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Singapore Stocks: How They’re Cashing In on China’s Travel Boom
May 15, 2023
Data from China-based Trip.com Group shows a significant surge in both domestic and international travel bookings, reflecting an upward trend during China’s increasingly popular May Day holiday.
In comparison, between the Chinese New Year holiday (January 21 to 27) and the May Day holiday, data from the online travel platform highlighted remarkable growth in travel bookings.
Specifically, flight reservations from China to Southeast Asian nations soared by 91%. Notably, bookings for flights to Japan and South Korea jumped by 120% and 204% respectively, while long-haul travel bookings to Europe experienced an increase of over 40%.
The top ten most sought-after overseas destinations during this holiday period were Thailand, Japan, South Korea, Singapore, Malaysia, the US, Indonesia, Vietnam, Australia, and the UK.
This suggests strong demand in travel as China reopens.
I believe that this also provides opportunities for investors to invest in Singapore’s travel-related stocks including airlines, hospitality, and tourism services.
Here are some key reasons why.
China was Singapore’s largest inbound market before the pandemic
Before the pandemic struck, China was Singapore’s most significant source of inbound tourism. The anticipated return of Chinese travellers in 2023 is set to reinvigorate Singapore’s travel-related sectors.
Leading indicators also suggest an imminent, swift, and extensive recovery in Chinese travel demand. Although the resurgence will be from a relatively low base due to the previous travel restrictions, it’s expected to be dynamic and robust.
As the numbers of Chinese visitors increase and international flight capacities expand, Singapore is projected to witness a consistent influx of over a million visitors each month for the remainder of the year.
The strong recovery is in line with the Singapore Tourism Board’s (STB) forecast of 12 million to 14 million international visitors in 2023 with a full tourism recovery expected by 2024.
Benefits to airlines
The reopening of China spells good news for airlines, with the pent-up demand for travel likely to boost passenger numbers significantly.
Singapore Airlines Ltd (SGX: C6L), the nation’s flag carrier, is poised to reap substantial benefits from the resumption of flights to and from China.
Singapore Airlines, or SIA for short, has emerged as a major beneficiary of the reopening of international travel.
With the full reopening in China, this will benefit SIA as one of the reasons why a complete recovery of Chinese tourists could not happen this year was due to limited flight capacity.
This shows the strong demand for its services.
One of the key downsides is the inflationary pressure that could hurt demand and operating margin for the aviation company.
Positive impact on the Singapore hospitality sector
Hospitality trusts and hotel operators like CDL Hospitality Trusts (SGX: J85) and CapitaLand Ascott Trust (SGX: HMN) also stand to gain from the influx of Chinese tourists.
With the resumption of tourism, these companies are expected to see an increase in occupancy rates, driving up their revenues and, in turn, their stock prices.
CDL Hospitality Trusts is one of Asia’s leading hospitality trusts with assets under management of about S$3.1 billion as of 31 March 2023.
Meanwhile, CapitaLand Ascott Trust, formerly known as Ascott Residence Trust, is the largest lodging trust in Asia-Pacific with an asset value of S$8.0 billion as of 31 December 2022.
Its objective is to invest primarily in income-producing real estate and real estate-related assets which are used (or predominantly used) as serviced residences, rental housing properties, student accommodation and other hospitality assets in any country in the world.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.