ARA US Hospitality Trust XZL has reported an improvement across the board for the 1QFY2023 ended March 31 as the US lodging market continued its recovery during the quarter.
For the three-month period, the REIT reported revenue of US$36.2 million ($48.1 million), up 10.2% y-o-y driven by the robust growth in occupancy rates and average daily rate (ADR). Its gross operating profit and net property income (NPI) also increased by 20.1% and 19.0% y-o-y to US$10.5 million and US$6.4 million respectively.
Gross operating profit margin increased by 2.4 percentage points to 29.0% while NPI margin increased by 1.3 percentage points to 17.6%.
Revenue per available room (RevPAR) rose by 24.4% y-o-y to US$80, above pre-Covid-19 levels thanks to the 10.0% y-o-y growth in the REIT’s ADR of US$130.
In its statement, the REIT says the outlook for the rest of 2023 remains positive with demand for lodging remaining “resilient” despite the increasingly bearish economic sentiment amid inflationary concerns and risks of an economic slowdown.
The REIT adds that the growing trend of hybrid work practices contributed to an expansion of demand where guests combine travel days beyond weekdays to combine business and leisure travel. Meanwhile, large-scale conventions, which take longer lead times to plan, have yet to regain their past momentum and represent a potential pool of additional hotel guests.
As at March 31, occupancy rates stood at 61.7%, 7.1 percentage points higher y-o-y, although this still remains 4% below its pre-Covid-19 levels.
As at the same period, the REIT's net asset value (NAV) per stapled security fell by 3 cents q-o-q to 77 US cents. Its aggregate leverage ratio stood at 40.9% with an interest coverage ratio of 2.6x.
For the FY2023, the REIT is projecting its full-year occupancy to come in at 64%. Its full-year ADR is projected to be at US$152, up 2% y-o-y. RevPAR for the year is expected to be at US$97, 5% higher y-o-y.
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In the US, leisure and business travel spending is expected to reach 105% and 91% of pre-Covid-19 levels by 2024, says the REIT in its business update.
“We are pleased to report that our portfolio continued to show improvements across all performance indicators in 1QFY2023 as travel demand remains strong in the US. Our well-diversified portfolio of upscale, select-service hotels have been able to benefit from the robust ADR and occupancy growth in US year-on-year, which outpaced the inflationary expense increases to preserve profit margins for our stapled securityholders,” says Lee Jin Yong, CEO of the managers.
“The lodging sector, emerging from Covid-19, continues to be resilient in the current period of volatility. The sector's recovery, which began with leisure guests hungry to travel after Covid lockdowns, has continued with business and group travellers. We are also seeing guests booking more extended stays as virtual working allows them to combine business and leisure,” he adds.
“We are cautiously optimistic that the operating metrics for our portfolio will further strengthen, barring any unforeseen circumstances,” he continues.
Units in ARA US Hospitality Trusts closed 0.5 US cents lower or 1.41% down at 35 US cents.
