In a recent report, CGS International (CGSI) has revised their projections for Thailand’s tourist arrivals in 2024 and 2025, decreasing to 35 million (+28.5% YoY) and 38 million (+8.5% YoY) respectively, down from the initial forecasts of 36 million and 40 million. This adjustment is primarily attributed to 62% of Chinese tourists visiting at a level equal to 2019, during the first 10 months of the year.
The slowdown in Chinese tourist arrivals is expected to impact the hotel sector, with growth anticipated to be concentrated in higher-end accommodations. Conversely, lower tier hotels, specifically 3-star and below, are predicted to face more significant challenges.
For the Airports of Thailand (SET: AOT) in 2025, the analyst anticipates that every 1 million decrease in foreign tourist arrivals would result in a potential decline of 1.5% in revenue and 4% in core EPS.
Domestic hotels are likely to outperform overseas hotels in 2025, driven by stronger demand growth, with the opportunity for Thai hotels to increase Average Daily Rate (ADR) compared to properties in Spain, Italy, and the Maldives.
CGSI maintains an ‘Overweight’ rating on the sector and foresees solid core EPS growth of +20% YoY for 2025, particularly favoring ERW and CENTEL due to their higher domestic exposure compared to peers.
Furthermore, the analyst also provides a preview of the third-quarter 2024 earnings reports for the following stocks:
The Erawan Group Public Company Limited (SET: ERW)
ERW’s Revenue per Available Room (RevPAR) in the third quarter of 2024 is expected to be at THB 1,410 per room night, which is 3% lower than CGSI’s previous forecast in September. The decline in performance is attributed to a weaker-than-expected showing in September and a more significant impact than anticipated at the Grand Hyatt Erawan following an incident of poisoning in July.
As a result, the estimated core net profit during the quarter was revised down from THB 164 million to THB 126 million.
S Hotels and Resorts Public Company Limited (SET: SHR)
CGSI estimates SHR’s Revenue per Available Room (RevPAR) for the third quarter of 2024 to be THB 4,470. This figure falls at the lower end of expectations due to a sluggish September performance, marked by numerous cancellations in the Maldives and Samui.
SHR’s selling, general, and administrative expenses (SG&A) will see a sizable quarter-over-quarter increase, rising from 24% of sales in the second quarter of 2024 to over 25% in the third quarter of 2024. This uptick is primarily attributed to heightened expenditures in the UK and other areas.
Consequently, CGSI anticipates SHR to report a loss of THB 39 million, contrasting with the slim profit of THB 21 million forecasted in September.
Central Plaza Hotel Public Company Limited (SET: CENTEL)
CGSI anticipates that CENTEL’s hotels will experience a notable 9% year-over-year surge in Revenue per Available Room (RevPAR) in the third quarter of 2024, with Same-Store Sales (SSS) expected to remain flat for the period.
Additionally, the forecast factors in THB 40 million in pre-opening expenses related to the launch of the third hotel in the Maldives during the same quarter.
Consequently, CGSI expects CENTEL to disclose a net profit of THB 163 million, reflecting a substantial 121% increase compared to the previous year but a slight 3% decline from the previous quarter.
Minor International Public Company Limited (SET: MINT)
MINT is projected to achieve a net profit of THB 2.4 billion in the third quarter of 2024, reflecting a 17% year-over-year increase but a 12% decrease from the previous quarter, without factoring in any potential foreign exchange losses on its derivative contract.
While MINT’s hotels in Europe are anticipated to maintain robust revenue growth driven by strong tourist arrivals, CGSI is closely monitoring the hotel gross margin, which decreased from 42.4% in the second quarter of 2023 to 40.0% in the second quarter of 2024 due to increased costs.
As a result, a conservative estimate places MINT’s hotel margin at 38.0% in 3Q24 compared to 41.5% in 3Q23.
Airports of Thailand Public Company Limited (SET: AOT)
AOT is expected to face the consequences of duty-free space reclamation, which will begin to affect earnings in the fourth quarter of the financial year 2024, ended September. The core net profit for FY4Q24 is predicted to be modest at THB 4.37 billion, showing a 20% year-on-year increase but a 5% decrease quarter-on-quarter.
Despite an increase in international passengers to 18.7 million, it is believed that a reduction in concession revenue due to space reclamation leading to lower concession earnings, coupled with higher operating expenses, will put pressure on earnings growth in FY4Q24 and 2025.
