Visitor arrivals rose 13% YoY in October

The number of days tourists stayed in Singapore increased 10.9%.

Visitor arrivals to Singapore rose 13% YoY in October and 5.8% YoY for the first ten months of 2017, OCBC Investment Research said.

According to a report, visitor days also extended by 10.9% YoY for the month and 4.2% for 10M2017.

Data from Singapore Tourism Board's (STB) also showed that industry-wide revenue per available room (RevPAR) increased 1.8% YoY for luxury hotels, 3.2% YoY for upscale hotels, 3.6% YoY for mid-tier hotels, and 13.0% YoY for economy hotels.

November visitor arrivals are expected to be robust as well as Changi Airport showed strong growth in passenger movements.

Here's more from OCBC Investment Research:

With the strong numbers expected for at least two-thirds of the fourth quarter, there may be a slight upside surprise to our 2017 DPU forecasts for hospitality REITs with significant exposure to Singapore: OUE Hospitality Trust, Far East Hospitality Trust, CDL Hospitality Trusts.

We are nonetheless wary of the tight yields that several of the hospitality REITs under our coverage trade at – a range of 5.5% to 5.9% 2018F yield based on Bloomberg consensus forecasts.

S-REITs, across multiple sub-sectors including hospitality, are trading at a yield spread of 350 bps, two standard deviations below its five-year mean.

While we do see some room for operational upside for Singapore-based hospitality REITs in 2018, there does not appear to be a sufficient margin of safety for investors at current unit prices.