Hotel Stock Prices Rise on Expectations of a Rebound in Tourism

Hotel stocks posted a gain on early Thursday trading as traders anticipated Thailand’s tourism industry to bounce back after the country lifted most Covid restrictions and China’s financial hub Shanghai finally eased lockdown.

The share price of Central Plaza Hotel Pcl. (SET: CENTEL) rose THB2.75/share or 6.71% to THB43.75/share, with a trading value of THB267 million.

The share price of The Erawan Group Pcl. (SET: ERW) rose THB0.14/share or 3.76% to THB3.86/share, with a trading value of THB81 million.

The share price of Minor International Pcl. (SET: MINT) rose THB0.75/share or 2.17% to THB35.25/share, with a trading value of THB319 million.

The share price of S Hotels and Resorts Pcl. (SET: SHR) rose THB0.08/share or 1.77% to THB4.60/share, with a trading value of THB105 million.

KGI Securities foresees tourist arrival at 8 million in 2022, of which 6 million arrivals are expected to be back loaded in 2H22, as many countries continue to see an improvement in Covid-19 situation, and most of them have already lifted Covid-19 restrictions.

Furthermore, KGI expects the negative impacts from cost inflation to be limited given the manageable rise in staff costs, and utilities costs are a limited portion of the total costs. Food business seems to receive a relatively higher negative impact as direct material costs have played a more vital role and accounted for around 40% of the total costs.

Overall, KGI has revised down its sector earnings forecast for 2022 in response to lower-than-expected profitability. On a positive note, its earnings forecasts for ERW and SHR are revised up due to their specific factors. KGI revised ERW’s earnings for 2022/2023 up 3%/11% due mainly to the higher-than-expected 1Q22 result and strong occupancy momentum going forward. SHR earnings for 2022/2023 are revised up 20%/12% amid its promising track record from the 1Q22 results and higher-than-expected hotel revenue in the UK.