Despite a weak performance during the first three quarters of the year, Taiwan's tourism sector is set to get a shot in the arm from the upcoming deregulation of Chinese tourists visiting the nation and the opening of the long-awaited high-speed rail system, according to a report issued by Macquarie Securities.
In the report published on Tuesday, the research house upgraded the tourism sector from neutral to outperform.
"We hold a positive view of the Taiwanese tourism industry mainly on the back of our assumption that the door to Chinese tourists will be opened in 2007," the report said.
From the high base last year, the number of visitor arrivals to Taiwan grew by only 4 percent year-on-year during the first nine months, compared with the 14 percent growth rate recorded last year.
The hotel occupancy rate dropped by 2.2 percent to 68.7 percent at the same time that the number of domestic tourists declined by 3.1 percent from a year ago, the report said.
But signs of recovery have surfaced in the third quarter, it said, adding that growth in the domestic food and beverage business are expected from postponed wedding banquet demand following two consecutive ghost months this year.
Moreover, domestic political uncertainties could instead push the government to improve relations with Beijing to boost the nation's economy.
"Given President Chen Shui-bian's (陳水扁) current weakened political position, we believe Premier Su Tseng-chang (蘇貞昌) has greater opportunity to push through policies beneficial to Taiwan's economy, including liberalization of the rules restricting Chinese tourists from visiting Taiwan," the report said.
As such, the research house forecast that type-I Chinese tourists, or normal tourists with jobs, are likely to start visiting the nation in the first half of next year. Currently only type-II and type-III Chinese tourists, or those with a visa or job permit from a third country, are allowed to visit Taiwan.
"With the assumption of a 1,500 per day quota next year and 2,000 people per day in 2008, we expect Chinese tourists to comprise 13 percent and 16 percent of visitor arrivals respectively," it said.
Another growth driver is the upcoming launch of the high-speed rail system late this year or early next year. The hotel industry, especially in the south, is expected to benefit from the increase in domestic tourists given more convenient and cheaper transportation, the report said.
Bolstered by these incentives, ratings for the Ambassador Hotel (
Shares of Formosa International closed up 0.1 percent at NT$92.9 (US$2.82) yesterday on the local bourse, with a 12-month target price at NT$90.1 set by Macquarie.
The 12-month target prices for Ambassador Hotel and Jianhushan Fancyworld would be NT$37.6 and NT$19.1, compared with their closing prices of NT$32.9 and NT$18.55 yesterday.