‘Compelling yields’: DBS flags opportunity in hotel S-Reits on Mice, concert hub status 

[SINGAPORE] Hotel Singapore-listed real estate investment trusts (S-Reits) could benefit from the Republic’s drive to establish itself as a regional hub for meetings, incentives, conventions and exhibitions (Mice) and concerts, said DBS analysts.

This comes as Singapore eyes a new Mice hub downtown amid plans by the Singapore Tourism Board (STB) to leverage the country’s position as a regional Mice and concert hub, to more than double tourism receipts from 4 to 10 per cent by 2040. It is set to promote bleisure – a blend of business and leisure travel – to short-stay business travellers as this group made up around 37 per cent of the business-related travel market share in 2024.

“The promotion of bleisure is at the heart of STB’s recent strategies to cement Singapore’s positioning as a Mice centre,” DBS analysts Geraldine Wong and Derek Tan said, adding that STB has a scheme to merge Mice itineraries with complementary experiences in Singapore.

“STB aims to target this significant portion of travellers through this scheme to promote extended business stays,” they added.

HPL site a ‘strong venue contender’; new convention centre could drive city traffic

The analysts said the Orchard redevelopment site owned by Hotel Properties Ltd (HPL) is a “strong venue contender” for the new convention centre.

The site is occupied by Forum Mall, voco Orchard and HPL House, they noted.

“Older hotels near the HPL site… could join the bandwagon of transformation and rejuvenation under the Strategic Development Incentive scheme,” they wrote in a Tuesday (Apr 15) flash note. These include Orchard Hotel owned by CDL Hospitality Trusts (CDLHT) and Orchard Rendezvous Hotel owned by Far East Hospitality Trust (FEHT).

The downtown location of a new Mice convention centre would draw Mice traffic to the heart of the city, they said.

The area is expected to be redeveloped into a mixed-use project comprising hotel, retail, office and residential spaces, and a convention centre would complement this project, given its proximity to many hotel projects such as the Pan Pacific Orchard or The St Regis Singapore, the analysts said.

Hotel S-Reits’ ‘compelling’ yields

Trip.com logged a spike in hotel bookings across Lady Gaga’s concert week, during the third week of May, compared with the following week, the analysts noted.

“(This) is reminiscent of the Taylor Swift concerts last year, and we view it as a stabiliser for hotel occupancy in Q2 FY2025 amidst higher hotel supply,” they said.

They highlighted that S-Reits are trading at forward yields of 6.7 per cent. CapitaLand Ascott Trust, CDLHT and FEHT, offer “compelling yields” of around 7 per cent or higher, they added.

Hotel S-Reits’ first-quarter earnings may face a high base effect as Q1 FY2024 notched strong earnings, thanks to events such as the Taylor Swift concerts in March and rising numbers of Chinese tourists, they said.

These boosted hotel S-Reits’ revenue per available room (RevPar), which notched a 7 to 16 per cent year-on-year increase for the quarter.

While RevPar for Q1 FY2025 could decline off the back of the previous Q1’s stellar results, this could present “tactical entry opportunities back into the (hotel) sector.”

“Tactical entry into hotels to emerge with Q1 reporting, as results could phase off the high-base effect from Taylor Swift concerts in Q1 FY2024; the Lady Gaga concert in May is a stabiliser for hotel occupancy,” they wrote.