Concerns over the late return of Chinese tourists and the low season effect have pushed share prices of hotel operators down recently, despite year-to-date foreign tourist arrivals in Thailand reaching 10.4 million, or around 30% of the Tourism Authority of Thailand’s full-year projection.
In recent weeks, shares of Thai hotel companies have fallen in value or been flat traded as investors are concerned that the country’s struggling tourism sector won’t bounce back as rapidly as hoped, particularly among Chinese travelers.
Krungsri Capital Securities, however, disagrees with the markets and argues that the tourism industry is not as dire as markets suggest. The brokerage also reiterated its positive view on the hotel sector, which it views as an attractive accumulation opportunity.
It is true that the return of Chinese tourists, a major tourism driver in Thailand for many years prior to the pandemic, is still sluggish in comparison to arrivals from Russia, India, and Korea. Only 20% of the TAT’s prediction and 21% of the pre-covid level of Chinese tourists have arrived so far this year. However, according to Krungsri research, concerns about safety when visiting ASEAN nations and China’s slow reopening for outbound travel are the two main issues discouraging Chinese visitors from traveling Thailand.
Krungsri maintains a “buy” recommendation on the hotel sector as valuation is reasonable, trading at historical 10-year average EV/EBITDA multiple.
