■ Visitor arrivals was subdued. 1Q15 tourist numbers dipped 6.1% y-o-y. For perspective,
2014 visitor arrivals declined 3.0% y-o-y from 2013. The decline in 2014 was the first full
year decline since 2009.
■ Hotel three key metrics of AOR, ARR and RevPAR were lower as well. Dampened by
absence of biennial Singapore Airshow and less demand for corporate bookings.
■ Chinese are tourists choosing Thailand, South Korea, Japan and USA over Singapore.
Easing of visa rules, strengthening of CNY and geographical proximity were contributing
Outlook for the sector
■ Currency headwind of relatively strong SGD will be the overriding factor. Weakened
regional currencies that have depreciated against SGD would deter visitors from
choosing Singapore as a destination.
■ Singapore visitor arrivals not likely to meet upper range of STB's estimate of 3%. On
the back of a 6.1% y-o-y dip in visitor arrivals in 1Q15, the remaining three quarters
would have to each grow by more than 6.1% in order to achieve the upper range of
STB's full year estimate.
■ Average Room Rate (ARR) facing pressure. Combination of weak visitor numbers and
upcoming supply of hotel rooms would continue to put pressure on AOR and ARR, and
■ Continued growth of outbound Chinese tourists. Facilitated by relaxation in visa rules
and longer re-entry terms by various countries to woo Chinese visitors. Strengthening of
CNY results in higher purchasing power of the Chinese tourist and encourages outbound
■ Key risk to the sector is the spread of MERS across the region. 19 fatalities reported in
South Korea so far.
■ All things equal, pure-play Singapore Hospitality REITs expected to underperform their
Hospitality-peers with geographically diversified portfolios. (Barring DPU-accretive
acquisitions and asset enhancement initiatives.) The two pure-play Singapore
Hospitality REITs are OUE Hospitality Trust and Far East Hospitality Trust.
■ Favour Retail REITs with presence in heartland malls over those reliant on Tourist
Receipts from Shopping. Frasers Centrepoint Trust (Accumulate: Target Price: S$2.14,
Last close: S$2.08)
■ Exposure to growth in outbound Chinese tourists. Beijing Capital International Airport,
HK: 694 (Accumulate, Target Price: HK$9.23, Last close: HK$8.73).
■ Cautious over lacklustre Singapore visitor arrivals,
undermined by strong SGD. SATS
Ltd (Reduce, Target Price: S$2.97, Last close: S$3.48). (Read Report)
Source : Phillip Securities Research
Labels: Hospitality Sector