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2 stocks for the love of travel

Sun, sea, sand and share trading are my recipe for a good holiday, and with Christmas coming it’s worth considering what investments may best provide for future holidays. Indeed, the growth in global tourism seems inevitable, who wouldn’t want to see the world, take a break, travel and spend some of that hard-earned cash. With that in mind here are two stocks set to benefit from the long-term increase in business travel and tourism.

First up is Australia’s largest independent travel retailer Flight Centre (ASX: FLT). It’s seen some phenomenal growth in recent times, as Australians embraced its blended bricks-and-mortar and online business model. Furthermore, it’s now an iconic brand worldwide, operating in 11 countries with more than 2,500 travel stores.

The potential for continued growth in off-shore earnings is attractive and what could drive the business to yet another level. Its second and third-largest markets are the U.K and U.S, two large but relatively weak economies until recently, both are now showing signs of renewed economic strength. Many thought the internet would spell the end for high-street travel agencies, however Flight Centre has disproved that theory even introducing the hyperstore to the UK – a concept that is now being exported back to Australia and even the U.S. Optimism over the group’s growth prospects made the shares look expensive until a recent price pullback. Based on today’s price and 2014 earnings estimates the group currently trades on a more modest PE ratio of approximately 16.5 and any further price drop looks an opportunity.

If you feel you missed the boat with Flight Centre you would do well to consider Corporate Travel Management (ASX: CTD). It specialises in providing business travel services, which is a sector where demand is closely aligned to improvement in the world’s major economies. The group recently announced the acquisition of specialist Asian travel agency Westminster Travel for $49.2 million. Corporate Travel is currently conducting a rights issue to raise the funds and hope the deal will be its passport to fast-tracked entry into the massive Asian travel market. The share price has been on a tear recently and with FY14 earnings guidance recently upgraded – the stars may be starting to align for its off-shore earnings growth strategy.

Foolish takeaway

It’s a fair assumption that business and retail travel demand will steadily increase over time. A global economic recovery would also prove a timely tonic for an industry that has suffered its fair share of setbacks in recent years. Companies like these should be able to power ahead providing there are no unforeseen external impacts, such as an act of terrorism or global health crisis. For these reasons investors should remember to hold them as part of a diversified portfolio.

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Motley Fool contributor Tom Richardson (@tommyr345) owns shares in Corporate Travel Management.

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