Here's why CDL Hospitality Trust is not threatened by home-sharing platforms

Home-sharing platforms only comprise 3-4% of hotel room nights, an analyst said.

CDL Hospitality Trusts (CDLHT) is expected to fend off minimal competition from home-sharing platforms in Singapore, UOB Kay Hian said. Analyst Peihao Loke said in a report that home-sharing platforms make up only 3-4% of the total hotel room nights in Singapore.

Loke added, “In management's view, home-sharing platforms are less feasible in the Singapore context, pointing to the high private home prices as the main deterrent as landlords may face difficulties generating sufficient rental yields from such short-stays (vs longer term rentals).”

Moreover, neighbours living in the same development may also resist sharing amenities with short-staying tenants.

“We believe Singapore's tough home rental rules are not likely to give way, even after several URA public consultations,” the analyst commented. “Even if homesharing platforms gain traction, we believe traditional hotels still maintain their relevance in catering to travellers who prefer the convenience and safety.”

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Consequently, the average daily rates (ADR) of CDLHT's Singapore hotels could pick-up despite a slowdown in new room supply and higher occupancies. “The last few years have seen many new hotel openings, which has kept a lid on the pricing power of CDLHT's Singapore hotel rooms. With new room supply tapering to 1.3% CAGR in 2017-2020, we see a return of pricing power to CDLHT's Singapore hotels,” Loke said.

Moreover, there was a pickup in occupancies on the back of strong corporate and leisure demand. According to the report, room rates for the more lucrative corporate business can see a differential of 20-25% (up to 30% in good years) against the leisure segment.

CDLHT is also bullish towards visitor arrivals from China and India, which grew 7.1% and 22.4% respectively. The company attributed the growth to the Singapore Tourism Board’s (STB) marketing efforts.

“Management expects the strong arrivals to be indicative of a boon to its leisure business as growth from Chinese and Indian outbound travellers comprises mainly tour-group types (while its Singapore properties are geared towards the corporate crowd),” Loke said. “Through their internal tracking (ie proxy via booking channels), management reckons that the corporate crowd accounts for about 50% of overall demand, and leisure travellers make up the remainder.”

Finally, CDLHT is on the lookout for overseas acquisitions, whilst remaining Singapore-centric, as local assets are more tightly-held and hard to come by. UOBKH expects assets in Singapore will not go below 50%.

Meanwhile, CDLHT sounded keen on targets in Europe to take advantage of the current low rates in Europe, Loke said. “It has also been looking at European cities with interesting growth/demand drivers, such as Budapest and Barcelona, and secondary UK cities (Cambridge and Manchester).”