The manager of ARA US Hospitality Trust XZL has reported a distribution per stapled security (DPS) of 1.501 US cents (2.012 cents) for the 1HFY2023 ended June 30, 5.2% higher than the DPS of 1.427 US cents in the same period the year before.
The higher DPS came as the US lodging market continued its recovery during the six-month period with lodging demand remaining resilient amid inflationary concerns and risks of an economic slowdown. The higher demand for business and leisure travel, as well as large group meetings and conventions, also contributed to the improvement.
Distributable income for the period rose by 6.8% y-o-y to US$8.7 million as revenue and net property income (NPI) rose.
Revenue grew by 5.9% y-o-y to US$86.0 million as the portfolio’s average occupancy improved by 6.2 percentage points y-o-y to 68.9%. Revenue per available room (RevPAR) also improved by US$15 to US$90. Average daily rates stood at US$154, 6% higher y-o-y.
Gross operating profit increased by 11.3% y-o-y to US$30.7 million as gross operating profit margin improved by 1.7 percentage points y-o-y to 35.6%. Net property income (NPI) rose by 4.3% y-o-y to US$22.0 million although NPI margin fell by 4.0 percentage points y-o-y to 25.6%. The higher gross operating profit and NPI were in tandem with the higher revenue.
“We are pleased to report that our portfolio continues to show improvements across all performance indicators in 1HFY2023 as travel demand remains strong in the US. Our well-diversified portfolio of upscale, select-service hotels has been able to benefit from the robust ADR and occupancy growth in US y-o-y, which outpaced the inflationary and interest rate increases to preserve profit margins, and flowing-through to distributable income for our stapled securityholders,” says Lee Jin Yong, CEO of the managers.
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He adds that the lodging sector, unlike other real estate classes like US offices, “continues to be resilient in the current period of volatility” and that the sector’s recovery, which began with the pent-up demand for leisure travel, has “continued with the recovery of business and group travel”.
“We are also seeing an uptick in extended-stay bookings as flexible work policies allow guests to combine business and leisure,” he adds.
“We believe that the outlook for the US lodging market remains optimistic, outweighing economic uncertainty and geopolitical risks. With US hotel RevPAR now above pre-Covid-19 levels, the continuing recovery of business and group travel will represent further upside,” he continues. “We are cautiously optimistic that the operating metrics for our portfolio will further strengthen, barring any unforeseen circumstances.”
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Unitholders will receive their distributions on Sept 27.
Units in ARA US Hospitality Trusts closed 1.5 US cents higher or 4.35% up at 36 US cents on Aug 7.
