- Singapore expects visitor arrivals in 2025 to reach 89-97% of pre-Covid 2019 levels, driven by new attractions and major events.
- Hotel industry revenue per available room (RevPAR) is projected to grow 2-3% in 2025, boosting hotel REIT revenues.
- We are overweight on our Hotel REITs coverage, expecting an attractive dividend yield of 6.9% to 7% in 2025.
Singapore’s tourism sector is on the rise, and this is expected to positively impact Hospitality Real Estate Investment Trusts (REITs) in 2025. According to the Singapore Tourism Board (STB), international visitor arrivals to Singapore reached 16.5 million in 2024, a 21% increase from the previous year. The top three source markets were China (18.7%), Indonesia (15%), and India (7.3%).
Looking ahead, STB projects that 2025 will see between 17 million and 18.5 million visitors, bringing arrivals to 89-97% of pre-Covid levels. Tourism receipts are expected to reach S$29 billion to S$30.5 billion, surpassing 2019 levels.
Factors Driving Tourism Growth
The growth in 2024 was fueled by high-profile events, increased air connectivity, and a 30-day mutual visa exemption with China. In 2025, new attractions will continue to drive growth, such as Minion Land at Universal Studios, Mandai Rainforest Wild Park, Disney Cruise Line’s Adventure (homeporting in Singapore), and an expanded S.E.A. Aquarium. Other major events like the Anime Festival Asia (June 2025), Usana Regional Convention (February 2025), and World Aquatics Championships (July 2025) will also attract more visitors.
Hotel Industry Outlook
In 2024, STB reported a 3% year-on-year (YoY) increase in revenue per available room (RevPAR) to S$226, driven by growth in luxury and upscale segments. This was supported by a 1.4%-point increase in average room rate and an 81.8% occupancy rate (vs. 80.5% in 2023). For 2025, with more visitors and the addition of about 1,494 hotel keys, we project a 2-3% YoY increase in RevPAR, assuming a similar average stay length of 3.56 days.
Attractive Investment Opportunity in Hospitality REITs
Our coverage of Hospitality REITs indicates a strong investment opportunity, with forecasted dividend yields of 6.9% to 7% in 2025, which is above the broader REIT sector’s yield of 6.3%.
Source: CGSI Research
Top Picks in Singapore Hospitality REITs
Based on our analysis, here are three top picks in the hospitality REIT sector:
1. CapitaLand Ascott Trust (CLAS) (SGX:HMN)
- FY2024 Performance: CLAS reported a 9% YoY increase in revenue to S$809.5 million and a 10% YoY rise in net property income (NPI) to S$370.9 million, driven by growth from existing properties and new acquisitions.
- Gearing Status: Stable gearing at 38.3%, with an average cost of debt of 3%.
- RevPAU Outlook: Potential growth in revenue per available unit (RevPAU) in FY2025, with strong demand from Japan and upcoming key events in Australia like the Australian Open and F1 Grand Prix.
- Catalysts: Two properties—The Cavendish London and Sydney Central Hotel—are set to complete their asset enhancement initiatives (AEIs) by 2026. The redevelopment of Somerset Liang Court is also expected to complete by 2026. The acquisition of lyf Funan Singapore was completed in December 2024, expected to contribute in FY2025.
[Click for our latest research report on CLAS]
2. CDL Hospitality Trusts (CDLHT) (SGX:J85)
- FY2024 Performance: CDLHT’s revenue rose by 1% YoY to S$260.3 million, driven by higher revenue from hotels in Perth, Japan, Germany and the UK. However, NPI fell by 2.2% YoY to S$135.2 million, due to the normalisation of demand in some markets post-pandemic.
- Gearing Status: CDLHT’s gearing increased to 40.7% post the acquisition of properties in the UK. It has a debt headroom of S$610.1 million at the 50% gearing limit.
- RevPAR Outlook: We lift our revenue projections for Germany and Italy hotels by 9-16% for FY2025, driven by major events like the UEFA Champions League Final in Munich and The Jubilee (Holy Year) in Italy.
- Catalysts: Recent UK acquisitions, including Hotel Indigo Exeter, expected to yield 6% in FY2025, and the purpose-built student accommodation asset Benson Yard, with an initial property yield of 5.6%.
[Click for our latest research report on CDLHT]
3. Far East Hospitality Trust (FEHT) (SGX:Q5T)
- FY2024 Performance: FEHT’s revenue rose 1.8% YoY to S$108.7 million, supported by retail and office spaces, as well as higher contributions from hotel and serviced residence master leases. NPI grew by 0.6% YoY to S$99.3 million.
- Gearing Status: Stable gearing at 30.8%, with an average cost of debt of 4.1%.
- RevPAR Outlook: FEHT has seen a recovery, especially from hotels that exited government contracts by the end of 2023. We expect continued hotel growth and stable serviced residence performance in FY2025, supported by positive pricing trends in the market.
- Catalysts: FEHT holds a right-of-first-refusal on several Singapore assets, including The Clan, Sentosa hotels and Oasia Residences. The REIT is also considering international acquisitions, including in Japan, to diversify its portfolio.
[Click for our latest research report on FEHT]
Potential Risks to Watch
While the outlook for hospitality REITs is positive, investors should be mindful of the following risks:
- Global Travel Demand: A potential slowdown in global travel due to economic challenges could impact hospitality REIT growth. However, the return of corporate and group travel may help boost RevPAR performance.
- Interest Rates: An elevated interest rate environment may pressure REITs with high debt levels, affecting future acquisitions and profitability, particularly for those with floating-rate debt.
Year-to-date, hospitality REITs have underperformed relative to the broader REIT sector, driven by lower expectations for RevPAR growth in Singapore. This underperformance stems from the normalisation of travel trends after a strong 1Q 2024, which was boosted by high-profile events like Taylor Swift’s concerts, setting a challenging comparison base.
Disclaimer: Hailey Chung, Manager of Content at ProsperUs, does not own shares in the companies mentioned.
Reference
CGSI Note | Singapore Hospitality REITs | Feb 4, 2025
