Summary of Results

SINGAPORE, 23 JANUARY 2019

Frasers Hospitality Trust (“FHT”), a stapled group comprising Frasers Hospitality Real Estate Investment Trust (“FH-REIT”) and Frasers Hospitality Business Trust (“FH-BT”), today announced that for the first quarter ended 31 December 2019 (“1Q FY2020”), its GR and NPI grew 4.3% and 6.8% year-on-year (“yoy”) to S$42.4 million and S$33.2 million respectively. The improvements were due to better performance across the entire portfolio.

DI increased 7.4% yoy to S$25.5 million on the back of higher NPI while DPS rose 6.1% to 1.3301 cents.

Mr Colin Low, Chief Executive Officer of the Managers¹ said, “Following the growth in GR and NPI in the fourth quarter of last financial year, we are pleased to continue the positive momentum in this quarter with stronger growth, as well as a yoy increase in DPS.”

“While our better performance remained underpinned by our Singapore, UK and Germany portfolios, we are heartened to see our Australia portfolio reporting improved profit despite the challenging trading environment. Our Japan and Malaysia portfolios are also continuing their recovery from a low base.”

“We are starting to see our initiatives to drive revenue growth and operational efficiency bearing fruits, with all country portfolios achieving improved performance. Moving forward, we will continue to build on our progress and pursue strategic opportunities to grow our portfolio and create value for our stapled securityholders,” Mr Low added.

Review of 1Q FY2020 Portfolio Performance

In 1Q FY2020, the Australia portfolio’s gross operating revenue (“GOR”) and gross operating profit (“GOP”) increased 1.9% and 5.4% yoy respectively. GOR improved due to higher food and beverage (“F&B”) revenue while the steeper GOP increase was attributed to better cost control on operating expenses. Portfolio occupancy rose to 90.3%, from 88.7% a year ago, despite the weaker trading environment weighing on average daily rate (“ADR”). This mitigated the decline in revenue per available room (“RevPAR”) and enabled all properties to outperform the market.

The Singapore portfolio reported a 2.6% increase in GOR and a 2.0% increase in GOP yoy. The portfolio RevPAR improved 6.9% yoy on the back of higher ADR and occupancy. Both InterContinental Singapore and Fraser Suites Singapore saw healthy gains in RevPAR, driven by stronger leisure and corporate demand.

The UK portfolio continued to benefit from the weak pound. As a result, GOR and GOP rose yoy by 5.5% and 7.3% respectively. The portfolio RevPAR was 4.9% above the levels in 1Q FY2019 due to higher ADR and occupancy.

ANA Crowne Plaza Kobe’s GOR declined 3.3% yoy due mainly to lower room and F&B revenue. Notwithstanding the lower GOR, its GOP increased 13.1% or ¥65.9 million yoy. The hotel has been reviewing and re-grouping resources to streamline its operations. This continual effort in driving operational efficiency resulted in the positive GOP growth.

The Westin Kuala Lumpur continued to recover from a market-wide low base as GOR improved 7.5% yoy, driven mainly by higher room revenue. With its continual efforts to increase operational efficiency, the hotel has achieved reduction in operating costs and improved its profitability. Its recent sustainability drive including the installation of new energy-efficient heat pumps led to substantial savings in utilities costs. Coupled with the 11.5% increase in room revenue, its GOP rose 46.4% or RM2.5 million yoy.

Capital Management

As at 31 December 2019, FHT’s total borrowings were S$870.0 million, with gearing at 35.5% and the weighted average debt to maturity at 4.38 years. The proportion of fixed-rate borrowings to total borrowings was 73.4% and the effective cost of borrowing was 2.4% per annum. Interest cover remained healthy at 5.7 times and net asset value per Stapled Security was S$0.72.

Market Outlook

For the first 9 months of 2019, Tourism Australia reported a yoy increase of 2.5% in international arrivals to 5.3 million. While hotel visitor nights in Sydney and Melbourne have risen, the growth has been offset by new supply. In Sydney, approximately 2,300 rooms will be built in the CBD by 2021. This is likely to inhibit rates increase in the short term. However, given the city’s global reputation and traditionally strong holiday and corporate visitor demand, the market is expected to absorb the new supply in the medium term2. In Melbourne, approximately 4,200 rooms are currently under construction and will enter the market from 2020 to 2022. The significant room pipeline and its impact on rates and occupancy levels warrant some cause for concern for hoteliers².

For the period from January to November 2019, the Singapore Tourism Board reported a 2.9% yoy growth in international visitor arrivals to 17.4 million. The outlook for Singapore’s tourism sector continues to be positive as refreshed and new tourism offerings and the introduction of new flight services are expected to support hotel trading performance3. Additionally, Singapore will play host to biennial and sizeable inaugural MICE (meetings, incentives, conferences and exhibitions) events in 2020. Supply is also anticipated to remain limited for the next 3 years, growing at a compound annual growth rate of 0.7% from end-2019 to end-2022³.

According to VisitBritain, the UK welcomed 29.2 million overseas visitors in the first 9 months of 2019, up 2.0% yoy. Business visits were 1.0% below levels seen in 2018 but holiday visits were up 3.0% yoy. Looking ahead, the weak macroeconomic outlook and Brexit uncertainty may continue to impact business sentiment and corporate bookings. Hotel performance is expected to vary by geography and segment. However, London is anticipated to hold on to some growth, with the weak pound continuing to support inbound leisure demand and events such as the Farnborough International Airshow and UEFA Euro 2020 providing further boost⁴.

For the period from January to November 2019, Japan National Tourism Organization reported a 2.8% yoy increase in foreign visitors to 29.4 million. Moving forward, the Tokyo Olympics is expected to drive inbound visitors to reach the 2020 goal of 40.0 million. Hotel supply, on the other hand, is anticipated to soften, which should provide some breathing room for hoteliers⁵.

For the first 9 months of 2019, Tourism Malaysia reported a yoy growth of 3.7% in tourist arrivals to 20.1 million, with Singapore, Indonesia and China being the biggest contributors of tourist arrivals to Malaysia. For 2019, Tourism Malaysia aims to achieve tourist arrivals of 28.1 million. In Kuala Lumpur, hotel trading performance in the near term is expected to remain subdued due to the ongoing room supply glut. However, new supply may be partially absorbed by continued visitor growth⁶.

For the period from January to November 2019, the Federal Statistical Office of Germany recorded a 3.7% yoy increase in the number of overnight stays by domestic and foreign visitors⁷. In Dresden, the total number of domestic and foreign visitors for the first 9 months of 2019 rose 1.2% yoy⁸. Dresden, the capital city of the Free State of Saxony, continues to grow its pipeline of MICE events for 2020 including HAUS (construction and energy fair), Bauen Kaufen Wohnen (real estate and construction fair), 25th Congress of the International Commission for Optics, Hematology and Oncology Conference, and International Conference on Metal-Organic Frameworks and Open Framework Compounds.

¹ Frasers Hospitality Asset Management Pte. Ltd. (the manager of FH-REIT) and Frasers Hospitality Trust Management Pte. Ltd. (the trustee-manager of FH-BT) are collectively known as the “Managers”.

² Source: CBRE – MarketView Australia Hotels, Q3 2019 (30 October 2019)

³ Source: JLL – Asia Pacific Property Digest Q3 2019 (20 November 2019)

⁴ Source: PwC UK Hotels Forecast Update 2019-2020 (September 2019)

⁵ Source: Savills – Spotlight: Japan Hospitality (9 August 2019)

⁶ Source: JLL – Asia Pacific Property Digest, Q2 2019 (19 August 2019)

⁷ Source: www.destatis.de 

⁸ Source: www.dresden.de