The managers of ARA US Hospitality Trust (ARA H-Trust) has reported net property loss of US$2 million ($2.8 million) for the 1H2020 ended June, compared to the US$29.5 million posted in 1H2019.
The trust has also declared no distributable income and no distribution per stapled security (DPS) for the half-year period compared to distributable income of US$19.7 million and DPS of 3.47 US cents the year before.
The loss was due to the trust’s temporary closure of 30 properties in March 2020 as part of its cost mitigation measures arising from the numerous travel restrictions and social distancing measures, which resulted in a significant decline in demand for hotels and occupancies.
“ARA H-Trust’s 1H 2020 financial results reflect the adverse impact on our hotel portfolio arising from lockdowns and travel restrictions amidst the COVID-19 pandemic. However, we observed a gradual uptick in hotel occupancies in June 2020 arising from domestic leisure demand with the loosened restrictions in some states within the country,” says Lee Jin Yong, CEO of the managers.
“Our US based team has been working relentlessly in pursuing demand from leisure and alternative segments and streamlining operating costs. In the near term, the velocity of recovery will be difficult to determine,” Lee adds.
Revenue for 1H2020 fell 58.4% y-o-y to US$39.3 million on the temporary closures from March till July 1.
Gross operating profit for 1H2020 plunged 84.7% y-o-y to US$5.8 million.
Portfolio recorded occupancy stood at 43.2% from the forecast of 75.6% with an average daily rate (ADR) of US$111, 15% lower than forecast.
Operating expenses in 1H2020 increased to US$33.5 million from US$16.5 million registered from the listing date to June 30, 2019, due to room expenses, other operating expenses, including bad debts written off for the half-year period, which amounted to US$13,000.
As at June 30, ARA H-Trust has a total of some US$21.5 million in cash on-hand and an aggregate leverage of 42.5%, which remains below the regulatory limit of 50%.
Looking ahead, the trust says it sees initial signs of gradual recovery in hotel demand for the months of June and July, although the duration and magnitude of Covid-19 continues to present “significant challenges”.
Lee remains optimistic on the trust’s prospects upon the gradual recovery in hotel demand.
“We believe that trends will favour value-priced, transient guest-oriented, compact hotels located in drive-to markets such as our portfolio. ARA H-Trust remains in a secure financial position to weather the crisis and will continue to exercise caution and prudence in our capital and cashflow management,” he says.
Units in ARA H-Trust closed flat at 38 US cents, down 56.3% year-to-date on August 4.
