What stocks will profit from the reopenning of tourism?

Travel in Phu Quoc Island

COVID-19 had caused a "severe" decline in worldwide tourism from 2020 to 2021. In 2020, there would be just 3.8 million international arrivals in Vietnam, down 79 percent from 2019. The number of domestic tourists has also decreased to 56 million. Meanwhile, Vietnam's tourism industry's overall revenue was only VND 312 trillion, down 59 percent.

In early 2021, the Delta variant, as well as stringent social distancing, continue to present exceptional difficulties for Vietnam's tourism business. In 2021, there would be only 157,3 international visitors to Vietnam, a decrease of 96%. Domestic tourists  numbered around 40 million, with overall tourism earnings falling to VND 180 trillion.

The tourism industry in Vietnam made a stronger comeback from March 15 when Vietnam fully opened its doors to international travelers, as requested by the Ministry of Culture, Sports and Tourism.

Negative SARS-CoV-2 test results, a continuous connection while traveling in Vietnam, and health insurance or travel insurance that covers Covid-19 therapy with a minimum liability of $10,000 USD are among the rules that will apply to foreign visitors to Vietnam starting March 15.

SSI Research believes that, while there are still regulations in place to ensure the safety of epidemic prevention, the Vietnam tourism industry looks positive from 2022, especially with the orientation of tourism reopening for international visitors to Vietnam, and with the gradual reopening of other countries around the world. The number of visitors is unlikely to rebound to pre-epidemic levels immediately, but 2021 may be the most difficult year for Vietnam's tourism businesses.

According to the Vietnam National Administration of Tourism, the tourism industry in Vietnam aims to welcome 65 million tourists by 2022, with 5 million international visitors and 60 million local visitors. The tourism industry's total revenue is anticipated to be 400 trillion VND.

The reopening of the tourism industry will take time to reflect on businesses’ performance, according to SSI Research, but given stock investors' expectations, stock prices will often respond ahead of earnings performance.

"When Vietnam formally opens its doors to international visitors, three primary industries would profit," SSI Research said.

First, a big comeback in the number of visitors after two years of epidemic might immediately boost tourism and travel. VTD (Vietourist), VNG (Thanh Thanh Cong Tourism JSC); CTC (Hoang Kim Tay Nguyen JSC); TCT (Nui Ba Tay Ninh Cable Car Tour JSC) are among the stock recommendations.

Tourism revenue for 2019- 2022F period

However, in the context of a gradual rebound in travel demand, the issuance to raise chartered capital at VTD will diminish its profit. TCT also has to contend with Sunworld cable car, which is a formidable competitor.

Second, the tourist accommodation sector may benefit from the tourism opening as occupancy levels rise in response to the increased number of visitors. DAH (Dong A Hotel Group JSC), OCH (OCH Hotel and Service JSC), NVT (Ninh Van Bay Tourism Real Estate JSC) are some of the stocks to consider.

Third, by transporting passengers and commodities via air, rail, road, and sea channels, tourist transportation could benefit indirectly... The record gasoline prices, on the other hand, will have an impact on companies in this category.

HVN (Vietnam Airlines), VJC (Vietjet), SKG (Superdong Kien Giang), SRT (Saigon Railway Transport JSC), and HRT (Hanoi Railway Transport JSC) are among the stocks that will profit. ACV (Airports Corporation of Vietnam), according to SSI Research, will also gain greatly from the post-epidemic recovery.