Chart of the Day: Hospitality REITs under threat from massive hotel room glut

Almost 9,000 rooms will flood the market.

Hospitality REITs are under threat from the massive supply of hotel rooms that are set to flood the market until 2017, a report by DBS said.

This chart shows that almost 9,000 rooms will come onstream until 2017, on top of the over 55,000 rooms that entered the market in 2014.

“The Singapore hospitality market faces the challenge of navigating a 5-6% increase in hotel room supply but at the same time a modest recovery in tourist arrivals (we estimate a 3% bounce this year). In such an environment, to maintain occupancy, we understand the newer hotels have resorted to cutting average daily rates (ADR),” DBS said.

“Any significant increase in the number of hotel rooms without commensurate growth in demand, could limit income growth for REITs, as hotels may have to lower their room rates in order to remain competitive and maintain high occupancies,” the report added.