Travel and Tourism: a key UK economic sector, but potentially volatile

travel and tourism no more overseas holidays?As with any consumer-dependent sector of the economy, travel and tourism is susceptible to changing trends in consumer behaviour, to their disposable income and inflation, and of course to the weather.
The travel and tourism industry involves many businesses, from the small, independent SMEs running camping and caravan sites, holiday cottages, B & Bs and independent hotels in traditional seaside resorts, to adventure sites, amusement parks and beachside cafes, as well as the small independent travel agencies offering bespoke holidays and mainstream travel agencies offering packages.

Attitudes to holidays and disposable income

There has been a trend among UK consumers to opt for the “staycation”, holidaying at home rather than going abroad for a couple of weeks.
There have also been signs that the larger travel companies offering packages overseas have been struggling this year, with both Thomas Cook and Tui reporting declining bookings.
This has been more noticeable since the referendum vote in 2016 to leave the EU and can, at least partly, be attributed to the resulting substantial drop in the value of £Sterling. It has made it more expensive to travel outside the UK and more expensive to live with higher prices in the shops such as for food and goods as well as other basic needs like the recently announced above inflation 3.2% rise in rail costs.
Coupled with this has been a sluggish rise in wage growth that has barely kept up with inflation, despite record “full” employment, where many of the jobs created have been barely above living wage levels or involving zero hours or part time contracts.
All of this has an impact on disposable income and discretionary spending and as a consequence how much is available for holidays.

Difficulties in travelling abroad

Airlines and major airports have had significant bad publicity in recent months, making the prospect of travelling abroad an ordeal and far less attractive.
Ryanair, particularly flying into and out of Stansted airport, has had major problems with many flights being cancelled. These have been attributed variously to an electrical storm over Croydon on one occasion, to not enough air traffic controllers in Europe and strikes by its pilots in several European countries. The result has been flight cancellations at very short notice with thousands of stranded passengers suffering from delayed travel to or from holiday destinations and lengthy queues often of several hours to reclaim baggage.
This has been compounded by inadequate customer support and by Ryanair’s refusal to compensate many customers on the grounds of its exemption under Ts and Cs when circumstances are beyond its control.
Air traffic control strikes in France have also disrupted travel.
Inadequate staffing at the major airports, such as Heathrow, not to mention several IT failures, this year have also caused significant delays for travellers. This has led to one airline, BA, calling for improvements to the average wait of two hours for arrivees at major London airport hubs to get through border control.

Holiday attractions in the UK – and the weather

While the post-Brexit referendum exchange rate has made the UK a more attractive holiday destination for overseas visitors, it must be said that this year’s summer of unbroken sunshine has been a blessing for the UK travel and tourism sector.
One county in East Anglia, Suffolk, reported earlier this month that the sector had taken a record of £2 billion for the first time ever.
Suffolk, like many parts of the UK from Scotland down to Cornwall, has many features making it attractive for both overseas tourists and “staycationers”.  There are many places where visitors can find carefully-preserved historic buildings in attractive market towns and cities, so-called heritage sites, nature reserves and attractive countryside as well as our beautiful cities like London, Edinburgh, Bath or York. In UK there is something for holidaymakers of all tastes, although the weather can be a deciding factor.
It is admittedly more difficult to promote the UK as a sunny and warm holiday destination in the face of our usual summer drizzle, grey skies and variable temperatures.
Certainly, our recent sunny weather has been blamed by Thomas Cook and Tui for fewer travellers and lower profits.  Thomas Cook usually makes all its annual profits during the summer and this year’s slowdown in bookings has eaten to its overall profit rise.
Profits at Tui fell 18% to €193m (£174m) in the three months to the end of June, also attributed to the UK heatwave, but also to flight delays and cancellations during air traffic control strikes in France, along with the timing of Easter and the weaker pound in the UK.
A survey by Seasonal Businesses in Travel, which represents more than 200 outbound British travel companies, has predicted that post-Brexit completion European holiday prices are set to rise by 31 per cent, putting more than 250,000 UK jobs at risk.
Perhaps for those offering holidays in Turkey there is some respite following the recent 20% collapse in the Turkish Lira. Foreign exchange bureaux have reported running out of currency, indicating a mass exodus to Turkey.
Travel and tourism is always likely to be a volatile sector, but at the moment the signs are that the potential for more staycations will continue, and, if the airlines and airports can sort out their issues, possibly more holiday makers will come to the UK from abroad.

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