From our partner: Pound sterling devaluation post-Brexit vote boosts tourism, hotel businessSTR news
A study by STR and Tourism Economics indicates that the United Kingdom’s tourism and hospitality sectors have benefitted from an increase in arrivals from North America, brought on by the British pound’s drop in value following the June EU Referendum.
According to the ONS international passengers’ survey, U.K. arrivals from North America were up 6.8% between July and October 2016, compared with the same period in 2015. From January to June, the “pre-Brexit” vote period, arrivals from North America increased at a more modest 0.5% compared with first six months of 2015. Meanwhile, arrivals from Europe have dropped off slightly following the referendum, down 0.1% between July and October 2016. Overall, the U.K.’s international arrivals were up 1.7% to 33.9 million as of October.
Year-to-date 2016 figures as of October also show that holiday arrivals to the U.K. were down 3.7% overall. But between July and October, this rate of decline slowed somewhat to 2.9%. Meanwhile, business trips to the U.K. still show growth in 2016, but slowed from 4.3% between January and June to 1.8% between July and October.
“While we’ve seen a recent slowdown in business travel to the U.K., it’s important to put it in perspective that 2015 was a standout year for business arrivals, up 7.1% compared with 2014” said David Goodger, Director for Tourism Economics in Europe. “What remains to be seen is how holiday travel will be impacted in summer 2017. As the referendum vote occurred towards the end of June, when many already had July or August vacations planned, we’ll see how a favourable exchange rate for holiday visitors from North America will play out this coming summer.”
Impact on Hotels
For U.K. hotels, performance growth has been mixed between London and Regional U.K. (U.K. excluding London). In 2016, hotels in Regional UK recorded a 3.1% increase in revenue per available room (RevPAR), mainly driven by an increase in average daily rate (ADR), while occupancy remained flat. London, on the other hand, recorded a 0.9% decline in RevPAR, brought on by flat ADR growth coupled with a 0.9% drop in occupancy, following an increase in supply and a slow start to the year.
The most recent market forecast report from STR and Tourism Economics projects that hotels in London are expected to be impacted by shifts in demand throughout 2017, which will likely bring down both occupancy and average daily rate growth throughout the year. On the other hand, hotels in Regional U.K. (U.K. excluding London) are expected to post RevPAR growth within the range of 2% to 6% from month to month throughout 2017.
“While the capital has faced challenges in 2016, we have certainly not seen a slowdown in development,” said Robin Rossmann, STR’s Managing Director. “London currently has over 15,000 hotel rooms under construction or planned for development, which is more than all countries in Europe except Germany and Russia. This supply growth will put downward pressure on occupancy levels but recent signs are showing the weak Sterling may help to grow arrivals sufficiently to offset this. For Regional U.K. hotels, an increase in ‘staycations’ should boost performance, as outbound travel has become more expensive for U.K. residents given the current exchange rate.”
STR provides clients from multiple market sectors with premium, global data benchmarking, analytics and marketplace insights. Founded in 1985, STR maintains a presence in 16 countries around the world with a corporate North American headquarters in Hendersonville, Tennessee, and an international headquarters in London, England. For more information, please visit str.com.
About Tourism Economics
Tourism Economics is an Oxford Economics company with a singular focus on quantitative analysis of the travel industry. By combining rigorous modeling with industry knowledge, Tourism Economics develops custom market strategies, industry forecasts, policy analysis and economic impact studies. Our parent company, Oxford Economics, is one of the world's leading providers of economic analysis, forecasts and consulting advice. Founded in 1981 as a joint venture with Oxford University's business college, Oxford Economics enjoys a reputation for high quality, quantitative analysis and evidence-based advice. For more information, click here.