A plunge in the value of the pound is bad news for holidaymakers planning a trip abroad, but for investors it represents an opportunity.
A rise in the number of tourists visiting the UK and families opting for a ‘staycation’ is boosting profits at shops, hotels and entertainment companies. Now some fund managers are tapping into the trend by backing British businesses which could benefit.
Ed Meier, manager of the Old Mutual UK Equity Income fund, says: ‘The increase in visitors has been quite dramatic over the past few months. You only need to go out on to the streets, especially in London, to see for yourself the swirl of tourists.’
So which companies could benefit from this home tourist boom?
UK appeal: A rise in the number of tourists visiting the UK is boosting profits at shops, hotels and entertainment companies
Burberry, the luxury fashion house, has reported ‘exceptional’ sales in the UK over recent months. In its last trading update it said UK sales in the final three months of last year were up 40 per cent compared with the same period a year before. The company said overseas visitors were helping to drive strong sales figures.
Figures from Visit Britain show the number of visitors last year from the US and Canada was seven per cent higher than in 2015. There were also a record 25.3 million visits from European Union residents.
In total there were a record 37.3million visits to the UK last year – 3 per cent higher than the year before – with visitors spending £22.2billion.
That is set to climb further as tourists can now get far more pounds for their euros or dollars. In the first two months of the year alone they spent a record-breaking £2.67billion.
In fashion: Tourists have been helping Burberry sales to soar by 40%
It is not just overseas visitors that are boosting profits. With a pound now buying just €1.18 – down from €1.42 at the end of 2015 – more people are opting for staycations.
Meier believes theme park and attractions operator Merlin Entertainments is set for a boost this way. The company operates numerous sites, including Thorpe Park, Legoland and The London Dungeon.
Steve Davies, manager of the Jupiter UK Growth fund, says: ‘Merlin is one of the best long-term growth stories of any company in the FTSE 100 Index.
‘It should not only benefit from an increase in UK holidays – it is growing globally too, with more Legoland parks opening in key locations such as Nagoya, Japan, Chuncheon, South Korea, and New York.’
After a day at a theme park, tourists need a place to sleep. Whitbread not only owns the Costa Coffee chain – a possible pit stop en route – but it is also behind the Premier Inn hotel brand. Meier says: ‘Last time sterling tumbled we saw that people were taking more city breaks in the UK.’
4. GREENE KING
Tourist boost: Pub group Greene King has more than 3,000 pubs, with a third in London
Jo Rands, joint manager on the Rathbone Recovery fund, believes pub group Greene King should benefit from increasing tourist numbers.
The group has more than 3,000 pubs, with a third located in London. It also operates popular family pub brands Chef & Brewer and Hungry Horse, and fish restaurant Loch Fyne.
She says: ‘Shares in Greene King have fared well as consumers have started to feel more confident again over the past couple of years. A rise in staycations and good weather over the coming summer months should only help.’
5. SSP GROUP
Rands also likes SSP Group which runs food and drink outlets in train stations and airports. It operates 500 brands globally, some its own – such as sandwich shop Upper Crust – and others as franchises such as Starbucks and Shake Shack.
SSP is benefiting as airports and rail stations increasingly become part of the holiday rather than just an experience to endure beforehand.