Weak sterling following Brexit and the UK general election packs a punch for the staycation and package tour
The hung Parliament following the UK snap general election last week may have left a dark pall over the Conservative party, but it also has implications for the travel industry — some good, and some not so good.
Starting with the not so good is Jon Ostler, CEO of finder UK, a financial comparison site specialising in travel money, transfers and utilities. Ostler says their research shows that Brexit has already added 11.9% to the price of a holiday. “The prospect of a hard Brexit [following the hung Parliament] may be less,” he says, “but the only uncertainty today is uncertainty.”
…the only uncertainty today is uncertainty
Ostler recommends that companies should be sensitive to the decline in the value of the pound and offer additional value for holidays abroad. He recommends that firms would be wise to promote all-inclusive deals and, wherever possible, ‘staycations’. “Companies need to ensure that their supply chains understand the current pressures consumers are facing,” he stresses.
Travel trade association UKinbound is certainly aware of the pressures being brought to bear by Brexit. In a press release UKinbound’s chief executive officer, Deirdre Wells OBE, is quoted saying: “The general election result clearly shows that the electorate is against a hard Brexit, and so is the UK inbound tourism industry. Our members are calling for a continued strong relationship with the EU and the implementation of a sector deal that addresses issues such as the Customs Union, Open Skies Agreement and residency rights for EU workers. For inbound tourism to prosper long-term we need the Conservatives and DUP to champion our industry.”
It is an industry worth championing, employing over 3 million people across the country and contributing £22bn to the UK economy.
While uncertainty reigns, on the plus side the weaker currency is benefiting the UK hotel and homestay industries, as well as those selling tours and activities into this market. Eviivo, a booking platform for B&B type accommodation in the UK, says that data compiled from around 5,000 B&Bs nationwide shows that bookings are up 19.2% compared to the same pre-Brexit vote period.
Meanwhile, the Travel Trends Report 2017 from ABTA, the association of travel agents and tour operators, finds that the number of domestic holidays in the UK increased to 71% in 2016 — up from 64% recorded in 2015.
But it’s not just domestic travel that is on the rise. In fact, last Thursday, a day before the surprise results of the election were known, the Expedia Group announced that the UK was proving a popular destination for US travellers. US searches to the UK in the first quarter of this year rose by 45% versus the same two-week period in 2016. Expedia’s results also show that compared to 2015, in 2016 searches by US travellers were up 30% year-on-year.
In addition, a Barclays’ Destination UK report highlights that in a survey of more than 7,000 international holidaymakers, over 60% stated that they were now more interested in visiting the UK than they were 12 months previously.
Searches are translating into actual vists with UK destination organisation VisitBritain reporting that visits from the US to the UK rose by 2% in the first two months of this year.
Package deals make a comeback
According to Expedia, one product that seems to be benefiting strongly is the package deal. Expedia’s data finds that a growing number of US travellers are looking for package deals of over seven days, with searches for this sort of product rising by 30% in 2016.
Beyond the US, Expedia is also seeing growth and opportunity for packages. In fact in 2015, the online travel group sold over 7.1 million packages globally. And between 2014 and 2015 alone, there was a 4% increase in the number of US travellers booking packages. Meanwhile, outside the US, Expedia group data for the first half of 2016 reveals a 50% increase in international demand for Australian packages, compared with the same period in 2015.
This is good news for Expedia, which has been encouraging hotels to take package bookings more seriously. Its white label product, announced in September last year with Marriott as a first customer, allows hoteliers to offer package bookings directly from the hotel site.
Hotels are always looking for new ways to drive demand, says Expedia’s Marco Tagliatti, Vice President, North America Lodging Partner Services, and packages are a solid vehicle for doing that.
According to Expedia’s data, there are numerous benefits for hotels selling package deals. On average they:
Have a 20% higher ADR than standalone bookings
Are typically twice the length of the stay, and so they are a source of incremental demand
Have a booking window that is two times longer, which means more opportunity for upsell on the property
Half the cancellation rate of hotel only bookings
In uncertain times, it seems the package deal may provide some certainty – for both travellers and companies selling travel. For the rest, however, it may just be that there is no place like home.