Taking place when it did, the timing of June 23rd vote by UK citizens to leave the European Union (EU) seems to have allowed the tour and travel industry that deals with the UK to buy some time. More time may very well help the UK-driven Visit USA inbound travel and tourism industry adapt to a marketplace in which the cost of travel increased by 10 percent on the day following the Brexit vote.
The nature of the news media’s analysis and coverage of Brexit, as well as the commentary posted on travel-related websites have changed from one that was calamitous, almost apocalyptic, in tone the day after the Brexit vote to one that is more tentative and less dire.
Were the vote to have taken place in the first quarter of 2016, the reaction and the concomitant decrease in the value of the pound sterling vs. the U.S. dollar would almost certainly have had a worse impact on a decision to travel to the USA this year. As it is, nearly all UK holiday travel to the United States this year had already been booked and paid for by June 23. For the most part, winter travel for Q4 2016 and the first quarter of 2017 won’t be affected that much, as the leisure market for that period is light and, to the extent that it depends on ski and snow travelers who have the resources to handle a weaker pound.
Holding on to what We’ve Got: There is only the slightest evidence—still it is evidence—that the withering of the pound against the dollar may have attenuated to the point that it might not slide that much further down the scale. Here are some late figures we put together:
Value of Pound to Dollar from
Day of Brexit Vote, June 23, 2016
|Date||Value of pound sterling vs. U.S. dollar|
|Source: Compiled by Inbound Report, from Xe.com; figure is rounded to nearest cent|
The U.S. destination that will be the hardest hit by a decline in traffic from the UK is Florida—in particular, Central Florida, which is a favorite of the UK family market. Even so, placed in context, the damage might be offset by the fact that, it was only this past March that the UK’s Air Passenger Duty was eliminated for all passengers under the age of 16. Depending upon their ages, a two-child family had been paying up to $400 more for round-trip flights to international destination. Now … so much for that $400 savings.
Also, low-cost carriers have been driving a highly competitive price war in the UK over the long-haul flight marketplace, with Norwegian Air leading the charge. Over the weekend, the carrier was advertising round trips flights to Orlando from London’s Gatwick Airport as low as $179 per person. Even with the British pound devalued by 10-15 percent, such price points make travel to the USA doable for middle-class Brits on a tight budget. (Check out other fares at http://www.norwegian.com/uk/destinations/)
We at the Inbound Report are not striving to present a rosy outlook to the future of inbound tourism market from the UK: Damage has been done and more will be done if the pound slides further downward. In the next couple of months, before 2017 tariffs are in place, receptive tour operators who sell product to the UK trade will have to see if there is any room to renegotiate rates that we discussed during IPW two weeks ago in New Orleans.
Much can, and likely will, happen between now and four months from now when World Travel Market convenes Nov. 7-9 in London, at which time we’ll know for sure what steps the industry has taken and, by that time, put in place to staunch the expected downturn in Visit USA traffic from the UK.
REMINDER: With this issue, the Inbound Report will be published biweekly until after the USA’s Labor Day holiday (September 5, 2016), when we will resume publication on a weekly basis.