OCBC downgrades hospitality sector to 'neutral'

PHOTO: OCBC downgrades hospitality sector to 'neutral'

OCBC Investment Research downgraded Singapore's hospitality sector to 'neutral' from 'overweight', citing a slowdown in the sector, but Ascott Residence Trust remains a top pick for its global exposure.

Hotel bookings up to next year's Chinese New Year in February are still weak, OCBC said in a note. It expects 2013 to see fewer MICE (meetings, incentives, conventions and exhibitions) events.

"Hoteliers have also expressed concern over the upcoming competition that will result from the growth in hotel room supply, as new hotels typically provide substantial room rate discounts in the first few months of operation," the brokerage said.

OCBC has a 'buy' rating on Ascott with a target price of S$1.37, due to its exposure to growth regions such as Europe and developing Asia in the serviced residence industry.

By 0306 GMT, Ascott units were unchanged at S$1.305, but have surged 38 per cent against a 34 per cent rise in the FTSE ST Real Estate Industrial Trust.

However, the brokerage has 'hold' ratings on CDL Hospitality Trusts and Far East Hospitality Trust, with target prices of S$1.91 and S$1.02 respectively.