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OCBC Investment Research Analyst Peng Chu said demand for staycations is healthy on the back of pent-up demand from local travellers.
OCBC Investment Research expects Singapore’s hospitality REITs to face slow recovery in the second half of 2020.
Results for the first half of 2020 of three hospitality REITs under the coverage of OCBC – Far East Hospitality Trust, Ascott Residence Trust and CDL Hospitality Trust – came below expectations, reported Singapore Business Review (SBR).
In 1H 2020, the three REITs saw RevPAR plummet 43%, 49% and 56%, respectively, due to a weaker-than-expected operating environment as well as the retention of distributable income.
OCBC Investment Research believes the second half of 2020 holds promise for the hospitality sector as temporarily closed properties have reopened and more countries had exited from lockdowns, said SBR.
It also expects the government’s support on domestic tourism and the implementation of “travel bubbles” to further boost the sector.
The Singapore authorities announced on 3 July that hotels can apply to reopen for staycation bookings.
OCBC Investment Research Analyst Peng Chu said demand for staycations is healthy on the back of pent-up demand from local travellers, noting that average daily rate remains largely comparable to that of pre-COVID-19 levels.
However, Chu does not expect staycation to buoy performance – largely remaining as a weekend business and unlikely to compensate for income shortfall due to the COVID-19 pandemic or make up for losses in weekday occupancies.
Of the REITs covered by OCBC, Ascott Residence Trust is expected to perform best as its defensive and geographically diversified portfolio and strong financial position provide a buffer amid the still uncertain outlook.
Overall, OCBC Investment Research said serviced residences were more resilient than hotels due to the serviced residences’ longer pre-existing leases as well as lease extensions coming from corporate business and project groups.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg