3 tourism companies that may bounce back once the pandemic ends

PHOTO: Unsplash

Of the many industries that have been adversely impacted by the Covid-19 pandemic, one of the worst-hit has got to be tourism.

The tourism industry had, in recent years, been booming due to higher disposable incomes and the emergence of low-cost carriers.

But the erection of border closures and the curtailing of air travel have decimated the industry.

Singapore Airlines Limited’s April operating statistics are a good proxy for the tourism industry, with passenger volumes plunging a stunning 99 per cent across all three of its key airline brands.

Changi Airport has also suspended the operations for both Terminals 2 and 4 to reduce costs amid plunging visitor volumes.

Companies that rely heavily on tourism for their revenues face the prospect of a long winter as there is no indication as to when the pandemic can be brought under control.

However, if the borders reopen, business may return.

Here are three tourism companies that may bounce back once the crisis abates.

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Straco Corporation Limited

Straco is an owner and operator of tourism attractions in China and Singapore.

The group owns two aquarium assets in Shanghai and Xiamen, China, named Shanghai Ocean Aquarium (SOA) and Underwater World Xiamen (UWX), respectively.

Straco also operates a cable car service called Lixing Cable Car and owns the rights to develop the Chao Yuan Ge historical site in Xi’An, China.

In Singapore, the tourism operator owns 90 per cent of the Singapore Flyer, an iconic giant observation wheel.

Due to the initial spread of the virus in China, Straco had to temporarily shut all three of its China attractions from January 25.

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The SOA was re-opened on March 18, but it proved to be brief reprieve as it was forced to shut again on March 30 due to precautionary measures by the authorities who were eager to prevent a second wave of Covid-19 infections.

SOA re-opened a second time on May 15 but has to maintain the number of visitors at not more than 30 per cent of normal daily capacity.

Lixing Cable Car resumed operations on March 20, while UWX resumed normal operations (but with restrictions similar to SOA) on May 17.

Elsewhere, the Singapore Flyer encountered a technical fault and had to shut temporarily since November 19, 2019, but operations resumed on March 20 this year.

However, due to the circuit breaker measures in Singapore, the giant observation wheel had to be shut from April 7 until further notice.

Once some semblance of normalcy returns, Straco should be able to pick itself up again as visitor volumes ramp up gradually.

Genting Singapore Ltd

Genting Singapore operates and owns Resorts World Sentosa, an integrated resort (IR) that includes hotels, a theme park and a casino.

The pandemic and resulting plunge in tourist numbers have affected the group badly.

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In its first-quarter 2020 business update, revenue declined by 36 per cent year on year to $406.9 million.

Gaming revenue saw a plunge of 38 per cent year on year, while non-gaming revenue fell by 34 per cent year on year.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell by a steeper 55 per cent year on year.

The group expects to face significant challenges soon and is pessimistic for the rest of 2020.

One bright spot is the Japanese IR opportunity that the group continues to pursue.

It plans to submit a request-for-proposal for the IR in Yokohama City in the second half of 2020.

Sim Leisure Group Ltd 

Sim Leisure is a developer and operator of theme parks based in Penang, Malaysia.

The group operates ESCAPE theme parks in Malaysia and has opened three such parks in Penang by late-2019.

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In February this year, Sim Leisure inked an agreement to develop and operate its ESCAPE theme parks in Sri Lanka.

The signing of an MOU with Sri Lanka-listed Elpitya Plantations PLC marks the group’s first foray outside Malaysia.

In April, the group built on this momentum by signing a cooperation agreement with Guangzhou Daxin Water Park, granting its China partner the right to use “Sim Leisure” to secure theme park contracts in China.

Sim Leisure will receive a 5 per cent royalty payment from this agreement.

Though the pandemic will surely throw a major spanner into Sim Leisure’s plans, the group’s business development achievements should pay off handsomely once the crisis passes.

This article was first published in The Smart InvestorDisclaimer: Royston Yang owns shares in Straco Corporation Limited.