Maybank IB is positive on the hotel sector in Thailand, with a promising earnings growth in FY24-25E, the house maintains it POSITIVE view of the sector, driven by demand from foreign tourists, expanding margins, and new hotel expansion.
The house believes an expected 4Q23 core profit contraction (YoY) hiccup has been priced in while it expects a 1Q24 rebound, driven by demand from Chinese tourists and higher margins for food operations. Tourist arrivals reported in Dec’23 by official sources showed signs of recovery from key international markets such as China, Russia, South Korea and India. Average daily arrivals from China in the first half of Dec23 accelerated to 47% of daily average Chinese tourist arrivals in Dec’19.
It also expects this momentum to persist through to Chinese New Year on 10 Feb 2024. CENTEL stands to benefit most as it has the highest exposure to Chinese guests at its hotels in Thailand and the Maldives. Slower-than-expected resumption of flight capacity for Chinese flag carriers remain a downside risk for TAT’s target of 8.2m Chinese visitors in 2024 vs. 3.5m in 2023.
From its channel checks with managements, blended occupancy rate for listed hoteliers (Thailand portfolio) in Oct-Nov’23 was at 70% (vs. 68% in 3Q23 and 69% in 4Q22). The house expects the rate to reach 72% in 4Q23, still below 4Q19 at 77%. Asset renovation at key premises is the key reason for the slow recovery. However, it estimates RevPAR to stand 15% above 4Q19, thanks to high ADRs. Growing leisure travel demand and recovery in the MICE segment should continue to drive FY24 hotel sector earnings to are record high (+21% YoY).
Maybank says it sees limited downside to earnings forecasts from the slow recovery in Chinese group tours as most hotel operators under its coverage don’t rely heavily on this segment. In addition, travelers from the mainland tend to spend less on accommodation compared with other nations while the length of stay is relatively shorter for Chinese guests.
The house micks MINT as its Top Pick for its strong earnings growth potential and attractive valuation. Maybank believes corporate client arrivals will hit pre-Covid peaks in FY24, spurring room rate and F&B growth and higher operating margins.
While Central Plaza Hotel group (CENTEL) as the prime beneficiary of recovery in Chinese tourists amid declining domestic food and utility costs.
