There are few genuine tailwinds out there that investors can take advantage of. The ageing demographics of various countries is one tailwind and the rise of the Asian middle class is another tailwind.
I think there’s a way to play both of the above themes at the same time, through tourism shares.
When a person reaches retirement and hits their ‘golden years’ they want to travel the world and see new places. The Asian middle class has worked hard to create wealth for themselves and now they want to see the world too.
Indeed, Chinese tourist numbers are reportedly growing at more than 20% per annum. That is a huge increase of a potential addressable market.
With that in mind, here are three ideas to take advantage:
Auckland International Airport Ltd (ASX: AIA)
I think this is one of the best ways to access the tourism tailwind on the ASX. Most people arriving into (or leaving) New Zealand will fly through Auckland Airport because it’s the major airport of the country.
The country’s majestic landscapes are attracting a growing number of tourists every year and I believe it could generate a lot more profit for itself as it expands the services offered in and around the airport.
It’s trading at 32x FY18’s estimated earnings.
Sydney Airport Holdings Ltd (ASX: SYD)
Sydney Airport is profiting from the rise of passengers arriving into Australia’s tourist hub. The company reported today that total international passengers increased by 5.6% last month compared to May last year.
This growth in passengers has allowed the airport business to steadily increase its dividend, making it a decent income stock too.
It’s currently trading at 42x FY18’s estimated earnings.
Crown Resorts Limited (ASX: CWN)
Crown is Australia’s most prestigious provider of hotels, casinos and entertainment complexes.
It could grow significantly in the future after it finishes building Crown Sydney, which could be a major attraction in Australia’s richest city. Crown is also planning on building a brand new hotel at the Melbourne complex as well.
It’s currently trading at 25x FY18’s estimated earnings.
Over the next five to ten years all of these companies will likely experience a good increase in tourists. The rising interest rate makes me wary of asset-type businesses like the airports. Crown would be favourite pick at the moment, but if interest rates make all three drop then Auckland Airport would be my preference in that scenario.
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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 and Sydney Airport Holdings Limited. 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.