DBS Group Research on Monday (Dec 6) said that Singapore hotels are unlikely to be impacted significantly by the sudden emergence of the newfound Omicron variant, given domestic demand drivers.

The research team's top picks are Ascott Residence Trust (ART) HMN and Far East Hospitality Trust (FEHT) Q5T, : Q5T 0% due to their ability to ride the upcycle faster and their significant exposure in large domestic markets and high stable rent make-up.

"With vaccination rates higher globally this time round, we remain optimistic that any delay in reopening is unlikely to be extended; we have not yet seen any restrictions on travelling domestically," the research team said.

DBS has "buy" calls on both ART and FEHT.

Its ART target price of S$1.30 represents a potential upside of 32.7 per cent from the counter's trading price of S$0.98 as at 3.50 pm on Monday.

Meanwhile, its FEHT target price of S$0.78 represents a potential upside of 33.3 per cent from the stapled group's trading price of S$0.58 as at 3.50 pm on Monday.

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The hospitality trusts are also trading at attractive valuations, DBS said in a sector note. It estimates DPU (distribution per unit) growth to remain robust, in the 16-43 per cent range, when travel momentum starts.

"We think that the long-term strategy of gradually pulling the tourism sector and business travel segment back to normalcy remains and can be quickly ramped up just as they are halted," DBS said.

While tourist inflow was minimal in 2021, the hospitality sector has primarily relied on local staycation demand and the government quarantine business for most part of the year. That being said, the tightening measures coincided with major holiday months - June and September, affecting both dine-in and social limit caps, deterring families from booking hotel staycations, DBS said.

"2021 was a softer-than-expected year for us but we maintain that the year 2022 onwards brings much hope," DBS said.