Will Falling Tourist Arrivals Hurt Singaporean Companies?

Over the weekend, I read an article about the weak consumer sentiment that’s plaguing the shopping malls along Singapore’s famous shopping belt, Orchard Road.

The author of the article had cited two possible reasons for the phenomenon: Consumer fatigue and falling visitor arrivals to Singapore. The author also suggested that Singaporean malls will need to step up their game if they want to remain relevant in the future.

This led me to a question: Are there listed companies that are affected by these shifting trends? This article is an attempt at a quick run through of the question.

Competition from the region

A reason for the fall in tourist arrivals to Singapore could be the lure of the cheaper Japanese yen.

Visitor Arrivals

Source: Singapore Tourism Board (STB)

The graph above shows how visitor arrivals to Singapore in 2014 had dipped by 3%. When we dig deeper, we can see that visitor arrivals from China to Singapore was a big contributor as it fell by 24% year over year. Meanwhile, visitors from China to Japan almost doubled, suggesting that mainland tourists had chosen to show up elsewhere.

That fact has not escaped the eyes of Henry Tay, chief executive of luxury watch retailer Hour Glass Ltd (SGX: AGS). In Hour Glass’s 2014 annual report, Tay revealed that mainland Chinese consumers accounted for 20% of his company’s sales. The positioning of the company’s stores in places like Japan and Australia was a reflection of Tay’s thoughts on where his customers may turn up.

Hotel owner CDL Hospitality Trust (SGX: J85) may already be feeling the pinch from lower tourist arrivals in Singapore. In its recent earnings report, the trust reported an 11.3% decline in distribution per stapled unit (DPS). As you can see in the graph above, the lower tourist arrivals may have had an impact on the amount of revenue (represented by RevPAR or revenue per available room) that hotels in Singapore can charge in general.

Uneven fortunes

Not every company may be suffering from lower visitor arrivals to Singapore, however.

While the ever-present Wisma Atria, which is owned by Starhill Global Real Estate Investment Trust (SGX: P40U), reported sharply lower tenant sales, Vivocity, which is owned by Mapletree Commercial Trust (SGX: N2IU) saw its tenant sales inch up by 0.3%.

The disparity in the fortunes of the two aforementioned malls could perhaps be traced to STB’s 2013 report which shows a growing visitor preference for integrated resorts (Vivocity is in the vicinity of an integrated resort in Sentosa) as opposed to a dwindling preference for Orchard Road (where Wisma Atria is located).

2015-07-07 STB

Source: Singapore Tourism Board (STB)

Foolish summary

The struggling retail sentiment at Orchard Road could be why the STB is launching a $20 million dollar global marketing campaign to attract visitors to Singaporean shores. Furthermore, Orchard Road will organize a pedestrian night for every first Saturday of the month.

It remains to be seen if these efforts will pay off. At the moment, the STB is expecting modest increase in visitor arrivals to Singapore in 2015.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.