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How to profit from the tourism industry

There are few sectors across the economy that seem to be universally exposed to tailwinds. I’d say the healthcare industry is one, but arguably sectors such as technology are driving their own change, it’s not a tailwind necessarily.

However, tourism does seem to have a fairly good tailwind from at least three different areas.

First, there is an ageing population in Australia that will soon be retiring and will want to spend their golden years travelling around Australia (and abroad).

There is also a growing cohort of younger people who want to spend on experiences such as travel, not material items or even buy a house. Owning a home for some is not necessarily a target.

A growing Asian middle class has worked hard and saved to create their wealth and they’re now looking to explore the world. Australia has some of the most iconic cities, landscapes and animals.

So, what options are there to profit from the tourism tailwinds?

Well, the distance involved travelling around Australia, or to other countries, means that airports are going to be in increasingly high-demand. Sydney Airport Holdings Ltd (ASX: SYD) and Auckland International Airport Ltd (ASX: AIA) are two options here.

Some tourists will want to stay in high-quality hotels and perhaps gamble too. Two of the listed options in this space are Crown Resorts Ltd (ASX: CWN) and SKYCITY Entertainment Group Limited (ASX: SKC).

Many people will want to use the services of a travel agent to arrange their flights and accommodation. Two high-performers in this area are Flight Centre Travel Group Ltd (ASX: FLT) and Helloworld Travel Ltd (ASX: HLO).

There are also businesses that operate tourist-related activities such as Sealink Travel Group Ltd (ASX: SLK) and Experience Co Ltd (ASX: EXP).

Foolish takeaway

Quite a lot of the above businesses’ share prices have been strong performers and therefore don’t represent good value. If I could buy them at the right price then Auckland Airport and Crown Resorts would be my favoured two, however I’d prefer the price to be 20% lower before purchasing.

Instead, this growth share could be a better risk/reward option for investors.

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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, Flight Centre Travel Group Limited, and Sydney Airport Holdings Limited. The Motley Fool Australia owns shares of EXPERNCECO FPO and Helloworld 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.

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