SINGAPORE (Jan 18): OCBC Investment Research is keeping its “neutral” rating on Singapore’s hospitality sector on expectations of a challenging 2017, but highlighting opportunities for dollar-cost averaging in 2018.

In a Tuesday report, lead analyst Deborah Ong notes a growing proportion of Chinese travellers arriving by land compared to by air – which she thinks could be due to an increase in long-haul flights from Chinese cities to Australia over the last three years.

“Many of these are operated by Chinese carriers that may conduct non-stop flights or choose to use other cities as opposed to traditional transit hubs such as Hong Kong and Singapore,” comments Ong.

“Nonetheless, we believe that the risk of this subset of stop-over travellers being further eroded is very minimal to the hospitality industry at this point in time; we estimate that these travellers make up only around ~0.5% to ~2% of total arrivals from all countries to Singapore.”

The analyst reckons double-counting of Chinese arrivals is another probable case should tourists be using Singapore as a base to explore Southeast Asia before re-entering the country at the end of their tours to fly home.

This also means the growth of Chinese arrivals may be more volatile than their corresponding impact on visitor days, she adds.

“As we continue to monitor industry developments, we believe 2017 looks to be another tough operating year with the supply injection and moderating growth in Chinese arrivals, but there are good opportunities for dollar-cost averaging before the industry stabilises in 2018,” concludes Ong.

OCBC’s top “buy” picks are OUE Hospitality Trust (OUE HT), Ascott Residence Trust (ART) and CDL Hospitality Trusts (CDL HT) with fair values of 73 cents, $1.24 and $1.48 respectively.

As at 10.10am, units of OUE HT, ART and CDL HT are trading at the respective prices of 68 cents, $1.16 and $1.40.