Investors should pay closer attention to the inbound tourism sector that is often regarded as the “poor cousin” to big industry.
Growth in inbound tourism is set to eclipse other sectors that have been the stalwart of the Australian economy and is a key reason behind the strong rise in the share prices of stocks like Sydney Airport Holdings Pty Ltd(ASX: SYD).
A report commissioned by Tourism and Transport Forum Australia and featured in the Australian Financial Review predicts that the tourism industry will create more jobs than manufacturing by 2025.
Relations between Australia’s and China’s political leaders may be at a multi-year low but Chinese tourists love our country! Let’s hope this never changes as the influx of tourists is giving our economy a nice boost.
The number of people employed in the sector is forecast to increase to nearly 1.5 million in seven years from 934,000 in FY16, according to the report.
What’s more, growth in the sector is trending around 10% over the last five years and the growth momentum is expected to continue for a while yet. There aren’t many large industries in this country that can grow at the same clip.
Of course, the report is designed to lobby the federal government for extra funding to the sector. If successful, the industry could grow at a faster pace.
It’s a pity that the pool of stocks that are leveraged to inbound tourism is so small. Sector heavyweights like Flight Centre Travel Group Ltd(ASX: FLT) are far more exposed to outbound tourism (Aussies looking to go overseas), while hotel operator Mantra Group Ltd (AS: MTR) is being sold to French group AccorHotels in a $1.2 billion deal.
Online travel booking site Webjet Limited(ASX: WEB) could enjoy some of the spoils from the tourism boom through its hotel booking service, although I doubt many foreign visitors (particularly from China) would use the site.
This essentially leaves Sydney Airport and airline operator Qantas Airways Limited(ASX: QAN) as the other large cap beneficiaries to this investment thematic.
However, embattled recreational facilities operators like Crown Resorts Ltd(ASX: CWN) and Ardent Leisure Group(ASX: AAD) could also catch a much needed break if patronage increases on the back of this trend.
But tourism isn’t the only sector that is tipped for boom times. The experts at the Motley Fool are particularly bullish on the outlook for a niche sector as they think it will have a big impact on markets.
Motley Fool contributor Brendon Lau 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 has recommended Webjet 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.