With the new vaccinated travel lanes (VTLs) set to return from Feb 25, DBS Group Research analysts Jason Sum, Geraldine Wong and Rachel Tan estimate that Singapore should “reopen” by 65% to 70% by June and could potentially reach 90% to 95% if China eases its border controls.
New VTL lanes with Qatar, the UAE and Saudi Arabia will begin on Feb 25 and VTLs with Israel and the Philippines will begin on March 4.
In addition to the resumption of its new VTLs, Singapore is also looking to relax its quarantine and testing requirements.
For instance, VTL travellers will no longer have take self-administered ART tests from Day 2 to Day 7 upon their arrival into Singapore from Feb 22. VTL and travellers from Category 1 countries will no longer need to perform a polymerase chain reaction (PCR) test on arrival. Instead, they will have up to 24 hours from their entry into Singapore to take a supervised self-swab ART test.
Category 1 countries include Hong Kong, Macao, Mainland China and Taiwan.
In their Feb 17 report, the analysts say they expect the pandemic situation to peak by the 1Q2022, in line with the curve of new cases seen in South Africa, the US and some countries in Europe.
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“Hence, Omicron’s impact to the sector should be largely confined to 1Q2022, and we should see a swift rebound in both inbound and outbound tourism from 2Q2022,” they write.
On the news of the borders reopening, Sum, Wong and Tan said that it will be “the sound of heaven’s bell ringing in the ears of our hoteliers”.
In terms of timing, the current reopening trajectory is potentially ahead of the market’s expectations before the end of the 1H2022.
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“The announcement is also timely as quarantine hotels end their government contracts; we note that hotel quarantine bookings have declined in substantial numbers before the start of 2022,” write the analysts.
“With testing requirements and quarantine requirements substantially relaxed, pandemic-related cost of travel has been substantially reduced, which, we think, will be a stride towards travel normalcy for inbound tourists,” they add.
With the international demand streams becoming more visible as we go into 2Q2022, Singapore hoteliers are likely to see a pick-up in occupancy and room rates ahead of the market’s expectations of a pick-up in 2H2022.
To the analysts, the surge of inbound travellers from key Asian markets, including Singapore, is seen to benefit the hotel Singapore REITs (S-REITs). The surge of travellers will bring about an estimated 42% to 100% of revenue exposure, “as [the industry] looks forward to developments on reopening from other key markets such as Japan and China”, say the analysts.
Aviation sector turnaround
Further to the relaxing of measures, air travel in Asia should begin to trend higher as more countries begin to relax border controls.
“Airline passenger yields should be supportive, given significant pent-up travel demand (particularly premium leisure), and help offset elevated crude oil/jet fuel prices and general inflation pressures,” write the analysts.
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“Hangar activity levels for maintenance, repair and overhaul (MRO) operators like Singapore Technologies (ST) Engineering will rise as airlines return more aircraft into service; SATS Ltd will also benefit from higher traffic at Changi Airport and in the region,” they add.
Not all Covid-related services will be gone in near-term as things go back to “business as usual”
Healthcare providers may still stand to benefit from the return of elective procedures and the potential pent-up demand of medical tourism, say the analysts at DBS.
This is in spite of the stepped-down testing requirements, that lead to lower contributions from Covid-19-related services that have generated earnings for healthcare providers during the pandemic.
“The further relaxation of travel restrictions and less stringent quarantine/test requirements would encourage the return of medical tourism,” they write. “In addition, simplified Covid-19 rules could hasten the return of elective procedures and recovery to ‘business as usual’ for healthcare service providers.”
Photo: Bloomberg
