Frasers Hospitality Trust 3Q FY2025: Slower Growth, Resilient Portfolio, and Key Markets in Transition

Frasers Hospitality Trust (FHT) has released its business update for the third quarter of FY2025, revealing a mixed landscape of market slowdowns, ongoing portfolio resilience, and shifting trends across key markets. As the travel and hospitality sector transitions beyond the post-pandemic rebound, retail investors should pay close attention to several crucial metrics and developments that could influence FHT’s share price.

Key Highlights from 3Q FY2025

• Singapore: Industry occupancy rose by 0.6% year-on-year, but average daily rates (ADR) fell by 2.6%, resulting in a 2.0% decline in revenue per available room (RevPAR). FHT’s Singapore properties mirrored this trend, with a 4.0 percentage point increase in occupancy, but an 8.3% fall in ADR, leading to a 3.1% year-on-year drop in RevPAR over nine months.
• Australia: RevPAR for the Australia portfolio was relatively stable, up 0.3% year-on-year for the nine months. However, 3Q saw a 4.1% year-on-year decline in RevPAR for Sydney and 2.5% drop in Melbourne, attributed to fewer major events and economic uncertainty.
• United Kingdom: The UK portfolio showed resilience with a 2.6% year-on-year rise in RevPAR for the nine months, driven by occupancy gains. However, ADR declined due to stiff rate competition and a softer market.
• Japan: ANA Crowne Plaza Kobe delivered strong performance, with a 17.6% year-on-year jump in RevPAR, buoyed by robust domestic and international demand, and spillover benefits from Expo 2025 in Osaka.
• Malaysia: The Westin Kuala Lumpur saw RevPAR slip by 0.1% year-on-year for the nine months, as the market entered a phase of moderate growth after a rapid post-pandemic recovery, with corporate and group demand softening in recent months.
• Germany: Maritim Hotel Dresden continued to benefit from post-COVID recovery, especially in domestic and MICE (meetings, incentives, conferences, and exhibitions) segments.

Portfolio Performance and Financial Metrics

• Overall RevPAR by market (3Q FY2025 vs. 3Q FY2024):
  • Singapore: S\$242 ▼ (5.6%)
  • Australia: A\$192 ▼ (1.2%)
  • UK: £134 ▲ 0.1%
  • Japan: ¥11,654 ▲ 17.6%
  • Malaysia: MYR450 ▼ (1.5%)
• Gearing remains healthy at 34.8%. Total borrowings stand at S\$721.7 million, with a weighted average debt maturity of 2.5 years. 96% of debt is unsecured and 72.7% is on fixed rates, with an effective cost of borrowing at 3.5%. Interest coverage ratio is a comfortable 2.9 times.
• Net asset value per stapled security is S\$0.64.

Market Trends and Outlook

• Softening in Key Markets: Sydney, Melbourne, Singapore, and London all reported weaker ADRs and RevPARs, attributed to fewer major events, economic uncertainty, and increased competition.
• Japan and UK as Standouts: Japan saw strong growth due to increased travel spurred by the weak yen and the Osaka Expo, while the UK portfolio benefited from strategic repositioning and returning long-stay/corporate demand.
• Malaysia Normalizing: After two years of double-digit RevPAR growth, Kuala Lumpur hotels are now entering a steadier, moderate growth phase.
• Macro Factors Could Be Price Sensitive:
  • Interest rates remain elevated. The US Federal Reserve held rates steady in July, with less than a 50% probability of a rate cut in September. This could keep borrowing costs high for FHT.
  • Currency volatility and economic growth are in focus as the Monetary Authority of Singapore maintains a modest appreciation path for the SGD, which could dampen inbound tourism.
  • Geopolitical risks in the Middle East and Russia-Ukraine continue to threaten global supply chains and commodity prices.
  • Tourism Recovery: International tourist arrivals rose 5% year-on-year in 1Q 2025, now exceeding pre-pandemic levels, suggesting underlying demand remains strong even as growth moderates.

ESG Commitment and Recognition

• FHT continues to deliver on its ESG (Environmental, Social, and Governance) commitments. It ranked first in the APAC Hotel Listed category in 2024 (score: 85, 4 stars).
• Targets remain aligned with Frasers Property’s Sustainability Roadmap, including a goal to achieve Net Zero Carbon status by 2050.
• Properties have achieved BCA Green Mark GoldPLUS, NABERS (Australia), and BREEAM (UK) ratings.

Potential Share Price Drivers and Risks

What Shareholders Should Watch:

• Softness in core markets (Singapore, Australia, Malaysia) may weigh on near-term earnings and distributions, especially if ADRs do not recover.
• Japan’s strong performance and the UK’s resilience could offer some upside to overall portfolio returns if the trends continue.
• Interest rate and FX risks remain material, with higher borrowing costs and SGD appreciation potentially impacting margins and tourist arrivals.
• Any acceleration or deceleration in global tourism recovery could significantly move FHT’s share price.
• Capital management is robust, but any deterioration in debt metrics or inability to refinance at favourable rates could become a concern.

Property Valuations and Asset Details

• FHT’s diverse portfolio includes high-value assets such as InterContinental Singapore (S\$519 million), ANA Crowne Plaza Kobe (¥17.8 billion), Novotel Melbourne on Collins (A\$235 million), and The Westin Kuala Lumpur (RM495 million).
• Majority of assets are in prime city locations, offering both upside potential and resilience amid market volatility.

Conclusion

Frasers Hospitality Trust’s 3Q FY2025 update underscores a period of transition for the global hospitality sector. While some markets are normalizing after a post-pandemic surge, others like Japan and the UK are showing robust growth. Management’s prudent capital strategy and strong ESG credentials provide a degree of downside protection, but macroeconomic headwinds and softening in key markets could present near-term challenges. Retail investors should monitor RevPAR trends, interest rate developments, and the pace of international tourism recovery for potential share price catalysts.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own research or consult with a financial advisor before making any investment decisions. The information is based on the latest available company disclosures and may be subject to change without notice.

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