It’s no secret that the travel and tourism industries have taken it on the chin the past two years.
But there is light at the end of the tunnel.
With vaccinated travel lanes (VTLs) starting and the government extending the validity of the Singapore Rediscover vouchers to end-March 2022, tourism is starting to come alive again.
Based on initial demand, many are eager to travel overseas again.
Singaporeans have already ventured abroad to countries such as France, Germany and South Korea despite the hassle associated with additional safety precautions and regular testing via ART.
And this pent-up demand is not just limited to Singapore.
Expedia Group (NASDAQ: EXPE) announced new research that shows demand for cruises is on the rise, with a more than 20% month on month increase in demand for Canadian cruise searches in the current quarter and the next quarter.
With the outlook brightening, can investors see travel and tourism stocks hitting new highs next year?
Flights are picking up
Flights are gaining momentum at Singapore Airlines Limited (SGX: C6L), or SIA.
The airline has launched new flights in response to the launch of the VTLs and now has 92% of its pilots and 86% of its cabin crew back at work.
As of mid-November, SIA was running at 37% of pre-COVID capacity and anticipates that this will rise to 43% by this month.
Passenger numbers have also been on the rise at the airline, nearly tripling from the low of 67,700 in February this year to 189,700 in October.
VTLs have also been extended to six more countries as of end-November, taking the total number of VTL countries to 27.
Importantly, these 27 countries accounted for around 60% of total daily arrivals pre-COVID, which means their inclusion in the VTL list should provide a boost to tourism here.
Over at SATS Ltd (SGX: S58), the numbers are also showing a positive trend.
The ground handler reported a 4.1% year on year increase in flights handled for its fiscal 2022 first half (1H2022) ended 30 September 2021, while meals served jumped by 27.2% year on year to 26.3 million.
The company’s base case scenario is for Asia-Pacific air travel to reach pre-COVID levels by 2023, with the best-case scenario being a return to pre-pandemic levels by the second half of 2022.
This gradual but sustained increase in tourists will surely benefit tourism-related businesses such as Genting Singapore Ltd (SGX: G13) and Straco Corporation Limited (SGX: S85).
A view to the future
The blue-chip names in aviation are already gearing up for a brighter future.
SIA is increasing its fleet from 178 to 193 by 31 March 2022 in anticipation of more demand.
The group is also enhancing its KrisFlyer programme with more than 245 new non-air partners onboarded in 1H2022.
And over at SATS, the airline caterer has come up with a four-year growth plan during its recent Capital Markets Day.
It intends to reduce reliance on travel-related revenue by boosting its food solutions division to include a wider spread of clients.
Investors can take heart that these two integral companies in Singapore’s aviation industry are already planning to capture higher demand in the months to come.
New plans afoot
The good news is that the Singapore government is not stopping there.
The importance of Singapore as a regional travel hub cannot be overstated.
A land VTL scheme has been inked with our northern neighbour, Malaysia, since November 29, and will be expanded to general travellers from mid-December.
Currently, this VTL cross-border travel scheme allows up to 1,440 people into each country daily.
Once conditions stabilise and safety is assured, the numbers will be gradually ramped up.
A new sea VTL may also be launched soon such that Singaporeans can visit destinations such as Desaru, which now boasts luxury resorts and golf courses.
The increase in cross-border travel will benefit food and beverage businesses on both sides of the Causeway and also result in a further boost for tourism stocks here and in Malaysia.
Get Smart: A breath of fresh air for the two sectors
It’s been a long, tough road, but there is finally good progress being made at reopening borders and restarting the economy.
Optimism is in the air despite the emergence of the Omicron variant.
It’s tough to derail the positive sentiment and momentum unless the new variant turns out to be highly transmissible or deadly.
Thus far, evidence points to the contrary, which should bode well for aviation and tourism stocks as we head into a better 2022.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
