Asia helped spark a mining boom for Australia and while that's on the wane, the region is helping trigger the next boom for us in tourism.
That's certainly the message coming out of Sydney Airport Holdings Ltd (ASX: SYD), with management unveiling another increase in its monthly traffic numbers.
The news sent the stock jumping 1.3% to $5.30 in early trade when the broader market is struggling to hold its head above water.
The number of passengers from India and China that are moving through its terminals surged 20.5% and 14.4% in April compared with the same month last year.
Koreans were a distant third at 6.7% while those from Europe have been spooked into staying at home thanks to the region's economic woes.
But the Chinese and Indians were not enough to lift total international traffic for the month, which was essentially flat.
It's domestic travelers that saved the day with a 1.9% increase last month – taking total passenger growth to 1.2%.
But one data point doesn't make a trend and I believe the boom in Asian visitors is real and sustainable. On a year-to-date basis, international passengers are 2.9% higher than over the same period last year.
This is important to keeping investors onside as Sydney Airport will be able to pay bigger dividends. The stock is already on a respectable yield of around 5%.
Yield and earnings stability are probably the biggest draw cards for the stock. It's hard to imagine that anyone would buy the stock because of value given that the stock is trading on a 2014-15 price-earnings (P/E) of 65x, which drops to 55x the following year.
I don't think its lofty P/E will cause a price correction given that Sydney Airport is one of the best ways to gain exposure to the Asian tourism boom and growing demand by locals for domestic holidays as the Australian dollar weakens.
But I think it will give would-be buyers of the stock pause for thought. There's nothing wrong with paying a premium for a quality stock, but Sydney Airport has generated an average return on equity that's just keeping up with inflation over the past five years.
I won't be keen on adding the stock to my portfolio at these levels. If you wish to capitalise on the tourism theme, you should have a closer look at leisure facilities operator Ardent Leisure Group (ASX: AAD) or hotel operator Mantra Group Ltd (ASX: MTR).
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