Safety fears test Thai tourism stocks

THAILAND’S tourism-related stocks are enduring a turbulent start to 2025, with share prices down 8% to 18% this month alone.

The sell-off follows viral reports of a Chinese actor allegedly being kidnapped in Thailand and taken across the border to Myanmar, which have sparked safety concerns among Chinese tourists.

Despite the jitters, Maybank Securities (Thailand) PCL remains optimistic, seeing the current correction as an overreaction.

“We think the investor panic is irrational as tourist arrival data to Jan 19 showed continued strong growth of 14% year-on-year (y-o-y) in average daily visitation from China,” notes the investment banking group.

The kidnapping claims have revived fears akin to the so-called “No More Bets” effect, named after a blockbuster Chinese film that discouraged travel to Asean countries due to safety concerns.

A late 2023 survey on Chinese social media platform Weibo reveals 85% of 54,000 respondents were hesitant to travel to the Asean nations. While these sentiments have amplified in recent weeks, past experience suggests the market reaction may soon stabilise, Maybank Securities states.

“We gathered data from past incidents including a shopping mall shooting, terrorist bomb, and a boat sinking in Phuket.

“The recent viral news started around Jan 6, and stock prices fell by a similar margin. Therefore, we expect an imminent end to the correction,” says the research house.Resilient tourist numbers

The Association of Thai Travel Agents (ATTA) has warned that Chinese tourist arrivals could drop by 10% to 20% during the upcoming Lunar New Year holiday (Jan 29 to Feb 16). However, as of Jan 19, average daily tourist arrivals from China have grown by 14% y-o-y, reinforcing Maybank Securities’ belief that the overall impact will be limited.

While the incident may deter group tours, a key segment for the mass market, independent Chinese travellers continue to visit. Listed hoteliers have also seen minimal cancellations.

Maybank Securities highlights that, for hotel operators under its coverage, Chinese tourists contributed just 17% of revenue for Erawan Group (ERW), 14% for Asset World Corp (AWC), and 10% for Central Plaza Hotel (Centel) in the first nine months of 2024.

“We thus see limited 2025 expected earnings impact of 0.5% to 1.4% for every 5% drop in Chinese arrivals. Impact on Minor International would be tiny due to its high overseas revenue exposure,” it explains.

History of recovery

Thailand’s tourism industry has endured crises before, from shootings to boat sinkings.

On average, such events have led to share price declines of 9% to 13%, with recovery taking nine to 10 trading days. The current market reaction appears to be following a similar pattern.

Looking back to 2024, the country welcomed 6.7 million Chinese tourists – below the 7-8 million target set by the Tourism Authority of Thailand (TAT) – due to China’s economic slowdown and competition from Japan’s booming tourism sector. For 2025, ATTA expects flat arrivals from China, challenging TAT’s ambitious goal of nine million.

Still, diversification is cushioning the blow.

Thai hoteliers are increasingly tapping markets like India, Europe, and the United States, while high-spending tourists continue to show no signs of slowing.

Maybank Securities expects the viral story to “pose a small threat to Thai tourism” and highlights the benefits of a more diversified mix of tourist nationalities.

Despite recent headwinds, the outlook for tourism stocks remains positive.

The hotel sector under Maybank Securities’ coverage is currently trading at a 10-year low in terms of both price-to-earnings and price-to-book value multiples, suggesting valuations are attractive.

While individual challenges persist – such as ERW’s lease concerns, renovation impacts at Centel, and AWC’s heavy investments – these are already priced in, the investment bank says.

“Despite multiple earnings downgrades from the above negative factors, the sector still offers strong earnings growth in 2025 to 2026, at 23% and 20%, respectively,” it states.

Overall, the long-term outlook for Thai tourism stocks remains bright, bolstered by robust fundamentals and ongoing recovery in tourist arrivals, according to Maybank Securities.

It believes that the current correction is nearing its end and reiterates its “positive” outlook on the tourism sector based on limited earnings downside, with 2025 visitor growth projected at 23%.

Investors may find reassurance in the resilience of the sector, which continues to adapt to shifting trends and challenges.

For now, the viral story is just another bump on the road to recovery.