Why an active January for CapitaLand, Ascott a sign of things to come

SINGAPORE — CapitaLand Group and The Ascott Limited, its wholly owned lodging business unit, have had an active acquisition start to 2024. And given the company’s long-term goals, that deal pace may not be stopping anytime soon.

On January 7, a joint venture between Ascott and CapitaLand Wellness Fund (C-Well), bought the 308-key Hotel G in Singapore from Gaw Capital Partners for just under S$240 million ($180 million). The group said it was repositioning the property under its lyf brand to become the lyf Bugis Singapore in mid-2024.

“The acquisition is aligned with Ascott’s asset-light growth strategy, as we invest alongside our funds while growing a pipeline of quality assets that can be subsequently injected into our other funds,” Kevin Goh, CEO for Ascott and CapitaLand Investment Lodging (CIL) said after the acquisition.

Two days later, Ascott announced the further expansion of its lyf brand with seven more property signings in Australia (160-key lyf on Sussex Sydney), Germany (lyf Frankfurt), Indonesia (200-key lyf Canggu Bali, the brand’s first resort), Japan (200-key lyf Shibuya Tokyo), Malaysia (138-key lyf Georgetown Penang and the 204-key lyf Brickfields Kuala Lumpur) and another in Shanghai, China. Ascott also opened five lyf properties in Austria, China, Japan, Malaysia and the Philippines in 2023. The newly signed properties are scheduled to open in the next four years.

Ascott said the signing pace for the brand has almost doubled since 2022.

“There is tremendous potential for us to further scale lyf across more hospitality asset classes, whether as a full-service hotel or resort, especially with the growth pace we have seen,” Goh said.

He also said Ascott’s target is 150 lyf properties and over 30,000 units by 2030.

Doubling fee revenue

The growth for Ascott also comes with aggressive goals for fee revenue.

In April 2023, CapitaLand said it wanted the The Ascott Limited to double fee revenue to more than S$500 million in the next five years. Ascott said at the time it expected that growth to be driven by new property openings and new signings at an expected annual net room growth rate of 8% to 10% over the next five years.

For CapitaLand’s latest earnings, it said through September 2023 that Ascott had 97,000 hotel lodging units open with 66,000 more in the pipeline. Ascott’s lodging management fee related earnings increased 31% from S$190 million in 3Q2022 to S$249 through 3Q2023.

“To achieve our new growth target, we will secure more management and franchise contracts for prime properties that generate higher quality fees; and leverage our strong brand equity and direct distribution channels to deliver greater value to property owners and customers,” Goh said. “In addition to ramping up the opening of our properties, we will be stepping up efforts to upgrade several of our strategically located properties into brand flagship assets.”

Goh said properties in the pipeline for those improvements include The Robertson House by The Crest Collection in Singapore as well as The Cavendish London and Citadines Saint-Germain-des-Prés Paris, which will be re-branded under The Crest Collection.

Not surprisingly, the rest of the numbers for Ascott saw similar increases, with a 25% increase in RevPAU year-over-year. Marketwise, Singapore (+36%); and North Asia, excluding China (+110%) saw the biggest RevPAU increases (The North Asia number was driven by fast growth in Japan). The RevPAU numbers also performed strongly when compared to pre-Covid numbers with Singapore (+130%) and Europe (+117%) leading the way.

An active 2023

But CapitaLand and Ascott are not just net buyers in the market. In December CapitaLand Ascott Trust (CLAS) announced it was divesting from three hotels in Japan for JPY10.7 billion (S$99.8 million). The three properties, Hotel WBF Honmachi, Hotel WBF Kitasemba East and Hotel WBF Kitasemba West, sold about 15% above book value and net proceeds were expected to be about JPY3.9 billion (S$36.4 million).

“The divestment of the three properties is part of our active portfolio reconstitution strategy,” CapitaLand Ascott’s CEO Serena Teo said. “The properties are situated outside the prime districts in Osaka and the divestment enables CLAS to unlock the value of the properties, redeploying capital to assets and/or asset enhancement initiatives that can generate stronger yields, uplifting the overall value of our portfolio.”

Earlier in December, CapitaLand Ascott acquired two hotels in Europe and one in Asia. It spent £275 million ($348 million) for the 230-key The Cavendish in London, the 136-key Temple Bar Hotel in Dublin and 185-key Ascott Kuningan Jakarta. In November, it sold two hotels in Sydney for AU$109 million ($73 million), the 196-key Courtyard by Marriott Sydney-North Ryde and the 194-key Novotel Sydney Paramatta. And in April 2023, the company bought a 90-key property in Amsterdam from Accor, which had operated as a hotel for €43.7 million ($47.6 million).