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HOSPITALITY REITS AND HOTEL BUSINESSES, WILL IT RECOVER?

There may be positive news on the vaccine front with developments in Pfizer.

That means hope that hospitality sector can recover!

Moreover, SG-HK travel bubble will start on 22nov2020 which is more good news.

Read "Everything you need to know about the travel bubble between SG and HK"

If the travel bubble is successful, do expect more partnerships to emerge and a resurgence of tourist to Singapore!

Makes sense to own hotels?

Hotels benefit from tourism of course.

A simple way to own hotels is via a Hospitality REIT 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.

Do note that hotel room rentals are usually a day-day business.

Not just covid-19 that can impact hospitality, economic crisis will also.

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.

Quick overview of four HOSPITALITY REITS

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.


CDL Hospitality Trust on the other hand owns 7 hotels in Singapore.

Some are familiar such as Novotel Singapore Clark Quay, Grand Copthorne Waterfront hotel, M Hotel.

There are hotels owned in Japan and europe to name a few

Far East hospitality Trust owns 9 hotels (including the Village brand) and 4 service apartments.

All properties are Singapore based.

Will Covid-19 spike up again in future?

Judging from what happened at start of 2020, covid-19 affected global hotel businesses and Hospitality REITS with a global portfolio can't be sheltered in such a situation.

There is every risk that covid-19 rears another ugly head again especially from spikes again now in Europe.

Even Australia had to do a second lock-downs some months back.

The risk is real and this video sharing below is an analysis on certain surrounding the travel industry specifically.

Conclusion

There are many ways to be invested into the hospitality.

End of 2020, all Singaporeans will get a $100 staycation voucher and this is revenue to this sector!

However, as risk is high within this sector, I do advocate to be cautious and avoid over concentrating investments into it.

Investing into SATS or SIA has similar risk to this sector as they are also related to travel.


If you are keen on hospitality sector, amongst the many hotel owners in Singapore, in particular, I like the business of Genting Singapore.

RWS which includes the theme park, casino and hotels has competitive advantages as a business and if you'd like an analysis of it, check it out in the tutorial below.

Josh Tan Jian Liang (CHFC) Principal Author

REVIEWS: https://theastuteparent.com/josh-tan Practising financial planner with Promiseland Independent Pte Ltd. EXPERIENCE: More than 13years. Josh Tan is a young parent, speaker, author and founder of TheAstuteParent.

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