The tourism boom is certainly in full swing if the latest traffic numbers from Sydney Airport Holdings Ltd (ASX: SYD) are anything to go by.
Its shares have climbed 3% today after the operator of Australia's busiest airport revealed its passenger numbers for the month of December and the 2016 calendar year.
In December Sydney Airport welcomed a massive 1,472,000 international passengers through its gates. This was an increase of 7.2% from a year earlier and was thanks largely to strong growth in inbound international passengers from Indonesia, Japan, and India in particular.
For the full year international passenger numbers hit 14.9 million. This was an increase of 1.2 million or 8.9% from the 2015 calendar year.
This is likely to be good news for accommodation providers such as Mantra Group Ltd (ASX: MTR) and Event Hospitality & Entertainment (ASX: EVT) which may be experiencing strong demand for their rooms.
It wasn't just international traffic that increased. Domestic traffic rose 3.8% year on year to 29.9 million passengers. According to management this was driven by domestic load factor improvements and larger aircraft during the peak holiday period.
As a whole Sydney Airport welcomed a massive 41.9 million passengers throughs its gates in 2016, up 5.6% from 2015.
Should you invest in Sydney Airport?
At 35x estimated FY 2017 earnings I think Sydney Airport is reasonably expensive. Whilst the market has historically been willing to pay a premium to own its shares due to its monopoly-like business, I do think there are better options out there for investors today.
For this reason I would hold off an investment, at least until a better entry point emerges.
