<News Analysis> Singapore Hotels – Data points to a brighter future
- Business Times reported that Singapore Hotel revenues declined 21% y-o-y
- Data is skewed to include 1Q20 which reflected post COVID performance, and we estimate monthly revenue to be up 32% y-o-y instead
- RevPAR continues to trend higher, with Dec’21 (S$156) at a post-pandemic high
- Gradual opening might start translating to operating performance of our hotel REITs in the coming reporting quarter
What’s new?
Business Times reported that full year Singapore hotel revenues down 20.9% year on year to S$979.6m in 2021 despite Dec bump. While the article suggests that the hospitality sector’s performance may negatively surprise, we believe that headlines may not paint the future picture.
We observe the following:
For 2020: Borders remain substantially closed through the year
- Hotel revenues in 2020 totalled S$1.24bn (55% of that came from 1Q20, prior to border shutdown)
- Stripping out 1Q20, we estimate average monthly hotel revenue to be up 32% y-o-y, which shows greater consistency with industry RevPAR trend we track.
- Government quarantine business was the main demand driver for 2020 keeping systemwide occupancies at about 54% – 67% in 2Q – 4Q
- RevPAR averaged about S$67/night with average daily rates at about S$114/night.
For 2021: gradual opening starting in 4Q20
- With borders remaining substantially close, hotel performance totalled S$978m, a c.21% drop y-o-y. However, if we strip out the impact of 1Q20 prior to shutdown, overall revenues in 2021 was up 36% instead.
- Government quarantine business remain the key driver but over occupancy rates declined slightly to c.60% as government gradually reduces their quarantine block bookings for hotels as we approach an “endemic living” with COVID. Staycation business and VTLs were key drivers, with Dec’20 seeing a new high in overall revenues (S$127.8m with a RevPAR of S$156/night)
- This set the stage for a gradual recovery from the claws of COVID-19.
Source: STB, DBS Bank
Our thoughts
Bright spots starting to appear in 4Q21. While hoteliers continue to see suppressed revenues for full year 2021 but we see bright spots emerging. In fact, Dec’21 numbers were very encouraging in our view, seeing RevPAR reaching a high of S$156/night, which appears to be at a 2-year high. Occupancy rates in Nov’21/Dec’21 was back to pre-pandemic levels of 71%-78% which essentially means that rooms are largely full (for those on staycation, you will know what we mean!).
A gradual step to normalcy. Based on our understanding, the weaker occupancy rates was multi-fold, while staycation demand and travellers on vaccinated travel lanes (“VTL”) partially took up the incremental demand, we generally notice a drop off in corporate demand as workers that were temporarily roofed in hotels when the pandemic first hit had switched to alternative lodging options such as renting housing apartments in Singapore. Government contracts that had generally supported the industry for over close to 2 years now has also seen a tapering down. We do still understand that some contracts under our hotel REITs has seen extension to 1Q22. Staycation demand was also affected by periodic lock down measures that hammered peak staycation periods such as the September holidays. December numbers still came in at a robust 36% higher y-o-y.
How will hospitality S-REITs report ? We remain optimistic that the hospitality S-REITs, which is due to be reporting towards the end of this week, will start to show further improvement in operational metrics. Using CDL Hospitality Trust, Far East Hospitality Trust and Frasers Hospitality trust, which have more substantial exposure to Singapore market will show improvement performance from their Singapore hotels.
Source: STB, DBS Bank
