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Why Investors Should be Excited About Asian Airport Stocks

Asia’s middle class is not only travelling more but also allocating additional disposable income towards experiences over discretionary items. Asia’s rising purchasing power is moving alongside the expansion of low-cost airline carriers and easing visa restrictions, making physical mobility more feasible and affordable. This is creating vast opportunities for investors.

In the latest Conference Board Global Consumer Confidence Survey, 51% of Asian consumers preferred to use spare cash for vacation purposes, against 42% of those surveyed globally.

The study also found that Asian consumers were less likely to cut back on travelling in order to save on household expenses. So where is the growth and how can investors tap it to benefit?

China’s potential market

Chinese tourists took almost 150 million overseas trips in 2018, a 15% increase from the previous year according to the China Tourism Academy. Reports vary on overseas spending by Chinese travelers, with estimates ranging between US$130 billion to US$277 billion last year.

The growth outlook for international travel remains compelling given only 9% of China’s population holds a passport. International travel optimism also stems from China’s domestic tourism activity, which recorded over 5.5 billion trips, according to the Ministry of Culture and Tourism – an increase of almost 11% from the previous year.

Growing travel within ASEAN

ASEAN is home to almost 700 million people and as a single entity, would represent Asia’s third-largest population after India. Like Chinese travellers, Southeast Asians are travelling more as well.

According to data from the ASEAN Secretariat, there were more than 288.8 million international air travellers at the end of 2017, up from 92.4 million in 2004.

ASEAN tourists made up 125.5 million visitors with intraregional tourists accounting for 49.1 million trips – 39.1% of the total. This suggests neighbours are both visiting and spending in each other’s backyards.

Two Asian airports riding this trend

Shanghai International Airport Co Ltd (SHA: 600009) is the operator of the Shanghai Pudong international airport. Situated at the edge of China’s Yangtze River Delta, Pudong airport appeals to investors as it sits within one of the Middle Kingdom’s fastest-growing economic regions – an area that accounts for a massive one-fifth of China’s GDP.

Meanwhile, Airports of Thailand PCL (AOT) (SET: AOT) manages six airports, including Suvarnabhumi Airport and Don Mueang International Airport, which are both in the capital of Bangkok. Suvarnabhumi Airport is the crown jewel of AOT’s portfolio, acting as the main gateway into Thailand for international travellers. Opened in 2006 with an annual capacity of 45 million passengers, actual visits are closer to 65 million.

Foolish last thought

The thematic investment of Asian travellers goes beyond airports, as several spillover categories also exist. Particularly regarding Chinese tourists, recent years have seen rising demand from them for beauty and skincare products, mainly due to the better selections offered overseas.

Medical tourism becomes another driver for overseas travellers as well, particularly into Southeast Asia, due to broader dissatisfaction of medical services in China and the top-quality healthcare services offered at reasonable prices in ASEAN countries.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Christopher Chu doesn’t own shares in any companies mentioned.