7th May 2019

Tourism: Where next for the UK Tourism Industry?

At 56 Degree Insight we bring a passion and expertise developed over many years working with clients across a range of sectors. As we approach our launch in June we will be sharing some details on our offer, our points of view and our recent experiences working in each of these areas. This week, let’s take a look at a period of great uncertainty for our tourism industry in the UK…..

With all of the economic and political uncertainty at the moment around the potential impacts of Brexit, how are things looking in the UK tourism industry – and what are the short to medium term prospects?

Firstly, let’s look at the latest annual statistics which have just been released by VisitBritain.  Great Britain Tourism Survey (GBTS) data highlights that overnight domestic tourism in the UK showed declines in 2018 in both volume and value – despite a strong early-mid summer period when the good weather encouraged increases in short breaks and longer holidays.  The number of trips declined by 1.8% to 118.5 million, and when inflation is taken into account, the value of these trips also declined very slightly to £23.9 billion. 

And what of the international markets?  Provisional International Passenger Survey (IPS) data suggests that inbound tourism to the UK also showed declines in 2018: 37.8 million trips were made but this was 4% down on 2017.  Spending declined by an even larger amount (7%).

So, 2018 was a year of decline for the UK tourism industry both amongst domestic and overseas tourists.  But to complete the picture, we also need to look at outbound travel by British residents going abroad. After 7 consecutive years of major growth in the volume of outbound trips from the UK, this also stalled slightly in 2018 with a 1.2% decrease in trip taking.  And same day tourism – the day visits market – also showed declines in 2018 over 2017 with a 5% drop in visits.

So, all in all, 2018 was clearly a year when tourism performance declined across the board.  Although the decreases were relatively small (around 2-5%), nevertheless, British residents undertook fewer tourism activities (day trips, domestic overnights or foreign trips) than in the previous year.  And with inbound travel from overseas visitors also on the decline, some early alarm bells should be ringing around what the immediate future holds.

So why these declines?  It would be very easy, but overly simplistic to put the blame on any one issue.  Tourism activity is impacted by such a wide range of interconnected factors that diagnosis of the causes of change is always a major challenge.  That said, the economic context is always a key underlying factor – and in 2018, the uncertainties around the economy had the effect of many people being more cautious than usual with their spending.  When it comes to the family budget, this always means that leisure spend is one of the first areas to be reduced. And of course, no discussion on the British economy would be complete without acknowledging the impact of the whole Brexit debate.  So much of 2018 – and the first part of 2019 – have had Brexit at the forefront of everyone’s thinking – and the huge uncertainties we have all faced around what it will mean to each and every one of us.  This has, without question, led to further caution around holiday taking, especially in the second half of 2018. If it were not for the excellent summer weather, the domestic tourism picture would have been even more disappointing in 2018. Domestic trip taking soared in May, June and July as Britain basked in record heat and plenty of sunshine.

Most consumer confidence surveys suggest that people being cautious with their spending remains the case in 2019 so what will it mean for tourism this year and beyond? Often one of the best ways to predict the future is to look back at historical performance in similar times of economic downturn. Though the global economic depression of 2008-2011 was exceptional, the patterns in tourism behaviour back then provide a picture of how things can quickly change. As British people tightened their belts, there was a clear switch to domestic destinations from overseas destinations – not on all trips, but certainly on second and third holidays (see below).

This rise of the ‘staycation’ illustrated how economic uncertainty could provide benefits to those businesses in the UK whose main focus was the domestic market.  Many businesses thrived as those who might previously have gone abroad swapped these trips for destinations much closer to home.  Of course, we now know that as the economic picture improved, we gradually returned to a similar set of behaviours to those pre-downturn, albeit the domestic market has managed to remain slightly above the levels prior to 2008.

So, what will happen going forward? The situation in 2019 is clearly very different from 2008 with so many additional factors at play, and few economists predicting such a major economic downturn. That said, so much will be determined by what happens in the next six months around Britain’s exit from the EU. As long as this uncertainty remains, many people feel that they are in limbo, putting off major decisions around holidays. We cannot get away from the fact that the UK’s economic growth has stalled – the chart opposite from Thomson Reuters illustrates how the country’s growth relative to the other G7 economies has tailed off significantly.

And even the legacy of last summer’s good weather continues to remain.  Recently, Thomas Cook were using this as a reason for poor bookings this summer. The weather is always a key player – the recent hot spell boosted Easter bookings, and if settled sunny weather returns later in May, we could see a similar boost to domestic tourism as we did last year.

So, in summary, it’s almost impossible to be definitive in our predictions for 2019. Given Brexit and the associated economic uncertainty, there could be a substitution from outbound to domestic tourism as happened ten years ago.  Or more likely, based on the more recent experiences of last year, there could simply be a further overall dampening of activity and trips generally. Perhaps lower expense same day tourism might benefit by ‘stealing’ from domestic overnights.  And of course, it is even harder to predict what will happen to inbound tourism from overseas both pre- and post-Brexit.

So much is in limbo this year with Brexit at the heart of the uncertainty, that it will not be until some clear decisions are made on Britain’s future either within or outside the EU that we will be able to look beyond 2019 and predict more medium term behaviours.   

Undoubtedly, this just means it is an extremely unsettling time for our tourism industry and the many thousands of businesses that are dependent on this part of our economy.  Although we don’t have all the answers by any means, 56 Degree Insight are here to help businesses to manage their way through the uncertainty.  We can help them to develop strategies focused on the areas they can control – the visitor experience and marketing communications – ensuring they have the customer insights needed to optimise performance.  Please get in touch to discuss how we can help your business in these uncertain times….

Footnote: In their previous roles at Kantar TNS, Jim Eccleston and Duncan Stewart managed the two main surveys of domestic tourism – the Great Britain Tourism Survey (GBTS) and the Great Britain Day Visits Survey (GBDVS) for over ten years.  As such, they have a deep understanding of these surveys, and domestic tourism trends and behaviours.