Rising cost of living due to war dampens tourism outlook

The outlook for UK inbound and domestic tourism has “softened” amid growing concern at fresh rises in the cost of living due to the war in the Middle East. 

Richard Nicholls, head of research and forecasting at Visit Britain, reported a “slow start” to the year even before the war began when he spoke at the Tourism Insights conference in London last week.

Nicholls reported a “slow start” to inbound tourism this year with international flight arrivals 5% down year on year in January and 6% down in February and warned: “The disruption to Gulf airports will have a wide impact on key markets. 

“Half of Australian and southeast Asian visitors to the UK and one third of Indian visitors transit via the Gulf.”

He noted arrivals from the Gulf states accounted for £1 in every £13 spent by overseas visitors to Britain last year and said “that will decrease” because of the war and added that “a reduction in spending power for US visitors” due to a decline in the exchange rate of the dollar since the war began would also have an impact.

Nicholls told a recent conference hosted by the Tourism Alliance: “The outlook has softened, but it’s not all down to the Iran conflict.”

He said inbound visitors had been forecast to surpass 43 million this year, up 4% on last year, but added: 

“The longer the crisis in the Middle East lasts, the more that will reduce.”

The 2024 total of just over 41 million was on a par with 2019, with inbound visitor spending exceeding £33 billion, but Nicholls said “inflation was doing a lot of that” with spending down 9% on 2019 when allowing for inflation.

He reported a 4% rise in visitors from Europe last year but a 1% decline from long-haul markets despite a 22% increase in US visitor numbers on 2019, with visits from the high-spending Gulf states 4% down and from China 45% down.

The volume of business trips remained “way behind pre-Covid levels”, he added, with “routine business visits replaced by video calls”.

Nicholls also noted “a pattern of decline” in overnight domestic trips, reporting “a drop each year since Covid”. 

A VisitBritain survey in February of consumer intentions to take a domestic holiday this summer showed a decline of four percentage points year on year at 49%.