• Strong International Visitor Arrivals (IVA) growth in July and August, underpinned by a recovery from Chinese visitor arrivals, further attributed to the spillover effect from Chinese visitors visiting Thailand, and a SG50 promotional campaign rolled out by STB in May-15.
• Optimistic on IVA resuming its growth trajectory amid a cluster of year-end events; tourist spending benefits shopping and accommodation segments.

What is the news?

Singapore Tourism Board (STB) released the Tourism Statistics for Aug-15 on 9 October. The Monetary Authority of Singapore (MAS) has eased monetary policy by slowing the SGD rate of appreciation for the second time this year. This was done with the view of combating slowing economic growth.

STB entered into Memorandum of Understandings (MOUs) with four major Chinese digital players to continue attracting Chinese visitors to Singapore.

How do we view this?

Our scenario analysis shows that the likelihood of a positive y-o-y growth for 3Q15 IVA is relatively high. Based on existing 8M15 data, we performed a scenario analysis for Sep-15 by using various y-o-y growth rates as the input variables. 3Q15 could be the inflection point for Singapore IVA after the MH370 incident in Mar-14 that has led IVA to decline y-o-y (in particular Chinese visitors) for a few consecutive quarters.

STB continues to make effort to draw more visitors. On top of the ongoing advertising campaigns to attract international visitors, STB has partnered with six major Chinese digital players to attract more visitors from China. STB noted that new attractions, such as Singapore Pinacothèque de Paris, National Gallery Singapore and Kidzania theme park, as well as events such as the Women's Tennis Association Finals 2015 will help to promote growth and maintain Singapore as a choice destination for tourists.

MAS reigning-in of the appreciating SGD is positive for the Hospitality sector. We held the view that the relatively strong SGD is the key impediment to IVA growth. MAS has adopted an easing in monetary policy, adjusting the SGD to appreciate at a slower pace. This is a favourable policy for the Hospitality sector.

Upcoming supply of rooms does not look so daunting anymore. 10 year CAGR for IVA is 6.1%. If the IVA growth trajectory resumes, it would be consistent with the 5.9% to 6.6% CAGR of hotel rooms.

Revising our previous view: Positive growth in International Visitor Arrivals in 2015 is now within reach. In our previous report (27 August), we opined that IVA for 2015 would likely experience negative growth. 8M15 IVA is now down by only 0.6% y-o-y, due to the strong y-o-y growth in Jul-15 and Aug-15. This is an improvement from 6M15, as IVA was then down 3.4% y-o-y. The result of our scenario analysis makes us optimistic on the growth trajectory resuming. We now revise our view and believe that positive IVA growth in 2015 now appears to be within reach.

Source: Phillip Securities Research - 30 Oct 2015