ARA US Hospitality Trust (ARA H-Trust) posted a net property income (NPI) of US$6.4 million for its first quarter ended Mar 31, 2024, marking a 1.1 per cent rise from the corresponding year-earlier period.
Gross revenue was a marginal 0.2 per cent higher at US$36.2 million for the fiscal quarter, while gross operating profit grew 2.1 per cent to US$10.7 million, from US$10.5 million.
The hospitality trust’s portfolio was affected by disruptions to demand from weather and the earlier Easter holiday, with occupancy falling 2.2 percentage points to 59.5 per cent, its managers said in a business update on Friday (May 3).
The strong US dollar stimulated increased outbound international travel, softening domestic leisure demand, they added.
Furthermore, the occupancy decline was exacerbated by asset enhancement improvement (AEI) projects at four properties – Hyatt Place Mystic, Hyatt Place Sacramento Rancho Cordova, Hyatt Place Omaha and Hyatt Place Secaucus – during the quarter.
ARA H-Trust is a stapled group comprising ARA US Hospitality Property Trust, a real estate investment trust, and ARA US Hospitality Management Trust, a business trust.
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“We have managed to deliver a stable operational performance across all indicators in Q1 2024, demonstrating the strength of our assets amid the challenging environment and demand displacement from the AEI projects at some of our top hotels,” said Lee Jin Yong, chief executive officer of the managers.
ARA H-Trust’s slightly stronger performance this quarter came against a backdrop of the US lodging market’s continued recovery. The US economy remained resilient, despite persistently high interest rates and elevated inflation.
The managers believe that the outlook for the rest of the year remains positive, as consumer spending – supported by a strong job market – is the primary driver for economic growth. This is even as it slows down, reflecting normalising performance.
US hotel occupancy is forecast to continue growing, driven by continued recovery in business and group travel, it noted.
“Upon completion of the AEI projects, those hotels disrupted in Q1 2024 will be in a better position to drive revenues and profits,” said Lee.
The trust posted a marginal increase in the average daily rate, up 0.4 per cent, but this was offset by lower occupancy. At US$78, its revenue per available room was down 3.1 per cent on year in Q1.
Its managers, providing an update on its portfolio optimisation strategy, said they had on Mar 26 this year completed the sale of Hyatt Place Pittsburgh Airport, a non-core asset, for US$7.7 million.
The net sale proceeds were used to pare down existing bank borrowings, to improve the portfolio’s aggregate leverage ratio and increase debt headroom.
As at Mar 31, 2024, ARA H-Trust had approximately US$33.5 million in cash and cash equivalents, which included the sale proceeds of US$7.7 million and reserves earmarked for upcoming capital expenditures.
The managers added that as the interest rate hedges entered during the initial public offering matured in February 2024, ARA H-Trust has been progressively hedging its outstanding debts.
To date, 34 per cent of its loan portfolio is hedged to fixed rates.
Stapled securities of ARA H-Trust closed flat at US$0.28 on Friday, before the update.
