What are Hospitality REITS ?
Want to own hotels? It's much easier to own a Hospitality REITS which owns hotels and service apartments.
If you buy such a REIT, you ultimately benefit from room rentals. Kind of like the owner of the hotel? =)
Let me give you a quick overview.
Frasers Hospitality and Ascott Residences owns service apartments in Singapore and Internationally.
Service apartments usually rent 1month-6months typically and suit high end travellers because of the service and home-feel.
Ascendas Hospitality Trust (A-HTrust) focuses on hotels and only owns 1 hotel in SG which is the Park Hotel at Clark Quay. It is very diversified
CDL Hospitality Trust on the other hand has more concentration in Singapore.
It owns 7 hotels in Singapore.
Some are familiar such as Novotel Singapore Clark Quay, Grand Copthorne Waterfront hotel, M Hotel.
Opportunity in Hospitality REITS ?
Do you know that Hospitality REITS gives you about the highest dividend yields at about 6.71%?
It's more than other REITS invested into Offices and Industrial Parks etc.
It's share price has lagged behind these sectors from last years market correction.
The high dividend yield is not everything. Check the next section on risks.
But the Price/Book ratio is possibly attractive. At 0.90, it means you are buying at a price that is cheaper than what is officially recorded as the asset worth.
Risk in Hospitality REITS ?
Hotel room rentals are usually a day-day business.
I invested in 2008 in CDL hospitality Trust and it was affected by credit crisis and a freeze in corporate travels. The share price plunged.
Hence, risk is always in macro-economical events.
SARS was another period which affected global hotels. Hospitality REITS with a global portfolio can't be sheltered in such a situation.
IFAST research has a justification of its great entry value now.
You may check this report from IFAST Hospitality REITs Are The Next Big Investment Opportunity for more information
Last updated on February 27th, 2019 at 10:02 am