SINGAPORE (Dec 29): UOB Kay Hian is keeping its “overweight” call on Singapore real estate investment trusts (REITs) despite visitor arrivals in Oct dipping by 1.6% y-o-y to  1.2 million visitors.

According to the latest statistics released by the Singapore Tourism Board on Dec 28, this marks the first decline in tourist arrivals in 2016, following nine consecutive months of positive visitor growth.

UOB analysts Derek Chang and Vikrant Pandey say this could possibly be due to “lingering concerns over the Aug outbreak of Zika in Singapore and the relatively quieter events calendar”.

Year-to-date, overall tourist arrivals are up 8.3% y-o-y, higher than UOB’s 2016 forecast of 5% growth in tourist arrivals.

Overall revenue per available room (RevPAR) in Oct fell 14.1% y-o-y to $193.2 amid declines across all sub-segments.

Economy hotel RevPAR fell 14.3% y-o-y to $74.4, while the upscale segment fell 13.8% y-o-y to $209.2 and the mid-tier hotels fell 11.5% y-o-y to $142.7. Luxury hotels saw the smallest RevPAR decline, falling 9.7% y-o-y to $370.7.

Chang and Pandey say hoteliers had guided for weak RevPAR numbers in Oct, which was a “particularly weak month”.

UOB’s preferred pick for the sector is Ascott Residence Trust, which it says has been a laggard play in the hospitality segment.

“Given supply-side headwinds looming for Singapore hoteliers, we prefer to be buyers of more geographically diversified hospitality players,” Chang and Pandey add.

Units of Ascott REIT closed half a cent lower at $1.125 on Thursday.