Singapore tourism to be hurt by Qantas-Emirates tie-up

But here's why it's no biggie.

According to DBS, Qantas website indicates that it has re-routed its kangaroo routes via Singapore to Dubai from 31 Mar, as part of its new alliance with Emirates.

DBS noted that this move has led some investors wondering about the impact on Changi Airport, Singapore's tourism, Singapore Airlines (SIA) as well as SIA Eng and SATS.

It outlined that the negative impacts are "1) travelers from Europe to their eventual destination in Australia might skip Singapore (as a transit stop) altogether and 2) Australians heading into Europe might also skip Singapore as a transit stop."

However, DBS also highlighted that this rerouting scheme may only have minimal impact on Singapore's tourism and hospitality industry.

Here's more:

Minimal Implications on Changi Airport operations. Qantas was previously flying 2 daily flights (QF1 and QF9) to London via Singapore (from Melbourne and Sydney), which will now be via Dubai.

These were operated using A380 aircraft where annual maximum seat capacity is 0.3m. This represents 0.69% of the 51.2m passengers that Changi handled last year. This is not expected to have major impact on operations of Changi Airport.

Singapore Hospitality sector to see minimal impact. The loss of these transit passengers may be read as negative on first look, but our analysis indicates a negligible impact on Singapore tourism as (i) transit passengers do not count as a visitor arrival statistic;

(ii) they are not a driver of accommodation demand in Singapore.

The Singapore Tourism Board continues to expect the demand for travel in Singapore to remain robust in 2013 with a growth target of 14.8m-15.5m visitors, implying a growth of up to c. 7.6% y-o-y for the year.

We believe a larger consideration is the rising room supply situation – where close to 4,100 rooms are to complete in 2013 (+8% increase in total room inventory) and expected to keep a lid on meaningful upside in room rates going forward.

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