Secondly, by nature, hospitality trusts are more volatile in terms of their distributions per stapled security (DPS) than other types of REITs and property trusts, which have longer weighted average lease expiry (WALE) profiles. This is because most hotel guests stay a few nights. Serviced residences are a longer-stay segment but even then, their length of stay averages months rather than years.
Hospitality trusts are a tad more challenging to manage than REITs of industrial, data centre and even healthcare and office properties. For one, there may be more wear and tear with hotels and owners having to regularly deploy capex to smarten their hotels.
Most recently, after Hilton Singapore Orchard, which is owned by OUE Commercial REIT, underwent extensive renovations, average day rates hit $500. Elsewhere, The Grand Hyatt is closed for major renovations and Far East Hospitality Trust’s (FEHT) Orchard Rendezvous Hotel has had something of a facelift.
