Hospitality sector may benefit, with 2026 tourist arrivals forecast to hit 17 million: OCBC Research

[SINGAPORE] The hospitality sector may be poised to reap benefits with Singapore’s tourist arrivals forecast to hit 2026 targets set by the Singapore Tourism Board (STB), said OCBC Group Research.

While 2025’s 16.9 million tourist arrivals were shy of STB’s projected 17 million to 18.5 million range, they nonetheless marked a 2.3 per cent increase from the previous year and a recovery to 88.5 per cent of pre-Covid levels, said OCBC on Tuesday (Feb 10).

It expects Singapore’s 2026 tourism arrival numbers to meet the STB’s expected range of 17 million to 18 million visitors, barring any “black swan events”. 

“We expect Singapore to meet this quite easily, supported by a steady pipeline of meetings, incentives, conferences and exhibitions events and concerts,” said Ada Lim, OCBC equity research analyst.

Notably, FY2026 could record firmer hotel performance, improved tourist receipts and higher retail sales, said Lim, citing STB projections for tourist receipts to come in within the S$31 billion to S$32.5 billion range this year, above the forecast range of S$29 billion to S$30.5 billion for 2025.

“Our house view is for retail sales to expand another 2 per cent to 3 per cent year on year in 2026, underpinned by a strong pipeline of new products and experiences, as well as a supportive macroeconomic backdrop.”

Stocks with exposure to the hospitality sector, from real estate investment trusts (Reits) to aviation names, may reap benefits in 2026, OCBC said. 

“(We) prefer upstream players within the aviation complex amid multi-year maintenance, repair and overhaul (MRO) upcycle,” OCBC added. 

Hotel performance expected to be firmer

OCBC noted that 2025 was a “challenging” year for hotels, with industry-wide softness affecting the results for Singapore-listed Reits with hospitality exposure. 

However, hotel performance is expected to be firmer in FY2026, on the back of a “more exciting calendar of events” and limited hotel supply, OCBC said. 

Notably, the projected slower growth in average hotel room supply for 2025 to 2029 could support room rates, OCBC said. 

Citing Cushman & Wakefield data, the bank noted that average hotel room supply growth is expected to stand at around 1.3 per cent from 2025 to 2029, which is “significantly below the pre-pandemic average of 4.6 per cent from 2015 to 2019”. 

In view of these forecasts, OUE Reit and CapitaLand Ascott Trust are guiding for a firmer FY2026, OCBC said.  

Aviation sector 

OCBC noted that global order backlogs for aircraft – which have surpassed 17,000 – will likely require multiple years to be resolved, such that even as production is expected to accelerate this year, a normalisation of this backlog is “unlikely before 2031 to 2034”.

As older planes are put to service for longer, the increased need for checks and servicing – alongside unanticipated maintenance visits – could bode well for MRO shops, said OCBC. 

While SIA Engineering has lost 4.2 per cent in the year to date, the counter is beginning to show promising signs, said the analyst. 

“At current levels, we are starting to see value emerge in SIA Engineering’s shares,” she said. 

This comes as the company recently inked two memorandums of understanding (MOU) at the Singapore Airshow to strengthen its talent pipeline.

The first MOU, signed with the Singapore Economic Development Board, involves the development of a training academy to boost hands-on engine maintenance capacity and technicians’ capability levels, OCBC said. 

The second agreement, signed with Singapore Polytechnic, aims to strengthen alignment between the institution’s curriculum and real world MRO requirements. This is to provide early industry exposure for students and to create applied-learning opportunities through industry-based projects. 

OCBC added that China Aviation Oil (CAO) has continued to extend gains with a total return of 8.4 per cent year to date, underpinned by tailwinds from China’s ongoing outbound travel recovery.

The bank noted that CAO is a constituent of the iEdge Singapore Next 50 Index, and could benefit from ongoing inflows from the Equity Market Development Programme, “especially if it begins to deploy its substantial net cash position for accretive acquisitions or to support a higher dividend payout ratio”.

While OCBC remains “constructive” on CAO’s long-term outlook, it expressed caution for the near term, amid an ongoing corporate restructuring between CAO’s parent China National Aviation Fuel Group and Sinopec.

“We do not yet have clarity at the time of writing over how the restructuring will affect the combined entity’s ownership in CAO, as well as implications on its licence to import and distribute jet fuel in China,” the bank said.