After nearly three years of ongoing travel bans, lockdowns and mandatory quarantines due to the pandemic, the majority of Asian and Southeast Asian countries have now scrapped their last remaining travel restrictions in a bid to welcome back foreign and international travelers.
While several countries reopened at the start of summer, some nations were not as lenient, keeping much of their border restrictions in place and imposing a limit on the amount of daily passenger arrivals.
Arnott Capital – September Performance Update
Arnott Capital commentary for the month of September ended September 30, 2022. The fund returned negative 1.79% for the month of September 2022. Net exposure averaged 29% long, while gross averaged 107%. This brings our Calendar Year Return to positive 3.06% and since inception return to positive 23.00% p.a. net of fees. Q3 2022 hedge Read More
Asia Opens Up Tourism
The latest insight reveals that roughly 21 Asian and Southeast Asian countries have now fully reopened for tourism, with some still having minimal travel requirements in place for foreign visitors. China remains mostly closed.
With the region now welcoming back tourists, travel merchants and corporate travel groups are eager to restart the local tourism industry as the pandemic demolished Southeast Asia’s $390 billion tourism industry and erased millions of jobs.
In Brunei Darussalam, Mongolia, Philippines, Thailand and Vietnam it’s estimated that nearly 1.6 million tourism-related jobs were lost during the height of the pandemic, with further estimates suggesting the number could be much higher.
Trampled by the pandemic, several nations have since reinstated new travel policies in hopes of rebounding their local tourism industry. Yet, the optimisation of recovery has been met with experts suggesting some nations could face long-term ecological and environmental issues due to over tourism.
Back in 2018, former Philippines president, Rodrigo Duterte managed to close off the white sand island of Crimson Boracay for six months in an effort to rehabilitate the natural environment. After reopening, the island has kept some sustainability measures in place, yet in April this year, exceeded its daily visitor count multiple times, conly creating more problems for authorities.
Despite prices up for nearly everything, from airline tickets, lodging, restaurants and transportation – pent-up consumer demand has surpassed expectations by far this year.
In recent weeks, Thailand, the second largest among the Association of Southeast Asian Nations (ASEAN) unveiled its target of welcoming back more than 30 million foreign tourists in 2023, an optimistic figure that’s still below pre-pandemic levels. The government has been eager to kickstart the country’s tourism sector which represented 20% of Thailand’s Gross Domestic Product (GDP) in 2019.
Thailand lifted all its travel restrictions on July 1, 2022.
The semi-autonomous Chinese city – Hong Kong – recently dropped its hotel quarantine requirements in September, later followed by Taiwan resuming visa free entry for U.S. and European citizens.
For much of the region in slow recovery mode, travel and leisure stocks endured positive change of course in recent weeks on the back of reports that nations are further easing restrictions.
Early September revealed positive growth for travel stocks in Southeast Asia, as the Nikkei 225 jumped 1.16%, and the Topix Index gained 0.75% after Japan announced reports of waiving its travel restrictions.
In recent days, stocks were trading upwards as the Wall Street rally continued. By October 14, both the Nikkei 225 and the Topix gained 3.25% and 2.35%, respectively. The Han Seng Index in Hong Kong jumped by 1.93%, while the Shanghai Composite was up 1.84% at market close.
Local economic rebound has been slow, but steady despite ongoing challenges. Market data suggests that as countries reopen for tourism, a much needed economic injection, red-hot inflation, soaring interest rates and higher travel costs could dampen optimism.
Yet, these challenges won’t hinder consumers from taking to the skies, as pent-up demand and revenge travel fueled a summer of travel chaos largely spread across the U.S. and Europe.
Although an exodus of the travel season is now behind us, Leeny Oberg, Finance Chief at Marriott International (NASDAQ:MAR) commented on the state of travel and leisure in the country at the moment. According to Oberg, “We are not seeing any signs of any demand pullback at this point. People want to get out there and travel.”
But on the stock market, higher prices reflected in overall better performance.
Airline Stocks Rise
Asian airline carriers have made a steady return in recent months. The Hong Kong-based Cathay Pacific Airways Ltd. (HKG:0293) announced in May 2022 it would rehire hundreds of previously laid-off cabin crew ahead of its recovery agreement.
Share prices have been steadily gaining in recent months, with August experiencing positive growth with the airline posting a 17% rise in revenue for the first half of the year. In post earrings, stocks were up by 0.94%, and investors are hopeful that talks with Boeing to refresh its fleet could drive up passenger count for next summer.
ANA Holdings (TYO:9202), the Japan-based aviation giant has seen share prices march upward in recent months with year-to-date (YTD) performance gaining 16.13%. Solid performance comes after the recent announcement of the Japanese government scrapping its COVID-related restrictions and welcoming back foreign travel.
Asian airline group Singapore Airlines Ltd. (SGX:C6L) has recently started a private discussion with Tata Group for a possible integration of Vistara and Air India. The deal would see the company growing its fleet, and operating more connecting flights to India. YTD share performance has gained 0.60%, but the airline carrier is confident in the upcoming holiday season to make a rebound on the stock market.
Corporate hotel group Hyatt Hotels Corporation (NYSE:H) has also been a solid performer so far, with prices soaring by 23.7% in the last year. This is a significant performance against the overall industry decline of 3.9%. The company has experienced positive growth in recent months, and last year’s performance has increased 2023 full-year estimates by 42.1%.
Japanese-based Oriental Land (TYO:4661) has managed to regain strong revenue performance after witnessing a 33.45% jump in its annual revenue, a major boost after two years of berish performance. Overall stock performance has been regaining traction, with YTD prices jumping 3.80%. Oriental is poised for a strong long-term increase over the coming months as travelers return to the region.
Hotel group, Pan Pacific (TYO:7532) has held strong revenue performance between 2019 and 2022, despite the pandemic seeing the company having to limit its operations in some of its more popular tourist destinations. For investors though, the outlook on share performance has been largely positive, with YTD prices up by more than 60%.
September and October saw prices come down slightly, but the company has been working on improving its topline by updating its guest packages and hiking prices due to operational cost increases.
Despite the surrounding possibility of a recession and consumers trying to cut back on irregular spending, other contenders such as Carnival Corporation (NYSE:CCL), Boyd Gaming (NYSE:BYD), and Choice Hotels International (NYSE:CHH) are all in a comfortable position after the turbulent summer season.
This rebound has allowed major travel and leisure corporations to regain losses experienced throughout the last two years, and build a suitable safety net in case of any sudden market turndowns.
On top of this, with borders now reopened, and travel back in full swing, companies can continue their expansion of operations in newer and foreign markets. This would allow them the opportunity to pick up where they left off just before the pandemic shut everything down.
Expansion, domestic growth, and adding new services and products means that companies can increase their capacity and dominance in their respective industry.
Investors might have fled the market in a flurry to shield themselves from the possibility of major market downturns, but there are still some opportunistic possibilities left in the forgotten travel and leisure sector.
Though the industry is not completely recovered, and will still need to revolve its tight labor market conditions, it’s shows that with persistence, and a bit of grit, even the most hard-hit sectors can make a comeback
Even as the market starts to iron out the choppy conditions, going forward we could see investors slowly but surely changing their direction, as travel and leisure rebuilds itself on the traditional market and re-instill bullish investor sentiment.