Fantastic investment opportunities in the booming tourism market
The global travel industry has been reaching ever greater heights for years now. And there are no signs that the boom in the tourism market will be over anytime soon. This opens up fantastic prospects for innovative companies and investors.
Swiss tourism market growing strongly for years
The Swiss tourism industry is booming. The industry is growing twice as fast as the overall economy. For while many Swiss citizens go abroad for vacation during the summer, even more people from outside the country are travelling to Switzerland.
The forecasts for 2019 estimate almost 10 million guests. Together with domestic tourists, there are likely to be more than 40 million bookings for overnight stays. That's about 50 percent more than in 2005. Since urban attractions have been more popular with tourists than the mountains recently, growth in the cities is particularly strong.
It's not just more guests helping the Swiss economy. Tourists are also spending more today than they used to. In 2005, they spent around EUR 1,300 per person on their travels in Switzerland. In 2018, that amount has gone up to approximately EUR 1,900. Today, tourism contributes around CHF 19 billion to the Swiss economy. That's around 3 percent of Switzerland's total economic output.
What investors need to know about the booming tourism market
This development is characterized by three aspects that Swiss investors should be aware of.
- Switzerland remains an attractive tourist destination regardless of the strength of the Swiss franc.
- Tourism is booming not only in Switzerland, but also globally. The increasing purchasing power of more and more people, sinking mobility costs, and the fact that vacations cannot be replaced with virtual experiences promote this trend.
- Private consumption is and remains the main driver of the global economy. Private consumption accounts for approximately two-thirds of the economic output of developed countries.
Downsides for the travel industry
Strong demand and new technologies are leading to many changes in the industry. This transition, however, is highly likely to cast a shadow on the industry's growth.
For example, digital booking platforms can be both a blessing and a curse. Although they make travelling easier for users and allow providers to find new customers, they also exert price and margin pressure. In the hotel industry, competition from major international hotel chains and home-sharing platforms like Airbnb make life difficult for small establishments. They have to highlight and actively market their special character, traditions, or services to stay competitive.
Tourism equities have great potential for growth
Innovative tourism companies can create added value despite cost pressure, price competition, and lack of subsidies. One example is Jungfraubahn Holding AG, which is listed on the stock exchange. Continuous infrastructure investments have helped to gradually increase the travel comfort and capacity of the Jungfrau Railway.
The results speak for themselves. The Jungfrau Railway set a record in 2018 with over a million guests and is able to regularly generate high profits. During the summer season, the Jungfrau Railway trains are fully booked on 28 days per month. The strong share price performance reflects this development.
Global travel industry booming
And the chances are good that this development will continue. Between 2014 and 2018, the industry grew an average of 3.9 percent, significantly faster than the economy as a whole.
One sign of this is the record number of tourists, estimated to be 1.4 billion, who went abroad in 2018. Not only does this represent a 56-fold increase over 1950, but many people have only just begun to explore the world! With a total global population of 7.7 billion people whose purchasing power is increasing in many places, an end to this trend is nowhere in sight.
Over a billion tourists went abroad in 2018
The growing tourism market offers many opportunities
In conclusion, there are three key observations for investors:
- Supertrends such as digitalization and globalization are changing and strengthening global consumption. In particular, money spent on business and leisure travel is increasing. Together, active management and the search for discrete winners open up a myriad of opportunities.
- Global mobility is rising rapidly and with it, the opportunity for people to travel across borders. This continuously pushes the necessary infrastructure to its limits: port cities, airports, countries, and regions will continue to invest in mobility infrastructure into the future.
- Consumers are the pillars of the global economy. As measured by earnings per share, no sector in the Standard & Poor's Index has risen as sharply during the last decade as the consumer discretionary sector. The boom in business and leisure travel is a significant contributor.