Rosy outlook for bookings this year offset by Brexit-induced recruitment fears. Ben Ireland reports
Inbound: Revenue tipped to rise 8% in 2017 to £24bn
Bookings data suggests tourism into the UK is set for a boom in the first part of 2017.
Figures reported by VisitBritain at Tourism Society’s Prospects event last week projected a 10% year-on-year increase in overseas arrivals in the first quarter.
The tourist board said arrivals were up by 11% year on year for January to date, following a 9% upturn in December and 3% rise in November. The upturn was put down to the impact of foreign exchange – the pound is down 15% against the dollar year on year – and a perception that Britain offers value for money.
American visitor numbers rose by 26% last year while Chinese arrivals were up by 43%.
Richard Nicholls, head of research and forecasting at VisitBritain, revealed tourism was worth £22.3 billion to the UK economy last year, up 1.1%. He said he expects that figure to rise by 8.1% this year to £24.1 billion.
Kurt Janson, director of the Tourism Alliance, said historical data suggests inbound tourism revenue will rise by 20% over the next three years based on sterling’s slump. “That doesn’t all happen at once,” he said. “The first year you get about half that.
“New visitors have a very poor understanding of exchange rates.”
In addition he said he expects a 12% increase in domestic revenue from people holidaying in the UK.
Denise Bridges, managing director of coach wholesaler Albatross Travel, warned some tourism sectors face higher costs.
“There is huge demand for UK hotels,” she said. “Demand will push hotel prices up and make it much more difficult for us to service the holiday needs of our demographic.”
Nicholls added a word of caution. “If the year 2016 has taught the world anything, it’s that events don’t always go according to the forecasts,” he said.
Independents: Outlook for 2017 bright
Small travel agents say they are confident they will survive a potentially turbulent 2017 because of high margins on upmarket holidays.
Aito chairman Derek Moore said feedback from retailers suggests they believe 2017 will be a “year to remember” and that most Aito members were “quietly confident”.
“Most of our members are niche operators at the high end of the market,” he said.
“There’s a saying that the rich will always be rich, and many of our smaller operators do sell very highly priced products with quite high margins, so they can cope a little bit better than some of the more mainstream operators with narrow margins.
“I wouldn’t say that anyone in our membership thinks 2017 is going to be the most fantastic year but they think it’s going to be a year to remember.
“Most of them are quietly confident they will survive, which is not the most positive message but a lot of them are reporting that bookings are up 3-4% and the amount people are paying for their holidays is also up.”
Moore added: “In 2016, with Tunisia and Egypt, and Turkey to a large extent, going off the market, people had to travel to the western Mediterranean.
“That meant it started to get full and prices increased. They will probably increase further in 2017.
“People, I think, generally will have to pay more for their holidays. On that basis, most of my members think they will survive to fight another day.”
Moore added that small operators have a better control over their spend, with fewer staff and smaller commitments to beds and flights than larger competitors.
“They can change course more quickly, without going through board decisions. The analogy I often give is that a large mainstream operator is like an oil tanker but a small niche operator is more like a speedboat and can change direction more easily.”
VAT: Government ‘unlikely to cut tax on accommodation’
The UK government is not expected to consider cutting VAT on accommodation to boost tourism post-Brexit.
Abta chairman Noel Josephides pointed out the UK has the most expensive VAT in Europe.
Asking whether a Britain out of the European single market would be more likely to drop the tax to “make the UK more competitive”, he said: “The difference would be enormous.”
However, the Tourism Alliance’s Kurt Janson said: “There was nothing stopping the government reducing VAT [now]. Being in or out of the EU has no real impact.”
He said Britain’s trade deficit was an issue, and said the “relaxing of austerity” means the government has to be more careful about cutting income streams. He said: “We’ve taken a step back from the possibility of reducing VAT on accommodation. You could only get government to go along with it if we had a strong economy.”
Albatross Travel’s Denise Bridges said UK hoteliers were choosing not to reduce prices to boost occupancies but were rising prices to boost revenue instead.
Janson added: “The government might argue that you’ve just had a 15% price decrease so why do you need VAT taken off?
You’ve got an industry that’s had a record year, why should it be subsidised?
“There’s no argument with government at the moment.”
Employment: ‘Brexit will spark recruitment crisis’
Britain is going to have to find thousands of skilled UK hospitality staff rather than turn to “world-class” EU nationals after Brexit.
Asked to comment on the prime minister’s confirmation of a “clean Brexit”, the Tourism Alliance’s Kurt Janson said employment was his top concern.
Based on the projected increase in visitor numbers and growth in domestic tourism, he anticipated 100,000 to 150,000 new jobs would need to be created and filled this year.
“The question is, where the hell do they come from?,” he said. “Where do we get the people to fill that gap – and not just fill them but fill them by giving the world-class service that means we get growth.”
Sector skills agency People1st has revealed EU nationals account for 11% of employees in the UK tourism industry and 35% of service staff in London.
Janson said some London businesses’ teams comprised up to 90% EU nationals.
“If we are at full employment and need 150,000 extra workers who can give world-class service to customers, where do they come from if we can’t get them from Europe?” he asked.
Janson said the PM’s assertion that the UK needs only “skilled” migrants from the EU might harm the industry.
“Skilled, in her terms, means university educations,” he said. “She’s not talking about the soft skills that we need.”