Investing in Transportation and Tourism
/by Valerie B. Dugan
The city of New London, CT, hosted its annual Sailfest last weekend, a celebration of all that pertains to the sea. As locals and tourists alike flocked to the seashore, the event was the perfect showcase for the importance of both tourism and transportation, especially to investors.
From July 12 to July 14, southeastern Connecticut residents, and hordes of tourists as well, enjoyed fireworks, free entertainment, ships, and over 200 vendors lining the streets. Last year an estimated 278,000 people attended the 2018 event, bringing more than $58 million to the area with them. That’s more than the population of the Norwich-New London metropolitan area and all of the 21 towns that it includes put together.
And most of those people had to use some form of transportation - boats, cars, trucks, airplanes, buses and trains - to get there. Meaning a lot of money was spent traveling to a popular event and on various enjoyments during and after the event.
Investors take note: Tourism and transportation go hand in hand. While federal spending has dropped slightly from its 2010 highpoint, it still is significantly higher at $440.5 billion in 2017 than its recent low point of less than $430 billion in 2013, with many states applying new funding methods to bankroll their transportation projects.
“The profitability of the travel and tourism sector provides myriad opportunities for investment.”
In the first five months of this year, a total of 19 states approved $1.8 billion in transportation funding for roads and bridges. Kansas has authorized a $100 annual fee for all-electric vehicles, and $50 for electric hybrid or plug-in electric hybrid vehicles. Iowa is implementing new fees for hydrogen, electric, and plug-in hybrid vehicles. West Virginia also has made a $54 million appropriation to the State Road Fund from a budget surplus, which is earmarked for state highway maintenance funding.
The fact that transportation spending, focused on capital improvements as well as operations and maintenance, is a high priority on the state and national levels bodes well for investors. Investment opportunities range from materials such as concrete, asphalt, and steel to heavy machinery, and even the wide range of goods and services needed for improvements to shipyards, airports, and rail lines.
Improvements to transportation pave the way for tourism, which is on the rise nationwide, generating over $1.6 trillion nationwide in 2017, which in turn supports 7.8 million American jobs. Travel and tourism represented 2.8 percent of gross domestic product that year, and also gave the U.S. a balance of trade surplus of $77 billion in that sector. Government projections indicate the U.S. will host nearly 100 million international visitors annually by 2023.
The profitability of the travel and tourism sector provides myriad opportunities for investment. Besides transportation, other sectors ripe for consideration include construction, hospitality, food and beverages, and general services. With billions of dollars in the system and the extent of the investment opportunities over such a broad range of companies, there and many possibilities for investment. to be limited only by the imagination of investors.
It should be noted, additionally, that the increases in tourism are not isolated to just the U.S. Studies show that international tourism also is on the rise, with developed countries seeing about 55 percent of international tourists, and developing countries seeing 45 percent. Opportunities exist on the international scene as well as domestically.
_______________________________
Valerie B. Dugan, CFP, is a Senior Vice President and Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Hartford. For more information, she may be contacted at 860-275-0779.
The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, /member SIPC. CRC 2638345 07/19
