• Still OVERWEIGHT; Top Picks: Airports of Thailand (AOT) and Minor International (MINT). The approved budget for Phase 5 of the domestic tourism stimulus campaign for Feb-Sep 2023 was halved vs in previous rounds. We think this may only result in a slight positive for the hotels under coverage, possibly contributing <1% to their toplines. While the quick recovery of international source markets should be the key earnings driver, in our view, we still expect a resilient local tourism outlook, ie 5% and 41% YoY growth in Thai visitors and domestic tourist income in 2023.

• One more phase of local tourism stimuli. The Cabinet on Tuesday approved the THB2.02bn fifth phase of the We Travel Together domestic tourism stimulus campaign that will run between February and September. Under Phase 5, the Government will cover 40% of the accommodation charge – not exceeding THB3,000/night – and provide a THB600/day e- voucher for food and services. Altogether, 560,000 “entitlements” will be provided to Thai citizens who subscribe to the campaign, with each subscriber being able to receive a maximum of five entitlements. However, airfares will not be subsidised as in previous phases of this scheme. The Tourism & Sports Ministry forecasts the subsidy rights will be grabbed by 112,000 people and generate tourism revenue of THB12.54bn. The Cabinet also approved a THB1.93bn budget for other tourism promotion measures, ie encouraging both local and foreign tourists to travel more in the kingdom.

• Slightly positive, smaller benefits to hotels. We think this fifth phase may act as a slight positive for Thai hotel operators. However, as the budget was halved vs in previous phases (ie 1-2m room nights and budgets between THB4bn and THB6bn each), we expect less benefits to our covered Thai hotels’ earnings – revenue generated from the campaign may be <1% of their FY23F toplines. In our view, the fast recovery of the international guests mix (approaching the pre-COVID-19 levels) may be the key earnings catalysts among listed hoteliers rather than the local source market.

• Seeking resilient domestic tourism in 2023. The domestic tourism market booked 189m trips (+257% YoY; 14% above 2019’s levels) and THB642bn receipts in 2022 (+197% YoY; 59% of 2019’s levels) – supported by the easing of the Omicron variant and improving travel confidence. Despite an expected uptrend in overseas travel among the Thais in 2023, we also expect an ongoing recovery in local travel – given the Government’s tourism promotions for second-tier cities and improving hotel room rates – to help support the domestic tourist segment, with 5% and 41% YoY growth in trips and revenue to 198m and THB904bn, ie 84% of 2019’s levels.

• AOT and MINT still Top Picks. We expect AOT’s earnings momentum to get stronger throughout FY23 (Sep) with an earnings turnaround by 1HFY23 on improving revenues from aeronautical and commercial activities. MINT’s current valuation is still attractive vs its peers, while the company’s overseas hotel operations – the Maldives and Europe – may also stand to benefit from China’s border reopenings as well. Potential hikes in average occupancy rates may strengthen its revenue per available room and improve profit margins further. We also have a BUY call on the Erawan Group (ERW) for its pure hotel play, with c.90% of topline generated from Thailand operations. We believe ERW may see a turnaround in 4Q22 bottomline to a core profit of THB111m – its first since 1Q20.

Source: RHB Research - 25 Jan 2023