• Zika-hit Thailand seems buoyant
• Impact expected to be milder than SARS
• Maintain NEUTRAL on sector

Number of confirmed cases has risen to 242 as of Sunday

Following news of a Zika outbreak here, countries such as Australia, Taiwan, and United Kingdom have issued travel advisories for travelers to Singapore. According to Asia One (2 Sep 2016), hotels and travel agencies have reported a “handful” of cancellations from foreigners intending to visit amid fears of the Zika virus. We note that the Zika virus is transmitted by the Aedes mosquito, the same vector as that for dengue.

In Feb, the Ministry of Health (MOH) announced that the number of dengue cases in Singapore may exceed 30K. Despite the potential for Zika to spread rapidly in Singapore, tourism growth seems buoyant in Zika-infected Thailand, which has nearly 100 cases. The Tourism Authority of Thailand has projected a 14% increase in revenue for the first nine months of 2016.

Impact on tourism expected to be much milder than that of SARS

A particular strain of the Zika virus bears a risk of microcephaly in the fetuses of pregnant women. According to a Washington Post article (25 May 2016), the risk may be as high as 13%. While these health implications are serious, we believe that non-pregnant travelers deem them less serious than that of the Severe Acute Respiratory Syndrome (SARS) virus.

During the Mar to Jul period in 2003, Singapore reported that 238 people had infected by the SARS virus, out of which 33 people died. During the SARS episode, tourist arrivals fell 14.5% to 70.7% YoY in Mar to May 2013. Assuming that the number of confirmed Zika cases remains less than 500, we expect the impact of a Zika outbreak to be milder than that of SARS.

NEUTRAL rating on the sector

We note that the share prices of CDL Hospitality Trust (CDLHT), Far East Hospitality Trust (FEHT), and OUE Hospitality Trust (OUEHT) have softened by ~1% to 3% since 41 locally transmitted cases was announced on Aug 28. Pending further information on the severity of Zika, we maintain NEUTRAL.  

Source: OCBC Research - 5 Sept 2016