It’s no secret that the tourism industry has put it on its chin for the past two years.
But there is light at the end of the tunnel.
With the launch of the Vaccination Travel Lane (VTL) and the government extending the validity of the Singapore Rediscovery Coupon to late March 2022, the tourism industry is starting to re-energize.
Based on initial needs, many people are eager to travel abroad again.
Despite extra safety precautions and the hassle of regular testing via ART, Singaporeans have ventured to countries such as France, Germany and South Korea.
And this pent-up demand is not limited to Singapore.
Expedia Group (NASDAQ: EXPE) announced new research showing that cruise demand is on the rise, with demand for cruise searches in Canada rising more than 20% sequentially this quarter and the next.
As the outlook improves, can investors see travel stocks hitting new highs next year?
The flight is picking up
flight at Singapore Airlines Limited (SGX: C6L) or SIA.
The airline has launched new flights in response to the VTL launch, and now 92% of its pilots and 86% of its crew have returned to work.
As of mid-November, SIA was at 37% of its pre-pandemic capacity and is expected to rise to 43% by this month.
The airline’s passenger numbers have also been on the rise, nearly tripling from a low of 67,700 in February to 189,700 in October.
By the end of November, VTL had also expanded to 6 additional countries, bringing the total number of VTL countries to 27.
Importantly, these 27 countries accounted for around 60% of total daily arrivals before COVID, meaning their inclusion on the VTL list should boost tourism here.
exist SATS Ltd. (SGX: S58), the numbers also show a positive trend.
The ground handling company reported a 4.1% year-on-year increase in the number of flights processed in the first half of fiscal 2022 (1H2022) ended September 30, 2021, while meals served rose 27.2% year-on-year to 26.3 million.
The company’s base case is for air travel in Asia Pacific to reach pre-COVID levels by 2023, with a best-case scenario returning to pre-pandemic levels by the second half of 2022.
This gradual but continuous tourist growth will certainly benefit tourism-related businesses such as Genting Singapore Pte Ltd (SGX: G13) and straco gmbh (SGX: S85).
Looking to the future
The airline industry’s blue chips are already gearing up for a brighter future.
SIA’s fleet will increase from 178 to 193 by March 31, 2022, in response to additional demand.
The group is also strengthening its KrisFlyer programme, with more than 245 new non-aeronautical partners joining in January 2022.
At SATS, the airline’s caterer presented a four-year growth plan at its recent Capital Markets Day.
It intends to reduce its reliance on travel-related revenue by expanding its food solutions division to include a wider range of customers.
Investors can rest assured that the two companies integral to Singapore’s aviation industry are already planning to capture higher demand in the coming months.
New plans are underway
The good news is that the Singapore government didn’t stop there.
The importance of Singapore as a regional tourism hub cannot be overstated.
We have signed an overland VTL scheme with our northern neighbour Malaysia since 29th November and will be expanding to regular travellers from mid-December.
Currently, this VTL cross-border travel scheme allows up to 1,440 people per day to enter each country.
The number will gradually increase once the situation stabilizes and it is safe to do so.
A new maritime VTL could also be launched soon so that Singaporeans can visit destinations such as Desaru, which now houses luxury resorts and golf courses.
An increase in cross-border travel will benefit the food and beverage business on both sides of the Causeway and will also further boost tourism stocks here and in Malaysia.
Get smart: a breath of fresh air for two industries
It has been a long and difficult road, but good progress has finally been made in reopening borders and restarting the economy.
Despite the Omicron variant, the optimism remains.
Unless the new variant proves to be highly contagious or lethal, it will be difficult to derail positive sentiment and momentum.
So far, evidence is pointing to the opposite, which should bode well for airline and travel stocks as we head into a better 2022.
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Disclaimer: Royston Yang does not hold shares in any of the above companies.
Article Year in Review: Can Singapore Travel Stocks Soar to New Highs in 2022? appeared first on The Smart Investor.
