Taiwan’s tourism shares have soared over the past few months despite an overall drop in the market, but analysts say a few can rise even further as the island prepares to cut restrictions on travellers from rival China.
Currently, Taiwan allows Chinese tourists to enter its territory only through a third point, usually Hong Kong. The limits on tourists and a ban on direct flights have been effective since Taiwan and China split amid civil war in 1949.
But last week Taipei and Beijing reached a landmark agreement to allow direct passenger charter flights during four major holidays each year.
The Taiwan stock market’s tourism sub-index has jumped 35% since April 1, when the two sides began moving to deregulate travel across the Taiwan Strait, while the overall market’s weighted price index has fallen 0,5% over the same period.
Only 173 000 mainlanders came to Taiwan last year, while 4,1-million Taiwanese visited China, said the Mainland Affairs Council, the island’s Cabinet-level body in charge of relations with China.
But once an agreement on year-round travel is reached, Taiwan’s annual tourism revenue is expected to reach 415-billion New Taiwan dollars (NT$ — about $12,71-billion), up about NT$20-billion, analysts said.
That extra revenue should be a welcome boost for the island’s tourism industry, which has grown rather slowly during the past decade, analysts said.
”We believe the high likelihood of the arrival of Chinese tourists in Taiwan, as early as in the third quarter, … warrants premium valuation for the sector,” says Jack Chang, an analyst at Yuanta Core Pacific Securities.
Tourism is a relatively small part of Taiwan’s economy. With NT$393,5-billion ($12,05-billion) in total revenue in 2005, it makes up about 3,4% of the island’s gross domestic product, says Chiou Charng-kuang, secretary general of the island’s tourism bureau.
Compared with other tourist destinations, Taiwan may hold special attraction to Chinese tourists because it has been off-limits to them for more than 50 years and because of the deep political and cultural ties between the two sides, analysts said.
”There are indications that, after 50 years of separation, there has been a lot of pent-up demand from Chinese tourists,” JP Morgan analyst John Chung says.
He says hotels should gain more than travel agencies or theme parks because tourists typically spend almost half their money on hotel bills.
Even though not all Chinese tourists will be able to afford five-star hotels, such as Formosa International, tight hotel-room supply, especially in Taipei, is expected to push all hotel prices higher.
Yuanta’s Chang says occupancy rates in Taipei hotels will likely increase by seven percentage points if 1 000 additional tourists arrive each day. — Sapa-AP