CDL Hospitality Trusts (CDLHT) J85 has reported a distribution per stapled security (DPS) of 2.51 cents for the 1HFY2023 ended June 30, 23% higher than the DPS of 2.04 cents in the corresponding period the year before.
Total distribution to stapled security holders for the six-month period rose by 23.8% y-o-y to $31.2 million after retaining $3.1 million for working capital purposes.
The distributable income also includes capital distribution from the trusts’ overseas hotels arising from operating cashflows.
1HFY2023 revenue rose by 20.9% y-o-y to $119.2 million while net property income (NPI) was up by 23.3% y-o-y to $62.9 million. The higher figures were thanks to the strong momentum in international travel with CDLHT seeing higher revenue per available room (RevPAR) across most of its portfolio markets.
The NPI was also mainly attributed to the group’s markets in Singapore, Japan, Australia, Europe and the UK, which increased by $17.2 million y-o-y and offset by the lower NPI from CDLHT’s New Zealand and Maldives properties, which fell by $5.3 million y-o-y.
The NPI contribution includes higher NPI from Claymore Connect and a full six months NPI recognition from Hotel Brooklyn which increased by 94.4% and 35.5% y-o-y to $2.8 million and $2.0 million in the 1HFY2023 respectively. Hotel Brooklyn was acquired on Feb 22, 2022.
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In Singapore, CDLHT’s average occupancy rate rose by 4.0 percentage points y-o-y to 69.2%. Its average daily rate (ADR) rose by 37.3% y-o-y to $258. RevPAR rose by 45.8% y-o-y to $179.
The portfolio’s overall performance would’ve done much better if not for the closure of the entire conference facilities at Grand Copthorne Waterfront Hotel for renovation from April to July this year, as well as the progressive removal of close to 34,000 room nights from inventory for ongoing bedroom refurbishment works in the 1HFY2023.
CDLHT is positive on the country’s hospitality sector with various events, concerts, improved tourism offerings as well as increased flight connectivity in the months ahead. Particularly, Coldplay, which will be playing in Singapore in 2024, is expected to draw a crowd that’s comparable to the annual Formula One night race, which saw 302,000 fans in 2022.
“Our portfolio hotels continue to achieve a solid performance in 1HFY2023 on the back of a robust recovery in global tourism. Strong leisure travel and the resumption of events have been key growth drivers across most geographical markets. Notably, 12 of our portfolio hotels have seen RevPAR in 1HFY2023 exceeding 1HFY2019 pre-pandemic levels, even though Chinese tourists have yet to return in full,” says Vincent Yeo, CEO of the managers.
“In our core market, Singapore, we look forward to an exciting events calendar with the upcoming F1 Singapore Grand Prix in September 2023, followed by major concerts in early-2024,” he adds.
In Australia, CDLHT’s hotels in Perth recorded a RevPAR growth of 74.8% y-o-y to A$104 ($92.74) driven by a robust events calendar and higher corporate rates. CDLHT is also upbeat on Western Austalia’s prospects with improving flight connectivity as well as major concerts and events that are in the pipeline.
Japan’s RevPAR surged by 143% y-o-y to 8,299 yen ($79.31), thanks to the strong recovery in inbound travel since the country lifted its Covid-19 restrictions. The return of tourists from China, one of Japan’s key source markets, is expected to give the country’s tourism sector a “significant boost”.
Italy’s RevPAR for CDLHT’s Hotel Cerretani Firenze rose by 66.4% y-o-y to EUR210 ($306.93). The hotel had achieved its highest average rate and RevPAR in the 2QFY2023 alone.
Germany’s RevPAR for the Pullman Hotel Munich increased by 64.7% y-o-y to EUR86 with a gradual recovery seen in the 2QFY2023 from fairs, events and the successful conversion of an airline crew providing base business to the hotel. According to CDLHT, the hotel's NPI growth did not match the significant improvement in RevPAR due to the recognition of accounting base rent on a straight-line basis in 1HFY2022 (despite a weaker hotel performance for that period that was below fixed rental levels).
In the UK, CDLHT’s RevPAR for both its hotels, Hilton Cambridge City Centre and The Lowry Hotel, grew by 14.5% y-o-y to GBP122 ($207.70). That said, the country’s NPI rose by a marginal 4.5% y-o-y on the back of higher operating costs from higher labour costs and the cessation of the government’s Covid-19 business rate relief.
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In New Zealand, Grand Millennium Auckland’s RevPAR fell by 12.1% y-o-y to NZ$139 ($114.31) as the hotel mostly operated as a managed isolation facility with high occupancy and rate in 1HFY2022. Postpandemic operating expenses were also higher as the hotel returned to normalised operations, which resulted in a $3.9 million (or NZ$4.6 million) increase in operating costs. A weaker NZD against the SGD further contributed to the decline in NPI by 47.9% y-o-y. That said, the country is expected to see continued recovery with the reinstatement of flights and additional services between New Zealand and other destinations.
Maldives’ RevPAR fell by 5.8% y-o-y to US$359 ($477.95) despite an increase in visitor arrivals due to the higher number of resorts as well as the reopening of alternative destinations such as Seychelles, Mauritius, and Thailand. The Maldives resorts registered an NPI decline of 29.3% y-o-y, mainly attributed to lower profit margins impacted by a 6.0% y-o-y reduction in average rate, as well as increased fuel prices and other inflationary costs. Increased resort supply in the Maldives in recent years will create more competitive pressure but the continued recovery of Chinese travellers will benefit the market, says CDLHT.
“We remain optimistic about the potential for further recovery in our portfolio, which is expected to benefit from the return of the Chinese travellers, as well as progressive restoration of flight capacity to pre-pandemic levels and beyond. However, high interest rates and inflationary cost pressures continue to pose challenges. We are looking beyond the current difficult economic environment as we continue to pursue suitable acquisitions. We are also committed to capitalise on strategic asset enhancement opportunities to boost the potential of our portfolio assets for the medium to long term in an ever-evolving hospitality landscape,” says Yeo.
As at June 30, CDLHT’s gearing stood at 37.9%. Its floating rate borrowings stood at 52.1% as at the same period.
On the REIT's higher proportion of debt on floating rates, Yeo explains that this isn't the best time to start fixing rates as the REIT will be locking its debt at a higher interest rate. Instead, the REIT manager deems it more prudent to wait for interest rates to moderate before putting more of its debt on fixed rates.
As at June 30, cash and cash equivalents stood at $61.8 million.
Units in CDLHT closed 1 cent higher or 0.85% up at $1.19 on July 27.
