The pound’s fall to a record low against the dollar last week led one US specialist tour operator to warn the market could contract by 20% next year.
USAirtours chief executive Guy Novik noted sterling “bounced back a bit” following a dramatic fall to below $1.04 triggered by a government announcement of unfunded tax cuts. A partial government retreat saw the pound recover to about $1.13 as Travel Weekly went to press.
But Novik said: “The exchange rate, combined with cost-of-living increases and increased interest rates, will reduce the size of the market. We anticipate the overall fall in the US market to be around 20% on 2019.”
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Cost of living now having ‘major impact’ on holiday choices
He argued: “A percentage of the market was probably stretching to afford a long-haul holiday. We imagine they will now take European trips instead.”
However, he insisted: “We’re not too concerned. There will still be millions going to the US. We believe we’ll maintain our 2019 booking figures because there is a bigger share booking through agents even though we anticipate the market shrinking.” Novik expects flight-only bookings to be affected most.
Caribtours chief executive Paul Cleary described the exchange rate’s impact as “huge”, saying: “We’ve seen our prices go up and the rises are significant. It’s a perfect storm because airline and hotel prices were already going up significantly.”
He warned there would be a point at which holidaymakers “would not pay any more” and said: “We’re beginning to approach that point. We’ll need to watch carefully. In the old days, you might contact the hotel for a discount to counterbalance the exchange rate, but hotels have put prices up because of the pandemic.”
He suggested rising prices would have “less of an impact at the luxury end of the market”, arguing: “Rising prices and a weak dollar are never good for business but the luxury end of the market is better placed.”
Cleary said he hoped the weakened pound would prove “a blip because of naive financial announcements” and “a correction” would prevent the market shrinking.
Gold Medal managing director Simon Applebaum agreed: “Sterling’s current weakness is making the US a harder sell.” But he said: “The majority of enquiries we’re receiving are for travel in 2023 and customers seem prepared to take the chance that by then things will have stabilised.”
He added: “Our supplier partners have taken a long view on the value of the UK market and been prepared to absorb small cost increases caused by these inflationary pressures. We’re monitoring the situation and in constant contact with suppliers to work to protect agents and their customers from the worst of these movements.”
On the flip side, inbound operators were keen not to appear too upbeat about the exchange rate at the UKinbound Convention in Aberdeen last week. However, one operator suggested inbound numbers from the US could hit record levels.
Chief executive Joss Croft said: “The US is our biggest market, worth as much as the next two biggest put together. US visitors spend a lot. September was a very good month.”
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