Reviewing the basic numbers and trends that are fundamental in measuring the strength or weakness of the inbound market from the UK—it is still the number one overseas source market for the United States—one gets the feeling that the tour and travel industry is sliding down a slippery slope just as it approaches that time of the year when brochures are prepared and prices are set for the summer of 2019. In the past two-and-a-half months, the UK travel trade has had to endure five major challenging developments:
- A continued decline in value of the pound sterling against a strong U.S. dollar that has resulted in a nearly 10 percent drop in the past six months. Right now, as we near the end of August, the pound sterling is at or near its lowest point this year vs. the U.S. dollar and the euro. Keep in mind, as you review the following tables, that, three years ago, in August 2015, the pound was trading at or near $1.55 vs. the U.S. dollar and €1.40 vs. the euro.
- A sharp decline in all international travel by Brits during soccer’s month-long (June 14-July 15) World Cup in Russia kept huge numbers of Brits home to watch the competition on TV. What made it certain that Brits would be watching was the presence of England’s team up to the semi-final round before it was eliminated. And then it competed in the playoff for third place on July 14th. The UK holiday season was, in effect, cut short by a month.
- A near disappearance of the “lates”—that is, late or last-minute holiday bookers, who have helped to keep August the number one month in UK outbound travel to North America. The importance of “lates” to the overall outbound travel by Britons to North America (about 90 percent of the traffic goes to the USA) is evident in the table below. During the beginning of this summer, the travel trade in both the UK and Germany, travel sellers were told not to worry—that the “lates” were coming in August. But they did not come.
What is happening to the “lates”? Welcome to the “earlies.” “Lates” are gone, according to one veteran British tour operator, Noel Josephides, chairman of Sunvil, which sells Mediterranean product. In an interview with TTG, Josephides said, “to put it bluntly, there is just too much out there – too much choice, too many flights, too much accommodation – and the public is making full use of the opportunities.
“The no-frills carriers launch with some very low seat rates, and the public now realizes seats can be bought – even in the peak – for very little, so the numbers now booking overseas holidays in this way have increased dramatically.
“We are therefore about to witness the coming of the age of the earlies market, and we all need to understand how to capture it and avoid losing it to the public’s appetite for self-packaging. This despite the total lack of financial protection, or of anyone taking responsibility for serious accidents in-destination, which could cost the holidaymaker dear.
“The entry of the generally unregulated, non-tax-paying American giants like Airbnb, booking.com, Expedia and TripAdvisor into the UK market has enabled the public to self-package to a degree the traditional industry never thought possible.
“If it wasn’t for the cruise market and the growing appetite of the middle classes for long-haul, tailor-made holidays booked well in advance, there would be far more travel agents in financial difficulty.”
- A searing heat wave that kept many Brits home where they visited their own beaches. Most overseas travel by Britons is to short-haul destinations such as Spain, Greece and Cyprus, and involves spending a good deal of their time lying in the sun or splashing in the waters of the Mediterranean. In the UK, it has been the hottest summer in more than 40 years. And so, a significant number of Brits have stayed home and hit the beaches of Britain.
- Intensified anxiety over the formal arrival of Brexit on March 29, 2019. So little progress has been made in reaching agreement with the European Union—the UK voted in June 2016 to exit the EU—on trade and transport issues that there are fears that the UK government will go for a “do nothing” option. This could create havoc at airports in the Eurozone and in the UK. It’s unclear, for instance, if travelers who originated their trip in continental Europe will face delays when connecting in London to the USA (or some other long-haul destination) and/or are unable to get European Commission safety certification to take off.
Reports earlier this month indicate that, by the end of August, the UK government is to release detailed guidance to businesses on how to deal with a “do nothing” option. In the meantime, financial markets are likely to become more skittish in investing in a UK that is no longer a part of a 28-nation trade compact.
To be continued …