MARKETS may still be volatile following the affirmative Brexit vote on June 23, but industry experts are already projecting uplifts for the UK’s inbound business due to a weakening pound.
Estimates are mostly based on the short-term for now as Britain comes to terms with the new reality, but preliminary findings by IATA suggests that international arrivals will increase with most currencies gaining strength over the sterling.
IATA reported broadly that “a weaker pound has raised the attractiveness and affordability of the UK relative to other destinations.”
This sentiment is similarly held by intermediaries such as metasearch engine Wego, which operates in Asia-Pacific and the Middle East.
Said its CEO and co-founder Ross Veitch: “The pound has dropped 9.8 per cent, with the value of the pound to the dollar at 1.34 in early trading since the referendum result has become clear, which means a UK holiday is going to be cheaper for most foreign tourists than it has been for about 20 years.
“(This means) in-destination trip costs such as accommodation, dining, entertainment and shopping will allow significantly better value for the foreign traveller after exchanging their local currency.”
Concurring, David Tarsh, managing director of UK-based Tarsh Consulting, which serves many in the travel industry there, said: “Brexit brought a slump in the value of the pound. Overnight, hotel rooms, taxis, restaurants and all visitor attractions in the UK are better value. I will not hesitate to invite people based abroad to come here and enjoy the value.”
Still, while many stand to gain from the currency depreciation, travel businesses there face uncertainty as key issues such as aviation policy, visa permits and unrest on the ground linked to xenophobia surface.
Commented David Scowsill, president & CEO, WTTC, following the Brexit vote results: “We are entering a period of market uncertainty which will undoubtedly put pressure on travel and tourism businesses, however we know that our sector is resilient and we expect business and leisure travel to hold up in the face of these challenges.”
Alicia Seah, spokesperson for Singapore-based Dynasty Travel, says she is less concerned about the racially aggravated attacks in the UK as they “appear to be isolated cases”, and is more concerned with the effects of Brexit on cross-border travel.
“The only worrisome issue we have is the Brexit impact on flights within Europe and access across the borders. Scheduled flights within Europe may be affected (if restrictions were put in place after the exit of the UK from the EU) and the airfares of these flights may go up as a result. Travellers from outside of Europe will be inconvenienced should they want to explore the region,” she said.
This regulatory uncertainty can lead to a change in air passenger behaviour as well, reasoned Veitch, who said that London, which has served as one of Europe’s major gateways for a long time, may now become less attractive for travellers within Europe. Arriving at other entry points such as Paris or Frankfurt may now prove more convenient for multi-destination travellers.
He added: “The UK’s airline network may also have to review regulations, which as a part of the EU secured single aviation area treaties across Europe, which may increase airfare costs for the UK’s national carriers. Accommodation costs however, could drop, as Britain fights to retain its large inbound visitor numbers from Europe who will no longer be able to travel freely into the country.”
Overall, this will likely lead to neutral traffic flows for travel and tourism businesses in the UK, with push and pull factors happening in tandem.
IATA predictions place a 1 to 1.5 percentage points decline in air traffic in the UK over the next few years, stating that the impact of the weaker sterling is likely to be relatively muted.
“This relates to the fact that we expect the weaker exchange rate to stimulate inbound demand to the UK to a greater extent than it deters outbound trips. As a result, despite inbound traffic accounting for a minority of traffic in the entire market, this will, in part, offset the negative impact on outbound travel,” explained IATA.
Additional reporting from Karen Yue
