Visitor arrivals in Nov 2016 showed a buck in the trend of declining growth rates since Mar this year, according to figures from the Singapore Tourism Board. YoY growth for the month was +2.5% (vs. -0.9% YoY in Oct), while growth for the first 11 months came up to +7.9%. Visitor days are up +2.2% YoY for the Jan-Nov period.

We are cautious with our base case of single digit decline in RevPARs for 2017 and note the downside risk of slowing demand on top of a ~6% supply injection. On the other hand, business sentiment worldwide appears to be more positive post US elections, which may be a boost for corporate travel.

With the prospect of RevPAR stabilization in 2018, we believe that 2017 will present important opportunities for dollar-cost averaging for our top picks given the weak operating outlook. In particular, OUE Hospitality Trust (OUEHT) has two key catalysts for DPU growth that we expect to serve as a buffer against the poor operating conditions this year: full-year contributions from anchor tenants Victoria’s Secret and Michael Kors in Mandarin Gallery and contributions from the Crowne Plaza Changi Airport’s extension.

We are positive on OUEHT [BUY; FV: S$0.73], Ascott Residence Trust (ART) [BUY; FV: S$1.24], and CDL Hospitality Trusts (CDLHT) [BUY; FV: S$1.48]. Maintain NEUTRAL on the sector.

Source: OCBC Research - 13 Jan 2017