Coronavirus outbreak afflicts tourism-related stocks in Singapore

Stocks of big players like SIA and Far East Hospitality Trust saw declines in their share prices.

Airlines and hospitality stocks in Singapore have taken a hit as the rise in cases of the coronavirus in China and globally has made people cautious about travel, according to a report from OCBC Investment Research.

“Based on the experiences during SARS crisis, should there be an outbreak of virus, tourism-related stocks such as travel and hospitality stocks are likely to be first hit as people tend to be cautious and delay their travel plans,” OCBC analyst Chu Peng said.

In particular, Singapore Airlines’ (SIA) and SATS’ operating performances could be put on pressure if the outbreak worsens. Already, their share prices declined 1.9% and 3.6%.

This was also the case for hospitality REITs. Far East Hospitality Trust (FEHT) saw the sharpest decline in share price at 5.2%, followed by CDL Hospitality Trusts (CDLHT) at 1.2% and Ascott Residence Trust (ART) at 0.7%.

Although the revenue per available room (RevPAR) is still expected to pick up in Q4 2019, it may see a slowdown in growth or even a decline in 2020 if the travel ban imposed by the Chinese government fails to control the virus spread and the situation further escalates.

Still, the market is expected to withstand the outbreak in comparison, as the experience from the SARS outbreak should mean that the authorities are better prepared.

The report also noted that around the SARS outbreak in November 2002 to August 2003, visitor arrivals to Singapore fell 19%, but quickly recorded a strong rebound of 36% YoY growth in 2004. Likewise, hotel occupancy plummeted 32.3ppt to 42.4% in Q2 2003, then soon recovered to 73.6% in the following quarter.

“Should the travel ban imposed by the Chinese government effectively control the spread of coronavirus, we would see the impact on the travel and hospitality sectors be shorter and lesser,” Chu said.

As of 23 January, there have been 28 suspected cases of coronavirus seen in Singapore, and one confirmed case.