$CDL HTrust (J85.SG)$$CityDev (C09.SG)$ 1. First Quarter End...

CDL Hospitality Trusts (“CDLHT”) experienced RevPAR growth across all geographical markets, largely driven through increased occupancies. Accordingly, gross revenue and net property income (“NPI”) in 1Q 2024 increased by 7.3% and 6.8% year-on-year (“yoy”) to S$65.3 million and S$34.9 million respectively.

A volume strategy was adopted for the seasonally weaker quarter of the year for hotels in Singapore. For 1Q 2024, RevPAR for the Singapore Hotels increased by 16.6% yoy, driven mainly by a 14.2 percentage point increase in occupancy. Consequently, NPI for the Singapore Hotels improved by 12.8% or S$2.3 million yoy for 1Q 2024. 1Q 2024 saw the return of significant demand drivers from a robust concert calendar as well as a 30-day mutual visa exemption agreement between China and Singapore that commenced from 9 February 2024. The earlier Easter commencement this year led to a tapering of demand during the last week of the quarter. Overall, during the first quarter, Singapore recorded 4.4 million visitor arrivals, an increase of 49.6% yoy. Visitor days rebounded to 94.7% of 1Q 2019’s level1.

The earlier commencement of Easter in March instead of April also had the effect of compromising the performance of the overseas properties.

Grand Millennium Auckland posted a marginal RevPAR increase of 0.8% yoy in 1Q 2024, with food and beverage revenues being affected by the ballroom closure for refurbishments in 1Q 2024. Increased operating expenses, compounded by a weaker NZD (against SGD), led to a decline of 17.3% or S$0.5 million yoy in NPI for 1Q 2024.

The Perth Hotels registered 6.4% yoy increase in RevPAR in 1Q 2024. Increased operating costs as well as the absence of a large project group with associated F&B spend together with the depreciation of AUD against SGD, led to lower NPI by 9.5% or S$0.1 million yoy for 1Q 2024.

Japan continued to experience robust inbound demand and the Japan Hotels posted a RevPAR improvement of 32.6% yoy. The Japan Hotels recorded their highest 1Q ADR and RevPAR of ¥11,646 and ¥10,014 respectively since acquisition in 2014. Correspondingly, despite the depreciation of JPY against SGD, NPI for the Japan Hotels improved 46.2% or S$0.3 million yoy in 1Q 2024.

In the Maldives, a 15.3% growth in visitor arrivals2 supported a 11.8% yoy improvement in RevPAR in 1Q 2024. At Raffles Maldives Meradhoo, higher operating costs, particularly in payroll as well as seaplane operations introduced in October 2023, reduced the profitability of the resort. Notwithstanding this, NPI for the Maldives Resorts posted an increase of 1.8% or S$0.1 million yoy for 1Q 2024.

Hilton Cambridge City Centre and The Lowry Hotel registered a combined RevPAR growth of 0.5% in 1Q 2024. The positive change in RevPAR was attributed to Hilton Cambridge City Centre, which grew by 5.9% yoy due to improved leisure and corporate demand, while The Lowry Hotel recorded a RevPAR decline of 5.0% yoy due to the decrease in number of football games following the re-introduction of winter break in January 2024. Increased operating costs particularly in payroll and utilities led to lower profit margins for both hotels. NPI contribution from voco Manchester (formerly known as Hotel Brooklyn, operating on an inflationary fixed-lease rental model) increased by S$0.1 million over 1Q 2023. Overall, the UK Hotels experienced a yoy NPI decline of 5.0% or S$0.1 million in 1Q 2024.

In Germany, Pullman Hotel Munich reported RevPAR growth of 8.6% yoy for 1Q 2024. The improved operating performance did not translate to higher NPI as only accounting base rent on a straight-line basis was recognised, similar to 1Q 2023. Coupled with higher repair and maintenance and utilities expenses from the commercial component, the property recorded an NPI decline of 5.8% or S$0.1 million yoy for the reporting quarter.

In Italy, Hotel Cerretani Firenze recorded a 27.5% yoy RevPAR improvement for 1Q 2024, mainly attributed to strong average rate growth. Robust demand from its traditional source markets led to a yoy increase in operating performance in 1Q 2024. The hotel also recorded its highest 1Q average rate and RevPAR of €235 and €144 respectively. The hotel posted NPI growth of 30.4% or S$0.1 million yoy in 1Q 2024 due to the recognition of higher variable rent of S$0.2 million (€0.1 million) above the accounting straight-line base rent.

Claymore Connect, the only retail mall in CDLHT’s portfolio, recorded an 11.9% or S$0.2 million yoy improvement in NPI primarily due to higher occupancy (committed occupancy as at 31 March 2024 was 98.3% as compared to 91.0% as at 31 March 2023) and compensation received from the early termination of a lease. Both average unit rate and variable rent collected improved due to rent escalation and improved gross turnover rental from tenants.

In Singapore, CDLHT’s core market, the outlook for inbound visitor arrivals remains promising. In February 2024, inbound Chinese visitor arrivals to Singapore surged to 96.3% of February 2019 levels. This coincided with the 30-day visa-waiver arrangement between Singapore and China, which was implemented early-February 2024 just ahead of the Chinese New Year. In the month of March 2024, Chinese visitor arrivals reached 83% of pre- pandemic levels. Overall, in the first quarter of 2024, China has regained its position as the top source market to Singapore comprising of 18% of total visitor arrivals3. This recovery trajectory bodes well for the whole industry as Chinese arrivals help to create demand compression in the market, which benefits all hotels.

There are multiple positive market developments announced in 2024 aimed at enhancing Singapore’s appeal as a tourism destination. Singapore’s tourism industry will receive a S$300 million boost from the Tourism Development Fund4 and a S$165 million Major Sports Event Fund5. There are also plans for a new arena to replace the Singapore Indoor Stadium to attract highly sought-after international events. These initiatives will support ongoing and future enhancements to Singapore’s infrastructure, tourism and lifestyle offerings, further solidifying its allure as a global travel destination.

The performance of CDLHT’s overseas portfolio is expected to remain bolstered by the broad recovery in international tourism. While lagging behind conspicuously, the eventual widespread return of the Chinese visitors will be a key determinant of the recovery trajectory. In New Zealand and Western Australia, the respective tourism authorities continue to drive initiatives to boost the sector. The positive trends for Japan’s tourism sector are likely to continue in 2024, supported by the country’s strong appeal as a travel destination and the weaker currency. In the Maldives, the government has a target to attract two million tourists in 20246, and the scheduled inauguration of a new terminal at Velana International Airport by year-end is poised to enhance the nation’s tourism capacity7. In the UK, the tourism outlook remains positive with inbound visits for 2024 forecasted at 39.5 million, representing 97% of the 2019 level and 5% higher than in 20238. In Europe, hotel demand in Munich will be supported by a general recovery in travel and events, while Florence is expected to maintain high demand levels.

International tourism recovery is well on its path towards pre-Covid levels despite economic challenges. Geopolitical uncertainties continue to pose headwinds to global tourism. Ongoing conflicts such as the Russia- Ukraine and Israel-Hamas wars could impact travel patterns.

The Castings, CDLHT’s Build-to-Rent project in Manchester, UK, is expected to open in mid-2024 which coincides with the active leasing period in the Manchester rental market. Three showflat apartments were made available in March 2024 to facilitate tenant viewings and pre-leasing activities. Residential rental demand remain strong in Manchester.

The US Federal Reserve has reaffirmed that the timing and number of the interest rate cuts will be dependent on confidence that inflation is on a sustainable course back to the 2% target9 and does not rule out delaying rate cuts if this target is not achieved. Amid the current interest rate environment, CDLHT remains vigilant and will adopt appropriate hedging strategies with respect to its capital management.

The Managers continue to implement asset enhancement initiatives to augment its hotels’ competitive standing in the respective markets. Plans are underway for bedroom enhancement works for Grand Millennium Auckland and Ibis Perth. More public area works including meeting rooms will be carried out for Grand Millennium Auckland in the coming months.

On the ESG front, CDLHT has begun preparations for reporting in line with ISSB standards for financial year 2025. The group is progressing decarbonisation efforts through ongoing installations of solar energy systems where viable as well as leveraging smart room technology to reduce on site consumption, among other initiatives.