INVESTMENT FOCUS-Tourists head back to Europe, and investors follow

Helen Reid

* European tourism data points to strong recovery

* Hotel bookings up, tourist spending in key centres rising

* Eurotunnel, Amadeus all report brighter outlook

* Analyst sentiment on sector improves

* Earnings revisions: http://reut.rs/2nd49S3

LONDON, March 10 (Reuters) - Tourists are heading back to

Europe, and the recovery is showing up in everything from rising

hotel bookings to tax-free shopping and air traffic, leading to

a brighter earnings outlook for travel and leisure companies.

A rebound in emerging markets is bringing visitors from

countries like China, Brazil and Russia to continental Europe,

while a weaker pound since Britain voted to leave the European

Union has boosted UK tourism. And despite the sagging pound,

travel from the UK also remains healthy, an HSBC survey showed.

"International travel both to and from emerging markets has

been growing, while average spend per trip has also been

increasing. For hotels, the revenue per available room has

improved in Europe and the UK," said Jeff Meys, head of

optimised portfolio strategies at NN Investment Partners.

The pan-European STOXX 600 travel and leisure sub-index

, which includes hoteliers, airlines, brewers and

bookmakers, is up 2 percent so far this year, after dropping 11

percent in 2016. Travel stocks have outperformed the

pan-European STOXX index over the past three months.

Security fears after attacks on Paris in January and

November 2015 and in Nice the following July dampened tourists'

appetite for France. That cost French hotels an estimated $675

million in lost revenue over 2016, the research firm MKG said in

January.

But France saw tourist numbers grow in the fourth quarter,

figures from the national statistics agency showed, indicating a

return to health.

The improvement in travel was apparent in the latest

earnings at companies such as Spain's Amadeus, which

provides booking systems for airlines, and Eurostar operator

Groupe Eurotunnel.

Merlin Entertainments, which runs London's Madame

Tussauds waxworks and more than 100 other attractions, said

earlier this month a weak pound was drawing tourists back to

London, reporting a jump in visitors from the EU in November and

December.

The pound has fallen 11 percent against the euro and 17

percent against the U.S. dollar since Britain voted to leave the

European Union in June.

Luxury goods makers Prada, LVMH and Hugo Boss all cited

higher tourist spending and increased inflows from Asia in their

results.

Analyst sentiment on earnings in the sector has improved

significantly from last year, Thomson Reuters data shows: http://reut.rs/2nd49S3

SPENDING UP

Tax-deductible shopping in Europe, a measure of tourist

spending, grew 21 percent in January, the second straight month

of growth after a year of decline, figures from Global Blue, a

tourism tax refund company, showed. An earlier-than-usual

Chinese New Year delivered a surge of Chinese visitors in late

January, Global Blue said.

Tax-free shopping in France grew 20 percent, while sales in

Italy and Germany rose for the first time in a year. Sales in

Britain grew 45 percent in January, with average spending also

increasing as tourists took advantage of the cheaper pound.

Europe's capitals vie for high-spending tourists. Spain's

capital Madrid is banking on developing its luxury shopping and

culture credentials to attract more high-spending Chinese

tourists.

"It's been very much a tale of Spain and the periphery,

which are usually weak, but they have swung back very hard,"

said Jonathan Frearon, European equities manager at Standard

Life Investments.

Increased air travel into and within Europe has also

underpinned investor enthusiasm for shares of companies that

operate airlines and airports in the region.

British Airways owner IAG reported increased

traffic for February, and budget airlines Easyjet and

Ryanair saw an increase in passengers of 8 to 10 percent

for the month compared to last year.

UBS analysts said it expected strong growth in the first

half of 2017 for the Spanish airport network of Aena,

the bank's preferred company in the airports sector.

Shares of Fraport, the operator of Frankfurt's

airport, are back to late 2015 highs. Along with prospects of

growth, the shares also offer a stable dividend, adding to their

attraction for investors looking to capture the revival in

European tourism and business travel.

(Reporting by Helen Reid, editing by Larry King)