Singapore-based CapitaLand’s lodging business unit, The Ascott Limited, has signed contracts to develop 26 properties with more than 6,000 units across 22 cities and 11 countries.
The properties, which will open in phases from 2019 to 2023, are mostly signed under management contracts, with three on franchise agreements. The majority of the new properties are in the Asia-Pacific region, which CapitaLand indicated continues to see strong demand for lodging in tandem with lower cost of travel, improving travel infrastructure and middle-class demographics’ growing disposable income and aspiration to travel.
The deals also are bringing Ascott into six new cities across Asia-Pacific, Central Asia and Africa, including Atyrau in Kazakhstan, Nairobi in Kenya, Yokohama in Japan, Seongnam in South Korea, as well as Cam Ranh and Hoi An in Vietnam.
The signings bring the number of contracts secured to date this year by Ascott to more than 40 properties with more than 8,000 units—an increase of more than 40 percent compared with the same period last year in terms of units. Ascott also opened 16 properties with more than 2,000 units, a 70 percent increase compared to 2018.
“We are fast-expanding Ascott’s global network of properties as we continue to pursue an asset-light business model to boost our recurring fee income,” said Ascott CEO Kevin Goh. “For the first quarter this year, our operational units have contributed $59.7 million of fee income...For every 10,000 serviced-residence units signed, we are expecting to earn approximately $25 million in fee income annually as the properties progressively open and stabilize. Through these growth strategies, we are looking forward to the fee income boost when we achieve our target of 160,000 units worldwide by 2023.”
With the recent completion of the Ascendas-Singbridge transaction, CapitaLand through Ascott, has become the sponsor of both Ascott Residence Trust (Ascott REIT) and Ascendas Hospitality Trust (A-HTRUST). Lodging assets under CapitaLand are valued at S$31 billion, equivalent to 25 percent of the group’s total assets under management. Last September, CapitaLand invested $25.9 million for a 70-percent stake in Indonesia's Green Oak Hotel Management, the holding company of Tauzia, one of Indonesia's top five hotel operators.
“The combination of Ascott REIT and A-HTRUST is a win-win for both unit-holders as the combined entity will be Asia-Pacific’s largest hospitality trust with an asset value of S$7.6 billion, making it a lot more attractive to investors,” Goh added. “A larger investment entity tends to trade better, as well as enjoy higher liquidity and greater cost efficiency. The combined entity will also have greater financial flexibility to seek more accretive acquisitions and value enhancements. Ascott as a sponsor can focus on growing and injecting our lodging assets into a single hospitality trust and recycle capital into new development opportunities. At the same time, Ascott will continue to benefit and participate in the future growth of these quality assets through our sponsored stake in the trust.”
By 2022, the World Tourism Organization expects global lodging sales to reach $812 billion, with Asia-Pacific remaining the second largest market.