Tourism and Hospitality Stocks Benefit from Recovery Momentum

Singapore’s visitor arrivals surpassed 1.1 million in April 2023, the highest in a month since the pandemic, bringing the total number of visitor arrivals to over 4 million in the year-to-date (YTD).

The World Economic Forum noted that global tourism rebounded strongly in 2022, with international tourist arrivals more than doubled when compared to the previous two years. As international travel continues to pick up, Singapore’s tourism sector has seen similar growth momentum.

With China’s reopening and the increase in international flight capacities, STB estimated that international visitor arrivals to Singapore would be in the range of 12 to 14 million in 2023, with full tourism recovery expected by 2024. Tourism receipts are anticipated to net $18 billion to $21 billion accordingly.

This forecast coincided with the latest air traffic statistics provided by Changi Airport Group (CAG), which reported that the airport handled over 4.6 million passenger movements in April, or around 82% of pre-pandemic levels; while aircraft movements totalled 26,300, which was around 83% of April 2019 levels.

CAG is set to reopen the northern wing of Terminal 2 in October this year, bringing the total passenger capacity to 90 million passengers per annum, higher than the pre-pandemic levels of 85 million passengers per annum.

The 10 stocks booked a combined net institutional inflow of S$186.7 million in the YTD, which was in contrast to the broader Singapore stock market, which booked over S$2.3 billion of net institutional outflow. Amongst the 10 stocks, Genting Singapore and Singapore Airlines led the net institutional inflow YTD.

Group passenger load factor reached a record high of 85% in FY2022/23 as compared to 30% in FY2021/22, attributing the positive results to strong demand for air travel after Singapore fully reopened its borders in April 2022. Both its carriers, SIA and Scoot, were among the first to launch flights and capture the pent-up demand upon the reopening of borders.

Prior to COVID-19, SIA commanded a 1.3% weight in the FTSE ST ALL-Share Index. Following on from a significant fund raising in 2020, the company maintained a 2.2% weight in the FTSE ST ALL-Share Index as of 18 May 2023. Similarly, the stock is now the second largest by weight in the Bloomberg Asia Pacific Airlines Index, moving up 4 spots from end 2019.

While the socio-economic impacts of COVID-19 devastated the airlines industry, back in mid-2020, SIA signalled its resolve that the next chapter of its transformation journey would focus on how it strengthens its position as a global aviation leader in the new world.

Riding on the recovery momentum, SIA noted that “demand for air travel remains robust in the first quarter of FY2023/24, underpinned by the recovery in air travel in East Asia.”

However, it also highlighted that “near term cargo demand is expected to remain soft as the industry navigates headwinds from the macroeconomic environment which include inflationary pressures, geopolitical tensions and high fuel cost”.

Going ahead, Genting will continue with its RWS 2.0 strategy, a $4.5 billion expansion project over different phases, and continue enhancing its brand identity as a premium luxury destination that appeals to trendy and affluent customers.

The Group noted that ongoing construction works for RWS 2.0 strategy including Minion Land at the Universal Studios Singapore and the Singapore Oceanarium are progressing well with soft opening scheduled for early 2025.

It has also been successful in securing premium lifestyle events that appeal to affluent visitors, having become the official venue to host signature events such as the Asia’s 50 Best Restaurants 2023 and Wine Pinnacle Awards 2023.

The trust also saw an increase in Revenue per Available Room (RevPAU) by 90% YoY, with key markets – Australia, Japan, Singapore and USA – performing at pre-Covid levels or above. Notably, CLAS’ Japan RevPAU jumped 351% YoY to 105% of same-store pre-Covid levels, following the country’s reopening to independent leisure travellers in October 2022.

Source: SGX article dated 23 May 2023.