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Here Are 5 Important Factors Singapore Investors Need To Consider Before Investing In Hospitality REITs

Mega events like the Trump-Kim summit in Singapore are great for the hospitality industry – and for owners of hospitality REITs.

In many other countries, Airbnb has been the biggest disruption to the hospitality industry in recent years, providing travellers with a home away from home and sometimes a cheaper alternative to typical hotel rooms.

However, in countries such as Singapore and Japan, strict government regulations on housing mean that hotels are still the go-to accommodation for inbound travellers. For Singapore, private homes have a minimum rental period of 3 consecutive months. For HDBs, the minimum rental period is even longer at 6 months. Other regulations such as a maximum number of tenants and occupants allowed in each flat also have to be adhered to.

Read Also: Airbnb Or Hotel: Which Should You Choose For Your Next Holiday?

Hospitality REITs in Singapore

There are five hospitality REITs in Singapore.

Ascendas Hospitality Trust

  • Owns 14 properties in 4 countries
  • Property in Singapore: Park Hotel Clarke Quay

CDL Hospitality Trust

  • Owns 19 properties in 8 countries
  • Properties in Singapore include: Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, Studio M Hotel and Novotel Clarke Quay Hotel

Far East Hospitality Trust

  • Owns 13 properties in Singapore
  • Properties in Singapore include: The Elizabeth Hotel, Village Hotel Bugis, Oasia Hotel Novena, Orchard Rendezvous Hotel and The Quincy Hotel

Frasers Hospitality Trust

  • Owns 15 properties in 9 countries
  • Properties in Singapore include: InterContinental Singapore and Fraser Suites Singapore

OUE Hospitality Trust

  • Owns 3 properties in Singapore
  • Properties in Singapore include: Crowne Plaza Changi Airport Hotel and Mandarin Orchard Singapore

Read Also: 7 Types of REITS In Singapore, And The Reasons Why People Invest In Them

Understanding Revenue Per Available Room (RevPAR)

RevPAR is the common metric used in the hospitality industry which measures revenue per available room. This represents how much the hotel is charging for every room that is available to be sold.

RevPAR = Hotel’s Average Daily Room Rate  X  Occupancy Rate

In Singapore, based on the Singapore Tourism Board Hotel Statistics 2018, RevPAR increased 2.4% year-on-year in 2018, with both the Standard Average Occupancy Rate and the Standard Average Room Rate both increasing by 1.2% and 0.9% respectively. This is an improvement compared to the drop in RevPAR by 1.5% in 2017.

5 Factors That Affect The RevPAR

Factors that affect the RevPAR are components that affect either the average daily rate or the occupancy rate. The average daily rate is dependent on the supply and demand for the hotel rooms. Since hotels have a fixed supply of hotel rooms, the demand for the rooms is the major determinant behind the rate charged by the hotel.

Here are 5 factors that play a part bringing tourists into the country, affecting the demand for rooms:

#1 Tourism Trends

The Singapore Tourism Board (STB) has shared that there were 18.5 million visitor arrivals in 2018, a 6.2% increase from 2017.  More visitor arrivals in Singapore means more tourists to fill hotel rooms.

Travelling is now more accessible, with online aggregators helping consumers find better prices and budget airlines offering more affordable tickets, making it possible for those with tighter budgets to travel as well. There are also more people becoming digital nomads, working from different places in the world. With more people travelling, the size of the pie in tourism is continuously increasing which bodes well for hotels.

Read Also: Complete Guide To Buying Travel Insurance In Singapore

#2 Hosting Key Global Events

When key global events take place in Singapore, hotels in Singapore stand to benefit. Events such as the 2018 North Korea–United States Singapore Summit (also known as the Trump-Kim Summit) as well as the ASEAN Summit in Singapore are good examples.

Besides providing accommodation for these global figures, hotels also have to cater for other important political figures, their secretaries, pilots and security teams that have come along as part of the entourage.

Global events like these also bring in media from countries around the world that are hoping to cover this key event from the ground. This increases the occupancy rate of all the hotels as other hotels see their rooms being filled up when the top hotels are full.

#3 Major Singapore Events

Events such as Formula 1 (F1) bring in a lot of revenue to hotels. An annual event in Singapore since 2008, F1 brings tourists to Singapore during that particular weekend and the days before and after it.

This is why prices of hotels during this period are always jacked up much earlier, especially when the dates of these events are determined months in advance. For example, rooms in Ritz-Carlton Singapore for the F1 period (20-22 September) are already sold out.

#4 Singapore As A Global Destination

Singapore has made its mark on the global map for both businesses and tourism.

Many companies are choosing to set up offices in Singapore. Some companies are setting up global offices in Singapore, while others are using Singapore as their base for their Southeast Asia operations. For example, technology giant Dyson has chosen to relocate their head office to Singapore while gaming company Razer is setting up their Southeast Asia headquarters in Singapore. This brings more business to hotels when there are more travellers coming to Singapore for business travel and meetings, incentive travel, conventions and events.

Singapore has also become the destination of choice for many tourists. Movies such as Crazy Rich Asians in 2018 have played a part in sharing the beauty of Singapore with the world, featuring Singapore’s modern landscape and iconic attractions.

#5 Tourist Attractions

Tourist attractions help to attract visitors to Singapore. Singapore currently has 2 integrated resorts, Marina Bay Sands and Resorts World Sentosa. Besides these integrated resorts, Singapore’s modern attractions such as Gardens By The Bay, Marina Bay Sands and the Singapore Flyer are popular places of interest for tourists. Heritage sites are also key attractions that need to be maintained for tourists to visit.

New tourists attractions will help to get tourists to come back to Singapore. Currently, Singapore has plans to revamp the Orchard Road shopping belt as well as rejuvenate Sentosa Island’s existing infrastructure and facilities.

These 5 factors play a part in bringing visitors to Singapore, which in turn impacts the demand for hotel rooms and the RevPAR. When looking at these hospitality REITS, it is also important to take note of these factors in the countries where they have other properties.

Read Also: [2018 Edition] Complete Guide To Start Your REITs Investing Journey In Singapore

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