Inbound Britain’s boom could go on with help
T
he UK inbound sector can hail a period of undoubted success. Visitor numbers surpassed a record 34 million in the 12 months to August 2014, up from the previous record of 32.8 million in 2013. About two in five of these visitors are
classed as holidaymakers by the Office for National Statistics, with 29% VFR. Three-quarters are from Europe and two-thirds from the EU - with France, Germany and the US the top-three markets by volume, but the US top by value by a considerable margin (chart: Top Inbound Markets, 2013). The annual visitor total has grown by
close to 40% since 2003 despite a three- year decline from 2007-08 – though the cumulative downturn of 9% was a fraction of that in the outbound sector between 2007 and 2010. A 22% fall in the value of the pound against the dollar and 23% fall
The Deloitte view
The UK inbound market has been pretty strong in recent years and this continued into 2014. Revenue has increased by about 30% since 2008 and last year there were 32.8 million visitors. The amount spent on each visit has
increased every year since 2004, albeit this plateaued in the first half of 2014 at about £640 per visit. Despite this, visitor numbers were 8% up in the first half of 2014 over the same period last year. France remains the biggest market,
but visitors from the US are the biggest spenders. In terms of location, London accounts for 54% of inbound spend. Unfortunately, if you dig deeper it’s
not an entirely positive story. First, while we have seen good growth
in numbers arriving from China, this is still a fraction of the Chinese now
travelling and the number arriving into the EU. Outbound tourism from China is rapidly growing and the UK needs to capture demand from this market. One possible reason for this has been the higher cost of obtaining a visa. Recent news on improvements to both Chinese and Indian visa- requirements could help the inbound tourism market going into 2015. Second, VAT is levied at 20% on accommodation and cultural attractions. While rules and VAT rates differ by country, most EU members have regimes more favourable to the inbound consumer than the UK’s. Deloitte’s own research shows that if the VAT rate on these services were reduced to 5% it would create 120,000 jobs and deliver £4 billion to the Treasury.
Third, Air Passenger Duty (APD)
continues to be seen as a drag. A recent study suggested abolishing APD could create 60,000 jobs and provide a net benefit to the Treasury of £500 million. What of the next six to 12 months?
The economy in parts of Europe, the UK’s key source market, remains subdued and that will impact on people’s confidence and propensity to travel. Decisions by the European Central Bank could impact on exchange rates, as could political unrest in some countries. A further softening of the euro-
sterling exchange rate would make it more expensive to visit the UK. However, we are optimistic that on balance the first half of 2015 will continue to show good results for inbound tourism.
Inbound visitor numbers hit record levels this year, but government action may be required to go further
against the euro between 2008 and 2010 was the main reason. The UK, and London in particular, suddenly became a lot more affordable. This has not encouraged greater
visitation from the US, with numbers plateauing at about 3.5 million for the past five years after plunging by one million between 2006 and 2008. Numbers from Europe recovered in 2013 to surpass the previous high of 2007 after similarly plateauing during 2009-11. The most- notable surge has come from the world beyond Europe and North America (chart: Overseas Visitors to the UK, 2006-13). National tourism marketing agency
VisitBritain has a target of 40 million visitors by 2020. The Deloitte view (below) identifies the main issues the sector views as barriers to this without government action: visas, VAT and Air Passenger Duty.
56 | Travel Weekly Insight Annual Report 2014
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