Yahoo Finance Singapore’s Tourism Boost: Which Companies can Benefit from it?
High-profile singers such as Taylor Swift and Coldplay held sold-out concerts in Singapore back in January and February.
Because of the arrival of these superstars, tourist numbers have surged.
Referred to as the “Taylor Swift effect,” Taylor Swift’s concerts have significantly increased visitor arrivals, with visitor numbers hitting 1.48 million in the month of March 2024, a post-COVID high.
According to data from CoStar (NASDAQ: CSGP), a leader in the provision of commercial property information, Singapore’s hotel industry reported record operating statistics in March.
The average daily rate (ADR), which measures the average rental revenue earned for an occupied room per day, as well as revenue per available room (RevPAR) both reached record highs for that month.
While the tourist influx has slowed slightly since March, Singapore’s strategic intent to re-establish itself as the leading tourism hub in Southeast Asia remains clear.
This goal was further demonstrated by a S$300 million investment by the government into a Tourism Development Fund aimed at boosting the tourism industry.
Exciting upcoming events, such as Formula 1 in September and Grammy Award winner Olivia Rodrigo’s tour this October, ensure that the second half of this year will be another bustling period for tourism.
Looking ahead, significant developments such as the expansion of Resort World Sentosa and Universal Studio Singapore will help to expand the attractions, hotels, and entertainment options for visitors.
The construction of the Porsche Experience Centre and Founders’ Memorial, slated to be completed by 2027 and 2028 respectively, will further enhance the Lion City’s appeal as a premier travel destination.
As the tourism industry gets a boost, several companies will be looking to capitalise on this opportunity.
Here are three companies that look poised for strong growth in the booming tourism sector.
1. Las Vegas Sands (NYSE: LVS)
While it might be surprising to many Singaporeans, the iconic Marina Bay Sands (MBS) is actually owned by an American company – Las Vegas Sands.
The resort developer acquired the rights to develop the property from the Singapore government in 2006.
Since its opening in 2010, MBS has become a mainstay in the tourism industry, attracting 40 million visitors annually before the pandemic.
Additionally, it has earned accolades as one of the top 25 luxury hotels in Singapore for 2023 and ranks among the 25 most saved hotels worldwide in 2021, according to the leading travel advisory platform, TripAdvisor (NASDAQ: TRIP).
For 2023, MBS generated US$3.8 billion in net revenue, marking a 52% year on year increase from the previous year’s US$2.5 billion.
The casino business contributed to the bulk of net revenue at 70%.
MBS contributed 37% of Las Vegas Sand’s total revenue for 2023.
Looking at Las Vegas Sands’ financial results for the first quarter of 2024 (1Q 2024), the company reported outstanding growth.
Revenue jumped by 39.6% year on year to US$3.0 billion while net profit soared over 230% year on year, from US$147 million to US$494 million.
MBS continues to be the standout performer for Las Vegas Sands, contributing the bulk (39.1%) of the company’s total revenue.
Las Vegas Sands has set aside US$750 million of capital expenditure for MBS, with plans to upgrade Tower 3, the hotel lobby, and Sands SkyPark.
Furthermore, MBS will play a pivotal role in reinforcing Singapore’s reputation as a business hub, having won the Singapore Meetings, Incentives, Conferences, and Exhibitions (MICE) award in 2023.
2. Far East Hospitality Trust (SGX: Q5T)
Far East Hospitality Trust (FEHT) is a hospitality-focused REIT, with a portfolio comprising nine hotels and three serviced residences.
Some hotels under this trust include Rendezvous Hotel Singapore, Oasia Hotel Downturn, and Quincy Hotel Singapore.
As of June 2024, the REIT’s assets under management (AUM) stood at around S$2.5 billion.
For 1Q 2024, FEHT saw improvements in both its revenue and net property income (NPI).
Gross revenue grew by 7.5% year on year to S$27.1 million.
Likewise, NPI rose 6.0% year on year to S$25.1 million.
The hotel segment experienced robust growth, with revenue increasing 8.4% year on year, contributing nearly 74% of the trust’s total revenue.
ADR for its hotel segment climbed by 8.8% year on year from S$165 to S$179.
Similarly, RevPAR went up by 6.7% year on year from S$135 to S$144.
With its affordable four-star hotels priced in the range of S$150 to S$200 per night, FEHT is well-positioned to attract middle-class tourists.
North Asia, which includes China and Russia, accounted for the bulk of visitors at 33.7%, with Southeast Asia (SEA) visitors coming in second at 22.6%.
Chinese citizens are more willing to travel this year because of improving economic conditions, causing travel demand to spike in the fourth quarter of this year.
Coupled with rising incomes in SEA, FEHT will be a popular choice for many.
Additionally, the recent introduction of the 30-day visa-free exemption between Singapore and China will further enhance Singapore’s popularity among Chinese tourists.
FEHT’s total distribution per stapled security (DPSS) in fiscal year 2023 stood at S$0.0409 per unit. This was a 25% increase compared to the DPSS for 2022.
3. CDL Hospitality Trusts (SGX: J85)
CDL Hospitality Trusts (CDLHT) is another hospitality-focused REIT with a portfolio that includes six hotels and one shopping mall in Singapore.
Unlike FEHT, CDLHT boasts a more diversified portfolio that spans across multiple countries, including several premium, five-star hotels.
Key properties in CDLHT’s portfolio include Orchard Hotel, Grand Copthorne Waterfront, and W Singapore.
CDLHT also manages Claymore Connect, a mall in Orchard Road.
As of 1Q 2024, CDLHT’s properties were valued at about S$3.3 billion.
The hospitality REIT announced a strong set of earnings, with gross revenue improving by 7.3% year on year to S$65.3 million.
NPI increased by 6.8% year on year to S$34.9 million, with NPI for Singapore hotels significantly rising by 12.8%.
Overall, Singapore properties contributed over 60% to the NPI for 1Q 2024.
Although the ADR for Singapore hotels declined slightly year on year, from S$259 to S$250, RevPAR improved year on year from S$176 to S$205.
Like FEHT, Chinese travellers made up the largest proportion of total visitors to CDLHT’s Singapore properties.
With positive developments in the tourism industry, CDLHT is also well-positioned to benefit from the upcoming favourable conditions.
For 2023, CDLHT’s DPSS came in at S$0.057 per unit, which was 1.2% higher than the DPSS for 2022.
Other companies to consider
While we have only covered three companies here, there are many more that will benefit from the tourism sector’s long-term growth potential.
Other notable mentions include Singapore Airlines (SGX: C6L), Genting Singapore (SGX: G13), and SATS Ltd (SGX: S58).
Readers interested in further details about these companies can explore articles on Singapore Airlines, Genting Singapore, and SATS.
This could be the fastest way to jump from a “newbie” investor to a seasoned pro. Our beginner’s guide shows everything you need to know to buy your first stock and beyond. Click here to download it for free today.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.
The post Singapore’s Tourism Boost: Which Companies can Benefit from it? appeared first on The Smart Investor.
