SINGAPORE (May 12): The manager of Far East Hospitality Trust (FEHT) has declared a distribution per stapled security (DPS) of 0.93 cents for the first quarter ended March 31, a 13.9% decrease from the 1.08 cents it reported in the same period a year ago on lower revenue.
Gross revenue was $24.8 million, 9.5% lower from the $27.4 million reported a year ago.
The trust’s manager attributes the lower revenue to soft corporate demand and intense market competition over the quarter, where its hotels continued to face pressure from companies exercising prudence in their business travel spending.
Nevertheless, it notes that demand for hotel accommodation from leisure travellers remained healthy although heightened competition as a result of new hotel supply has put pressure on rates, which declined by 4.7%.
The average occupancy of serviced residences declined to 71.2% in 1Q as well, as the trust manager notes that demand for serviced residences (SRs) were especially weak following a slowdown in corporate activities.
Project and training groups typically provide the based for its SR business, explains the manager, and as an increase in rates was not able to offset the fall in occupancy, revenue per available unit (RevPAU) fell 14% to $162.
Revenue from the retail and office spaces was relatively stable at $5.7 million
As at end-March, FEHT’s manager had refinanced $250 million of its term loans into four and seven-year loans ahead of their maturity, extending FEHT’s weighted average debt to maturity from 2.3 years to 3.6 years.
Looking ahead, demand from corporate travellers is expected to remain soft while hotel supply is expected to even out in 2018.
While the operating environment is expected to remain competitive in the near term, the REIT manager says it remains positive of the medium-term outlook given the Singapore’s government’s plans and marketing initiatives to attract more tourists, as well as investment to improve air connectivity and airport capacity.
Units of FEHT closed 0.8% higher at 62 cents on Thursday.
