Recent statistics released from Singapore Tourism Board (STB) revealed that overall international visitor arrivals to Singapore grew by a marginal 0.9% to 15.2m in 2015. This comes in at close to the mid-end of STB’s forecast range of 15.1-15.5m visitors for the fullyear. Tourism receipts dipped 6.8% to S$22.0b.

Although monthly visitor arrivals increased for eight consecutive months on a YoY basis from May to Dec, hospitality players remain largely cautious on the outlook. This can be attributed to an uncertain macroeconomic environment and large incoming supply of hotel rooms.

Looking ahead, STB has projected international visitor arrivals to come in at 15.2-15.7m for 2016, implying growth of 0-3%. Tourism receipts are forecasted to grow 0-2% to S$22-22.4b.

Our preferred pick within the hospitality sector is Ascott Residence Trust [BUY; FV: S$1.28], given its more resilient extended-stay business model. We also like CDL Hospitality Trusts [BUY; FV: S$1.38] for its cheap valuations.

Source: OCBC Research - 10 Mar 2016