Sunday, 26 July 2020

How a Lack of Domestic Tourism affects Singapore based businesses

Some of us have probably heard of the phrase "Domestic Tourism" in recent months. It refers to citizens being a tourist in their own country for holidaying purpose. Well known examples of domestic tourism are the Japanese visiting Hokkaido during late spring/ Okinawa during the winter months or Koreans visiting Jeju Island. 

In recent times, our government has been trying to boost the local tourism space by having campaigns and encouraging Singaporeans to visit our own attractions and have staycations; but truthfully, it is implausible that I can plan a 3 days itinerary to Jurong to visit attractions.

To me, this is an issue that seems to be under-rated by investors in Singapore now. Tourists are one of the most price insensitive consumers who are willing to spend money to unwind and try new things. For the Americans and Japanese, even if their borders are closed, they still holiday at other states or prefecture. This helps to boost their own economy and minimize the impact of COVID. Singapore on the other hand does not have a domestic tourist market to rely on at all.

The lack of a domestic market (price insensitive tourist) translates to a lower sales receipts. Industries ranging from Malls, hotels to Taxi businesses such as Grab and CDG are hurting a lot. Tourists are less hesitant to hail a cab so that they can get to the high speed rail station or airport with their luggage or eat at a well known restaurant because its probably an annual thing for them.

Building on this trend, until Singapore reopens its borders for international tourism, I am neutral if not bearish on Singapore based businesses such as Hotels and REITs. Expect more price slashing discounts for hotel deals (Hospitality REITS), tourist attractions (Genting Singapore) and restaurant deals (Japan Food, RE&S Holdings).

Its something that we have to accept being a small nation which lacks a domestic (tourist) market. It is going to hurt sales. No doubt the stronger businesses may survive, but I wonder how much cash burn will the smaller companies stomach with no tourist coming in until the end of year.

No comments:

Post a comment