Now that the result of the UK referendum on membership of the EU is known, there is much for the travel industry to consider. The consequences of the decision in favour of Brexit will extend far and wide, not only in the UK but across Europe and the rest of the world.
In the short term, the uncertainty and political upheaval have led to volatility in financial markets.
The lower value of Sterling will result in higher operating costs for some businesses; fuel and energy will be more expensive, potentially leading to higher air fares. Conversely, costs for travellers coming to the UK will be lower making it a more attractive destination, especially for leisure visitors.
While fluctuations in economic conditions are not unusual, especially in the period since 2008, there is set to be an extended period of instability for as long as the future path remains uncertain.
In the run-up to the referendum, many companies had indicated that a decision to leave the EU would have negative consequences for their businesses and for the economy of the UK.
It is too soon to be certain how the reality of Brexit will play out. The negotiation of the exit terms and the nature of the UK’s future relationship with the EU’s single market will take many months or even years to complete. In the meantime, businesses must continue to plan for the future and look to take advantage of the new opportunities that will arise.
For airlines based in the UK, a major consideration will be their access to the EU’s single aviation market which has enabled budget operators such as Ryanair and EasyJet to flourish. The lucrative US to London routes may also see changes if a post-Brexit UK is no longer participating in the US-EU open skies agreement.
For hoteliers, there are concerns over the impact that Brexit may have on key operational indicators such as RevPAR. According to STR Global, the moving average of RevPAR for London hotels has increased for 30 consecutive months. Recently the rate of growth has been slowing as uncertainty has taken hold.
Hoteliers are also considering the impact on their plans for expansion and investment which may have been made on the assumption that the UK would still be part of the EU.
Here again, it is important to differentiate between the short-term and long-term view. Hotels in London with a significant proportion of corporate business will inevitably be affected if large multi-national corporations based in the city decide to relocate their operations elsewhere in the EU.
Over time, new conditions will prevail in the UK. There may be a more positive outcome for hotels as a result of more rapid growth in the economy.
In the short term, overall inbound travel to the UK remains the focus. UK visitor numbers grew by 5%* in the period to April 2016; hotels will be waiting for the latest figures to see if the vote for Brexit has affected the positive trend.