the potential asset sale of Liang Court integrated development will drive NAV upside for both CDL Hospitality Trust and Ascott REIT,” he said.
Among S-REITs, CDL Hospitality Trust and Far East Hospitality Trust are seen to continue to benefit from the RevPAR’s upward trend given their 62% and 100% exposure in earnings to Singapore-based hotels and serviced residences.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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