There are few genuine tailwinds that investors can invest in that are likely to deliver good long-term earnings.
Aside from the ageing population, I think the best tailwind out there is the tourism tailwind.
There is a growing number of people visiting Australia and New Zealand. There’s a rising middle class in Asia that want to see the world. There’s a growing number of baby boomers in the US reaching retirement age who want to enjoy their golden years visiting countries. There’s our own retiree generation that want to see the rest of Australia and New Zealand.
With that in mind, here are three ideas to take advantage of the tourism tailwind:
Auckland International Airport Ltd (ASX: AIA)
This is the company that runs Auckland Airport. New Zealand is going through a big tourism boom and most international arrivals into New Zealand fly first to Auckland Airport, even if they then fly to another location.
The company just unveiled its April 2018 traffic update. For the year to date, international passengers increased by 5.2% and total passengers increased by 6.2%. More passengers means more passenger fees, car parking fees, retail fees and so on.
It’s currently trading at 29x FY19’s estimated earnings.
SKYCITY Entertainment Group Limited (ASX: SKC)
This is a business that runs several casinos in New Zealand and Australia. It has sole licences in several of the cities, this means there can be no competitors for many years. It’s a great moat to have.
The casinos and hotels are experiencing rising visitors, partly due to the tourism tailwind. It is investing in its locations to grow earnings further over the long-term. People want to stay in the best hotels and sometimes go to casinos when they visit a new city.
It’s trading at 15x FY19’s estimated earnings.
Crown Resorts Ltd (ASX: CWN)
Crown runs Crown Perth and the huge Crown Melbourne complex. Crown earns a lot of money from Melbourne and the earnings are starting to grow again as the VIP gaming worries subside.
However, future earnings in five years’ time will be driven by the completion of Crown Sydney and the new Melbourne hotel. Both of these projects could add significantly to the profit when they’re finished. Some tourists want to visit the best casinos and stay in the best hotels, which Crown can provide.
It’s trading at 21x FY19’s estimated earnings.
All three shares should be able to grow into the future as more visitors walk through their doors. Auckland Airport may offer the ‘safest’ earnings over time, but I think Crown is likely to provide the best returns over the long-term.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.