Asian travel industry leaders ponder the implications on tourism and business following Britain’s vote to leave the EU − and it’s not an entirely dismal picture
Shock and jitters were felt across the globe after the UK voted itself out of the EU (“Brexit”) on June 23, sending the British pound plunging to a 30-year low and the market into turmoil.
The referendum outcome has also taken many travel industry leaders by surprise and they have yet to see the full-on effects on businesses, but for now a weaker British sterling pound and the uncertainty Brexit has triggered are the biggest challenges in the immediate wake of the seismic event.
Pall of uncertainty over Asia
“It’s too early to tell how Britain’s decision to leave the EU will affect global travel and, more specifically, incoming tourism to Asia; we need to wait for the dust to settle and see how things play out over the coming months,” said Lisa Fitzell, group managing director at Diethelm Travel Group, who revealed that the Bangkok-based DMC will not be changing its strategy for the UK market.
Judy Lum, senior vice president sales & marketing international market at Tour East Singapore, has not seen signs of UK travellers holding back bookings at the moment, but reckons that “the plummeting pound will no doubt affect the spending of the British”.
She added:“We should brace ourselves for a slowdown by the fourth quarter as the effects and reality of Brexit will kick in and this may last till 1Q2017 when the changes are more defined.”
However, Singapore’s leisure market is unlikely to take a big hit from a falling pound as the city is just a transit hub, opined Dominic Ong, general manager of Star Holiday Mart. But he has more reservations for the MICE market: “We foresee that local DMCs may face delays in payment.”
Hideaki Furusawa, global sales department manager of The Yokohama Bay Sheraton Hotel and Towers, is bracing for “inevitable” effects in the next few months, as foreign visitors make up 45 per cent of the property’s clientile; the hotel is also a corporate partner of Nissan Motor, which has its global headquarters nearby and significant business interests in Britain.
The uncertainty Brexit brings also threatens to undo the recent gains that the Philippine inbound sector has made for the UK market.
“The UK market has grown 25 per cent last year. New flights from London were launched, the EU lifted the ban on Philippine airlines and just two weeks ago we hosted top 10 UK agents,” said Marjorie Aquino, senior sales and marketing manager, Blue Horizons Travel and Tours. “Then all of a sudden comes Brexit.”
Meanwhile, Michael Wu, managing director at Gray Line Tours Hong Kong, is already reeling from Brexit, as the GBP’s depreciation has translated to a 12-15 per cent rise in his tour fees.
“There is an immediate impact to our business because FIT bookings for October dropped obviously and even group traffic has slowed,” he said. “I reckon my UK inbound traffic would fall 20-25 per cent due to Brexit.”
Siggi Neuhaus, general manager of Caraka Travelindo Inbound based in Makassar, South Sulawesi, told TTG Asia that UK buyers she met with at the recent Bali & Beyond Travel Fair had already received cancellations from their customers and they expect business to Indonesia to shrink by 20 per cent.
It isn’t all gloom and doom though, as Asia’s affordability could improve due to the sharp devaluation of the GBP.
While Hamish Keith, group managing director of Exo Travel, thinks that a “slowdown in bookings” from the UK is possible in the short term, he maintains a confident outlook for the market in the longer run.
“The UK traveller is historically and traditionally very resilient and we do not expect a significant drop in business from the UK,” he said. “There is also a possibility that Asia business from the UK could increase as South-east Asia is particularly seen by UK travellers as a safe, good-value destination.”
Yap Sook Ling, executive director, Asian Overland Services Tours & Travel, agreed: “If (the pound) deteriorates further, there is a possibility that those who plan vacations to South-east Asia may switch to Malaysia, as British travellers will want to stretch their pound. We will see the impact during the Christmas and New Year period.”
Said Ikuko Hanano, of Nippon Travel Agency’s inbound European division: “Over the longer term, we are still expecting more tourists, including Europeans, to visit Japan as the government is trying hard to promote Japan as a destination.
“We are still confident that more foreign visitors will want to come to Japan between now and the 2020 Olympic Games in Tokyo.”
Aye to British tourism
The biggest winner could be the British inbound tourism sector, as a plummeting pound might drive stronger travel demand to the UK, long a favoured destination in Europe for Asians.
Ross Veitch, CEO and co-founder of Wego, commented: “The (pound slump) means a UK holiday is going to be cheaper for most foreign tourists than it has been for about 20 years…In-destination trip costs such as accommodation, dining, entertainment and shopping will allow significantly better value for the foreign traveller after currency conversions.”
Karan Anand, head, relationships, Cox & Kings, agreed: “The UK is one of the most sought-after destinations for Indian travellers. Last year close to 422,000 Indians visited the UK and we expect the numbers to go up this year as well. We will aggressively promote packages to the UK as we see this as an opportunity to promote and attract more people to the destination.”
Likewise, Aloke Bajpai, CEO and co-founder, ixigo.com, posits now is the best time to visit the UK. “We have seen an immediate (five to six per cent drop in airfares) on a few flight routes between India and the UK,” he said. “Along with the favourable GBP fall and aviation fuel rate drop, the British summer is also expected to hold strong for another two months.”
Still, Sedunia Travel Services’ executive director Teoh Leng Lan is cautious in selling the UK despite the anticipated stimulus the depreciated pound will bring to FIT travel. “We don’t know what the currency exchange rate will be like in two weeks, (let alone) one month, three months from now,” she remarked.
“If the pound continues to fall, tour packages will become cheaper. But how will my tour fares stand against the competitors?” elaborated Teoh, who prefers to adopt a wait-and-see approach to avoid any over- or under-pricing of her packages in the market.
Desmond Lee, group managing director of Apple Vacations & Conventions, meanwhile, does not expect a weaker pound to boost travel demand for the UK as the destination is still pricey for Malaysians, who are also suffering from a weaker purchasing power amid ringgit woes.
That, together with the higher frequency that Malaysians are denied entry at UK immigrations compared with other European destinations, have led him to rethink his strategy and focus on France, Amsterdam, Brussels and Germany for Central Europe tours.
Ramifications in the longer run
Considerable uncertainty also shrouds the UK aviation market, one of the stand-out beneficiaries of the EU single-market framework.
Preliminary estimates by IATA suggest that the number of UK air passengers could fall three to five per cent by 2020, but a bigger issue lies in aviation regulation as the UK faces a trade-off between accessing the European Single Aviation Market and having the policy freedom to set its own regulations.
One of the trade-offs could be a hike in airfares for the UK’s national carriers, suggested Wego’s Veitch. “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,” he said in a media statement.
The full effects of Brexit will take years to play out, and even so no one can accurately predict how the scenario will turn out with so many variables. And making light of the unfolding drama is David Tarsh, managing director of Tarsh Consulting, a strategic communications firm with several clients in the travel industry. “Overnight, hotel rooms, taxis, restaurants and all visitor attractions in the UK are better value, and similarly my firm’s services have become better value too.”
Perhaps the best way the trade can cope with this uncertainty is to abide by the venerable English phrase: Keep calm and carry on.
Reporting by Paige Lee Pei Qi, S Puvaneswary, Xinyi Liang-Pholsena, Julian Ryall, Rohit Kaul, Rosa Ocampo, Mimi Hudoyo and Prudence Lui
This article was first published in TTG Asia, July 8, 2016 issue, on page 4. To read more, please view our digital edition or click here to subscribe
