With the World Travel Market (WTM) set to convene next week (Nov. 7-9) in London, U.S.-based receptive tour operators, U.S. travel suppliers and the sales and marketing teams promoting U.S. destinations are anxious to find out through their face-to-face meetings with British travel buyers what the real outlook is—an outlook shrouded by the reality of a 20 percent decline in the value of the British pound sterling vs. the U.S. dollar since last year’s WTM.
First, last week, in a move that seemed to bring the reality of global strife and tension close to the exhibit floor of London’s ExCeL complex, government officials announced that armed police will be on the Underground’s network. The move came in the wake of an Oct. 20th bomb alert at a station near the O2 entertainment venue, a site used for various WTM-related functions.
Armed police, who are regularly deployed at mainline stations of the Underground system, will use the Tube to travel between jobs. Armed officers were first deployed on the London Underground following the July 7, 2005 series of bombings in the system that killed 52 people and injured more than 700 others. British Transport Police said that seeing armed officers on the Tube on a daily basis should reassure the public that they would be able to respond to any threats.
The move was announced after a suspect package was spotted on a Jubilee Line underground train by two members of the public. The train was stopped at North Greenwich station, close to the O2, where police carried out a controlled explosion of the package. A suspect in the incident, Damon Smith, a 19-year-old London Metropolitan University student, has been charged with making an explosive substance with intent to endanger life or injure property.
Also Last Week: The UK’s Office for National Statistics (ONS) released a report covering several key measures of the condition of the UK economy, including the rate of exchange between the British pound sterling and other currencies, as well as its impact on travel abroad by UK. Below, we’ve highlighted key portions of the report, quoting the ONS report directly.
“Although the value of the pound has been falling for some time, the vote to leave the European Union has had a big effect in recent months. The pound fell in value against many other foreign currencies on June 24 when the referendum result was announced and fell again in the beginning of October, following further announcements about Brexit.”
How the Value of the Pound Compares to its Value on the Day the Date
That the “Brexit” Referendum was Announced
January 2016 to October 2016
“Since the referendum there have been falls in demand for the pound influenced by:
—A cut in interest rates–all else being equal, this could cause investors to move their money into other countries that may pay them a higher return
—Expectations from some commentators for lower growth and higher inflation in the UK – which could make investing here less attractive
“But what does this mean for people in the UK? If you’ve been on an overseas holiday this year you will have probably noticed that your money didn’t go as far as it may have done in the past, but, aside from this, how else could the fall in the pound affect the UK economy and therefore, (UK residents)?”
A Fall in the Value of the Pound Will Increase the Price of Goods and Services Imported into the UK: “In recent weeks there have been reports of iPhones, Microsoft Office and even model trains going up in price as a result of the fall in the pound.
“Even so, it is difficult to predict how changes in the value of the pound will feed through to the overall price level. There are many factors that could delay the effect (such as supermarkets buying stock in advance) and some businesses may choose to absorb the higher costs rather than pass them onto consumers.
“In the most recent data we published, inflation (as measured by the Consumer Prices Index) rose by 1.0 percent in the year to September 2016. However, inflation has been on an upward trend since late-2015 and when analyzing the cause of this month’s rise, (ONS) Head of Inflation Mike Prestwood said: ‘There is no explicit evidence the pound is pushing up the prices of everyday consumer goods.’ ”
UK Headline Rate of Inflation (as Measured by the Consumer Prices Index),
January 2008 to May 2016 (12 month percentage change)
Will there be More Visitors to the UK and a Rise in the Staycation? “Nothing yet suggests that ‘staycations’ have risen in popularity. The number of UK residents travelling abroad has continued to rise in line with the trend seen since the economic downturn in 2008. This may be because there is no evidence (at this stage), to show a fall in the pound has had an effect on air fares or the prices of package holidays.”
Source: ONS Travel Trends
Finally, the following graph shows the value of the UK pound vs. the U.S. dollar from Nov. 1, 2015 to Nov. 1, 2016.