Spring is a good time to plan a summer holiday, and this year it looks like Europe will be very crowded with tourists.
The weak euro is making hotels, meals and tickets to museums cheaper for travellers from the US, Britain or emerging markets whose currencies are tied to the dollar, like those in Asia, prompting strategists to forecast an European tourism boom.
Another stimulus for Europe is in the lower oil prices, which have pushed down the price of flights and the cost of driving.
Finally, the much talked-about deflation will make things like food, clothes or souvenirs even cheaper, and this would likely encourage the foreign tourists to spend even more.
Europe is the top global destination for tourists anyway, attracting more than half of global tourism, equity strategists at Societe Generale point out.
France is the number one destination. Four other European countries – Spain, Germany, Italy and the UK – are among the top 10 most visited countries in the world.
Currently, the United Nations’ World Tourism Organisation expects international tourism in Europe to increase by between 3% and 4% this year, but the strategists believe growth will be even higher than that.
This would help the worst hit European countries, with Greece, Spain and Portugal the most geared towards tourism in Europe.
In Greece, receipts from tourism make up nearly 7% of GDP, for Portugal they’re almost 6% while for Spain they represent around 4.5%. Tourism is also important for France and Italy, making up around 2% of GDP.
The Societe Generale strategists selected 15 large-cap European shares that are likely to benefit from this trend.
In the infrastructure sector, they picked Italian road concession company Atlantia, Spanish infrastructure company Abertis and French infrastructure firm Vinci.
In the consumer sector, French luxury firms LVMH and Hermes and Italian luxury leather goods maker Tod’s stand to benefit from the arrival of more tourists.
Among hotels and leisure, Europe’s biggest online travel agency Priceline (based in the US) will benefit, as well as French hotels group Accor.
Looking at specialised retailers, Swiss World Duty Free, the world’s biggest airport retailer, is the best positioned to profit from the arrival or more tourists, while in the IT sector Spanish IT services provider Amadeus is their pick.
But most of the large-cap stocks that the Societe Generale strategists selected to profit from the European tourism boom are in the transportation and services sector.
They are Spanish airport operator Aena, Spanish airline group IAG, which is the result of a merger between British Airways and Iberia, Air France KLM and Irish low-cost carrier Ryanair, and Eurotunnel, the operator of the rail tunnel between the UK and France.
— Antonia Oprita, the author of this story, has no positions in the securities mentioned.