CFA Society Singapore
SINGAPORE (June 8): The historic Trump-Kim Summit is scheduled to be hold on June 12 at Sentosa Capella Hotel.
Also, prestigious hotels in Singapore, such as Shangri-La and St Regis, have also been marked as “special event areas”.
In a Thursday report, CGS-CIMB Research analyst Lim Siew Khee says, “We think the heightened security measures in the gazetted areas (Sentosa Island and Orchard area) could slightly disrupt hotel occupancy and footfall over the four to five days of the Trump-Kim summit.”
On the other hand, Singapore should also see an increase in overall visitor arrivals from delegations, security entourages and more than 3,000 reporters.
On an average, every tourist to Singapore spends about 3.5 days and contributes about $1,500 to the overall tourism receipts (TR).
Hence, this event could benefit the Singapore Tourism Board (STB), helping it hit its 2018 target of $27.1 billion–$27.6 billion.
According to Lim’s channel checks with the hospitality Singapore REITs (S-REITs), hotel bookings have not shown significant increases/cancellations ahead of the Summit.
CDL Hospitality Trust’s (CDLHT) Orchard Hotel is within the gazetted boundary of the Summit in Orchard, but the analyst thinks that the very short-term impact on hotel occupancy is negligible to the REIT’s performance.
CDLHT remains CGS-CIMB’s top pick as a proxy to the recovering Singapore hospitality market.
Genting Singapore’s casinos also operate within the Summit’s gazetted boundaries in Sentosa. This could lead to a very-short term impact to the casino’s gaming volume over the impact leading to the Summit. But Lim reckons that this impact is enough to leave a small dent in the group’s typically weaker 2Q results.
Other Orchard hotels and retail REITS’ operations that are not bounded by the gazette might also see very short-term positive spill-overs.
Far East Hospitality Trust’s (FEHT) The Quincy Hotel and Hotel Elizabeth Ascott Residence Trust (Ascott Orchard) located outside the gazetted boundary in Orchard may experience the spill-over effect.
CGS-CIMB has “add” calls on CDLHT, FEHT and Genting Singapore with target prices of $1.92, 79 cents and $1.40, respectively.
The other properties located outside the gazetted boundary in Orchard also include OUE Hospitality Trust’s (OUEHT) Mandarin Orchard; Starhill Global REIT’s Wisma Atria and Ngee Ann City; as well as SPH REIT’s Paragon Shopping Centre.
The Trump-Kim Summit reaffirms Singapore as a preferred choice of venue for a high-profile global summit and arbitration hub. The last historic meeting was in 2015 between Presidents Xii Jinping and Ma Ying-jeou over the cross-strait issues.
The Singapore International Arbitration Centre (SIAC), which is ranked the world’s third most preferred arbitral institution in the world, has seen a 32% y-o-y jump in new cases in 2017 involving $5.3 billion.
Beyond the Summit, hospitality numbers in Singapore have shown to be encouraging.
STB March statistics reported 6.6%/8.6% y-o-y increases in visitor/visitor days, while overall visitor arrivals increased by 7.1% y-o-y in 1Q18 to 4.63 million. Industry RevPAR was also up 6.2% y-o-y in Mar 18 and up 4.2% year-to-date.
“We see the encouraging statistics as precursors to our industry and hospitality S-REITS RevPAR forecasts of +7% and +5% y-o-y respectively. We expect a +6% y-o-y visitor arrivals in 2018, while STB has conservatively forecast a range of between +1 and +4% to 17.6 million-18.1 million,” says Lim.
As at 1.25pm, units in CDLHT are trading at $1.65; units in FEHT at 66 cents; and shares in Genting Singapore at $1.25.