If you want to earn a 10% yield on your investments and are interested in the tourism sector, you can find out how to achieve this regardless of market performance. With strong domestic demand and increasing international visitor numbers, several types of investment can deliver strong returns. This research note outlines three top tourism-related investment ideas that can help investors earn a 10% yield in Australia: the Defender Tourism and Hospitality Fund, a Real Estate Investment Trust (REIT), and direct investments in vacation rental properties.
Defender Tourism and Hospitality Fund
The Defender Tourism and Hospitality Fund specialises in acquiring and managing tourism-related assets across Australia. The fund aims to provide investors with stable returns by investing in resorts, motels, and hotels. As of Q2 2024, the Defender Fund has consistently delivered returns above its target rate, aligning with broader industry trends where the Hotels & Tourism sector reported an average return on equity (ROE) of approximately 11.61%. This underscores the fund’s ability to exceed investor expectations.
The properties under the fund are cash flow positive with a yield of about 13%, providing investors with regular distributions every six months. Additionally, the management team focuses on acquiring properties below replacement value and implementing repositioning strategies to enhance income and capital value. This approach increases overall returns while mitigating risks associated with market fluctuations. The fund’s diversified portfolio also reduces risk exposure to individual properties and sectors.
Investing in Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) offer excellent avenues for investing in the tourism sector without directly owning physical properties. One example of such a REIT is the Charter Hall Long WALE REIT, which has significant exposure to hospitality assets. REITs are attractive because they offer greater liquidity and trade on stock exchanges, allowing investors to buy or sell shares easily without the complexities associated with property management. Furthermore, REITs often benefit from favourable tax treatment, enabling them to distribute a higher percentage of their income as dividends to shareholders.
The Charter Hall Long WALE REIT has delivered a strong performance, with an average distribution yield of around 10% over recent years. This makes it an appealing option for investors seeking stable income from their investments.
Direct Investments in Vacation Rental Properties
Investing directly in vacation rental properties can generate high returns through platforms like Airbnb or Stayz. Properties located near popular tourist destinations often achieve high occupancy rates and can generate significant rental income. Vacation rentals typically command higher nightly rates compared to long-term rentals, providing strong rental income. Property owners can also benefit from tax deductions, further enhancing overall returns. This approach diversifies income streams and mitigates risks associated with market fluctuations.
According to recent data for Airbnb, some hosts in Australia have reported average annual earnings of AUD 20,000 per property. With the right locations and management practices, a 10% yield is achievable.
Achieving a 10% yield by investing in Australia’s tourism sector is not only feasible but also strategically sound, given current market dynamics. The three investment options outlined—Defender Tourism and Hospitality Fund, Charter Hall Long WALE REIT, and direct investments in vacation rental properties—offer diverse avenues for generating attractive returns. Investors should consider their risk tolerance, investment horizon, and management preferences when selecting among these options. By leveraging Australia’s growing tourism market, while being mindful of associated risks, investors can position themselves for sustainable long-term returns. With robust government support for tourism initiatives, increasing domestic demand for travel experiences, and various investment avenues available within Australia’s diverse tourism landscape, now is an opportune time for investors seeking solid returns through strategic investments in this sector.
