UK Travel and Tourism in the Aftermath of the Brexit Vote

The referendum result brought a period of uncertainty with many unknowns, leading to a period of shock and soul-searching across the UK. Euromonitor International’s macro model predicts a 2% fall in GDP growth over five years to 2020 stemming from a Brexit, with the biggest impact felt in 2017 and a return to the baseline forecast by 2023, meaning it will take several years for the UK economy to return to normal.

The UK is high up on the scale of popular destinations, ranked sixth globally in 2015, with an impressive 35.4 million international trips, worth £28 billion to the UK economy. The UK has firmly positioned itself on its cultural credentials, heritage and countryside and went through a major marketing revamp before the Olympics in 2012, to ensure that it could maximise the opportunity and pulled it off with aplomb. Despite a blip in 2012, inbound tourism growth has been consistently strong, averaging 6% per year over 2013-2016.

The UK has a high dependency on Western and Eastern Europe for its international tourists, with both regions accounting for 73% of all inbound tourism in 2015. France is the UK’s biggest source market, with 3.7 million visitors to the UK in 2015, and has exhibited a high level of resilience to external factors in turbulent times such as the Great Recession. France is therefore a robust source of tourism for the UK. However, based on previous travel behaviour during times of uncertainty and weaker economic performance at home, Germans and Americans are less likely to travel to the UK.

 

United Kingdom Forecast Adjustments to Arrivals from Key Source Markets Post-Brexit 2015-2020

 

Note: The incremental difference in terms of arrivals from origin countries to the UK was based on the forecast performance of inbound tourism before and after Brexit over the forecast period. We applied correlations displayed between tourism demand for the UK and economic performance of each source market over the historic period to gauge the potential difference in arrivals from key markets over 2015 to 2020
Note: The incremental difference in terms of arrivals from origin countries to the UK was based on the forecast performance of inbound tourism before and after Brexit over the forecast period. We applied correlations displayed between tourism demand for the UK and economic performance of each source market over the historic period to gauge the potential difference in arrivals from key markets over 2015 to 2020.

 

On the positive side, financial volatility in the markets and the ensuing slump in the pound to a 30-year low, dropping 10% since the vote, make the UK much cheaper for international visitors, so costs for lodging, transport and in-destination services will become more affordable in the short term. For budget-conscious European travellers, this will be a boon – and low-cost carriers should actively promote the country’s value for money. Nevertheless, a fall in the pound has the opposite effect on outbound demand, leading to price hikes from travel brands for the costs of services, and also for holidaymakers for food, drink and leisure activities in destination.

 

Gambling, tax and duty-free mecca

In February, I considered what the UK might look like post-Brexit, and discussed the need for a complete rethink on the country’s branding (#BrandNewUK). The launch of the single market led to the demise of the UK’s profitable duty-free business worth £4 billion back in 1999 and there is therefore likely to be an enormous opportunity to put duty- and tax-free back on the table. Inbound tourists already spent £5 billion on shopping in 2015, accounting for 18% of their travel budget, so there will be opportunities to develop more shopping retail outlets, duty-free shops and attract ever more investment in the UK’s high street shops.

We may see the UK go down the route of Las Vegas or Macau in establishing mega casino developments, including hotels, retail outlets plus casinos. This would be a means to attract Asian and Chinese visitors, diversifying the UK to find new revenue streams including casino cruises. Singapore would be a good case study to review how to balance mega resorts with sustainable development that minimises the impact on local communities and the environment by looking at Resorts World Sentosa for inspiration.

 

Digital divorce

The UK turning its back on EU data privacy laws may lead to a slowdown in online and mobile travel sales, seeing as data systems used in the UK and Europe diverge. It will be more difficult for online travel brands to launch pan-European platforms and there will be a need to develop UK-specific technology to meet national laws as the UK bifurcates from Europe on data distribution and privacy. The abolition of roaming charges across Europe is planned for 2017, and now doubt has been cast on whether the UK will follow suit. Already, mobile travel sales accounts for 21% of online travel sales sold to UK residents and there is huge potential for travel brands to mine this area to grow additional travel services sold during the trip – that opportunity may now be at risk due to Brexit.

For international start-ups looking for innovation, collaboration and a shared sense of purpose, London may lose its crown to European alternatives such as Berlin and Amsterdam, where it may be easier to secure a visa, business grants and short-term residency. This would knock a chunk out of London’s tech-hub status in the short to mid term as it struggles to attract and maintain top talent. Business travel into the UK is likely to take a sharp nose-dive over the next two years or more whilst deals are struck, seeing as business travel is much more sensitive to external shocks than leisure travel. The shockwaves of the vote will be felt for many months and years to come, and the travel industry needs to batten down the hatches and keep focused on ensuring the UK travel and tourism industry remains open for business.

Euromonitor International partnering for the 11th consecutive year with World Travel Market London is pleased to reveal the emerging global travel trends identified by the WTM Global Trends Report on Tuesday 8th of November at London’s ExCel Centre.

To receive a free copy of last year’s WTM Global Trends Report 2015, please click HERE.

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