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4Q 2016 vs 4Q 2015
Gross revenue of S$27.5 million in 4Q 2016 was a decrease of 4.6% compared to S$28.9 million in 4Q 2015, due to reduced revenue contribution from the hotels and serviced residences ("SRs") and marginally softer performance of the retail and office spaces.
Revenue contribution from the hotels in 4Q was lower year-on-year due mainly to the continued softness in corporate travel demand amidst the global economic uncertainties. The increase in the hotel supply further heightened the competition, which led to a compression in room rates. Due to the confluence of factors, the hotel portfolio's average daily rate ("ADR") declined by 8.6% year-on-year, while average occupancy increased 1.2pp. Consequently, the hotel portfolio's revenue per available room ("RevPAR") was a decrease of 7.3% year-on-year to S$136.
For the SRs, although Regency House enjoyed an increase in revenue from the corporate segment after its renovation, demand from the corporate segment remained soft for the SR portfolio as a whole. The ADR of the SR portfolio increased 1.2% year-on-year to S$220 in 4Q 2016 while the average occupancy was 2.9pp lower year-on-year. As a result, the revenue per available unit ("RevPAU") of the SR portfolio declined 2.3% year-on-year to S$176 in 4Q 2016.
A snapshot of the hotel and SR performance in 4Q 2016 is set out below.
Revenue from the retail and office spaces at S$5.7 million in 4Q 2016 was 0.8% lower year-on-year due to lower occupancy and a marginal increase in rental rates.
The net property income for 4Q2016 was S$24.9 million, a decrease of 5.4% year-on-year.
Finance costs of S$4.8 million in 4Q 2016 was 8.4% lower year-on-year as the short term interest rates had declined in 4Q 2016. 71% of Far East H-REIT's debt portfolio was secured at fixed interest rates with the remaining 29% on floating interest rates.
The income available for distribution in 4Q 2016 was S$20.2 million, or 2.3% lower year-on-year. The distribution per stapled security for 4Q 2016 was 1.12 cents or 4.3% lower year-on-year.
FY 2016 vs FY 2015
Gross revenue for the full year of 2016 was S$109.1 million, a decrease of 4.9% year-on-year due to the reduced revenue contribution from the hotels and serviced residences and the commercial spaces.
The weak and uncertain economic climate and the new supply of hotel rooms impacted the operating performance of the hotel portfolio. This was despite the uplift from biennial events such as the Singapore Airshow and Food & Hotel Asia and a stronger events calendar during the year. RevPAR for the hotel portfolio decreased 5.3% year-on-year to S$139.
Regency House delivered improved operating performance after the completion of the asset enhancement initiative. However, demand for SR accommodation in general remained soft, with a drop in project groups and lower corporate travel budgets. Consequently, RevPAU declined by 5.8% year-on-year to S$189.
A snapshot of the Hotels and SR performance in FY 2016 is set out below.
Revenue from the retail and office spaces declined by 2.5% to S$23.1 million due to a decrease in the average occupancy, although the portfolio's enjoyed a marginal growth in rental rate during the year.
The net property income was S$98.3 million or 5.1% lower year-on-year due to the reduced gross revenue recorded during the reporting period. Property expenses were 2.4% lower year-on-year due to a large part to the reduced property tax expense.
The income available for distribution was S$78.1 million, or 5.0% lower year-on-year. The distribution per stapled security for FY 2016 was 4.33 cents or 5.9% lower year-on-year.
The Ministry of Trade and Industry expects the Singapore economy to grow at a modest pace of 1% to 3% in 2017.
Growth in international visitor arrivals into Singapore slowed in the second half of 2016 despite a strong increase in the first half. Visitor days showed a similar decline in the latter part of the year. Growth in tourism is expected to remain subdued in 2017. The Singapore Tourism Board forecasts international visitor arrivals to be in the range of 16.4-16.7 million (0 to +2% year-on-year).
Competition in the hospitality sector remains keen, as demand from the corporate segment continues to be soft amidst the uncertain economy. The addition of 3,200 new hotel rooms in 2017 will put pressure on room rates. The REIT Manager will continue to implement measures to improve the competitiveness of its portfolio.
The REIT Manager plans to refurbish the guest rooms at Orchard Parade Hotel this year, as part of the property's third phase of renovation. Orchard Parade Hotel's reception, lobby, lobby bar, swimming pool, pool deck, gym and function rooms were renovated in 2016.