Overseas visitors to the UK will not be deterred by high VAT, providing sterling remains weak against key inbound currencies, reveals a report released yesterday (May 25) at the WTM Vision Conference-London.
Euromonitor International Head of Travel and Tourism Research Caroline Bremner told delegates this morning that the exchange rate plays a greater role rather than in-country taxes, although the latter will be a factor.
Sterling weakness against the euro makes the UK attractive to visitors from key markets such as France and Germany, Bremner said. At the same time, sterling has strengthened against the dollar, making the UK less attractive to the key US inbound market in the short to medium term. The recent royal wedding will result in an increase of visitors this year, which confuses the picture.
Furthermore, the report – Travel Industry Global Overview – states the UK’s VAT hike to 20% this year will have an impact on visitors’ spending, while in the UK, warning that “increased VAT may affect repeat visits over the long term.” It said visitors may return but for a shorter period of time or look for cheaper accommodation options to reduce costs.
The UK inbound industry can fight this by focusing on the guest experience and customer service to ensure the UK remains value for money.
However, while the UK government is increasing VAT as a deficit reduction strategy, other destinations have dropped their VAT rates in order to attract visitors. For example, Ireland slashed its VAT rate from 13% to 9%.
“The UK government’s increase in VAT as part of the deficit reduction program stands in sharp contrast to other countries that are taking bold steps to boost their tourism competitiveness by reducing VAT in an effort to stimulate domestic and inbound tourism revenues,” Bremner said.
Overall, the trend remains positive with arrivals in actual terms increasing year on year over 2010-2015, reaching 32.1 million inbound arrivals compared with 29.3 million in 2010. For the current year, Euromonitor International expects 29.9 million. In Olympics year, the UK should welcome 32 million, with a drop in 2013 to 30.9 million.
Over the same timescale, UK outbound traffic will plateau at around 60 million, below its pre-crisis level of 67 million.
The Euromonitor International report, worth £1000, was given to all attendees of the WTM Vision Conference-London as part of their attendance fee. The event was the third WTM Vision Conference this year, following successful events in Milan and Dubai.
World Travel Market Chairman Fiona Jeffery said: “The report’s findings are a positive sign for the UK inbound industry. Although, with other countries reducing VAT to attract visitors, the inbound industry should not be complacent, especially as a shift in exchange rates could have a detrimental impact on the visitor numbers.”
WTM Vision Conference–London is organized in association with Kingley Event Management and sponsored by corporate insurance, reinsurance, and services company Mapfre Assistance.