Following a query from an Inbound Report reader concerning the potential impact of the vote last week—the BREXIT vote, in which UK residents approved their nation’s withdrawal from the European Union—Jake Steinman, founder and president of the NAJ Group, which publishes the Inbound Report, responded with the following letter, which we share with you.
“I’ve given some more thought to your question about how the Brexit will affect the U.S. tour and travel industry.
“Initially, with the devaluation of the Euro and GBP, it will certainly reduce travel arrivals from the continent to the USA, since roughly 40 percent of inbound tourism is sourced from the EU countries, while, at the same time, spurt interest from U.S. travelers in Europe. Already, tour operators have jumped on this aggressively on Facebook.
“The real issue for selling the U.S. will be the end game, guessing where the exchange rate will finally rest without volatility, which is how the trade survived profoundly shocking disruptions of the Gulf War in the 90’s, 9/11 and the Great Recession. A stable exchange rate will at least allow those with resources to adapt.
(On June 28, five days after the BREXIT vote, the pound had fallen from $1.47 vs. the U.S. dollar to $1.34, a decline of about 10 percent. The euro had dropped from $1.12 to $1.11)
Regarding a silver lining, the only one I see for now is a cautionary tale where other countries such as France and Holland that have leaders already been beating the drum for their own exits, see first-hand the chaos, disruption and recriminations that have resulted in over 3 million people, many of whom voted to ‘Leave,’ sign a petition for a revote. And this from a country that didn’t have to suffer the unraveling of reverting from the Euro back to their original currency.
We’re advising U.S. clients that it is important now to maintain relationships with European operators as never before and offer help once the rates stabilize to create financial incentives to come to the US. MICE business will be the first to feel the impact as incentive travel will remain in Europe but leisure may return once they have confidence that the currency has found a bottom such as it did for Australia which shot up in 2015 by 18% despite the exchange rate’s precipitous decline of 30% during that period. The increase was driven largely by drastically reduced airfares as airlines moved swiftly to fill seats rather than reduce capacity.
At the same time, we all need to target tourism development efforts at emerging markets such as China, India and even markets in Latin America where it is possible to find pockets of growth such as Mexico and Colombia.
Right now, we are conducting a survey of U.S. receptive tour operations and other leaders in the U.S. inbound tourism industry. We’ll be reporting on the results of this survey as soon as we can analyze the results.
Founder and CEO