Tourism sector

Tourism sector

- Coup d'etat invoked to maintain order
Yesterday (May 22, 2014) at 4.30 pm, the National Peace and Order
Maintaining Council (NPOMC) seized the administrative power in the
country in order to keep the political situation under control. There had
been many violent confrontations in Bangkok, vicinity and other provinces
that caused death and damage on people and properties.
- More pressure on tourism
The coup d'etat has a negative sentiment on tourism, affecting tourists'
confidence in visiting Thailand. About 50 countries have already warned
their citizen to be extremely cautious on visiting Thailand. If the political
situation becomes violent, they might raise their Outbound Travel Alert
(OTA), or more countries are likely prevent their people from visiting
Thailand, thus threatening tourist volume. However, tourism would be able
to rebound, provided that the tension subsides to the point that a new
government can be appointed or elected, and a clear explanation about the
political situation is given to Thai and international tourists. The political
turmoil is expected to press tourism only around 2Q14 - 3Q14 (low
season). After that, tourism is projected to rebound in 4Q13 (high season).
According to the statistics, in the month that major political events took
place, tourist volume tended to plunge drastically; two or three months
was usually needed after that to regain confidence from tourists and revive
tourism. During the September 2006 coup d'etat, tourist volume dropped
by 20%qoq to 979,000 in September, then increased in 4Q06 (October -
December 2006). This is similar to the April 2009-2010 emergency decree
that took place in a low season. As the political turmoil has continued since
the beginning of 2014, foreign tourist volume is expected to drop from
26.7 million in 2013 (4M14 tourist volume dropped by 5%yoy). We are
currently working on how severely the coup d'etat affects FY2014 foreign
tourist volume.
- UNDERWEIGHT. Avoid hotel stocks
The negative factor has been pressing hotel-tourism stocks. We reiterate
UNDERWEIGHT and recommend avoiding investing on this sector for a
short term. Among three companies under our coverage, MINT would be
affected less by the political tension thanks to its diversified business;
income from hotel business in Thailand made up less than 20% of MINT's
1Q14 total income. For CENTEL, 50% of its income is from food business
while another 40% is from hotels in Thailand and 10% is from hotels in
Maldives. ERW would be affected most, as over 90% of its income is from
hotel businesses.