Significant longer-term issues are still to be sorted out: visas, passports, and customs and border control in general, which could put a crimp in inbound and outbound travel for the country. Already British Airways owner IAG SA lowered its 2016 profit target in anticipation of a drop in demand.
With the surprising outcome of Great Britain's referendum on its future in the European Union, there is much speculation about its potential impact on travel and tourism. It was already hard enough to forecast the outlook for travel in Europe, with so much economic and political uncertainty in the region and, indeed, the world.
The European travel market did not recover from the global recession as did U.S. tourism, and it was just climbing out of the doldrums in 2015. According to Phocuswright's European Online Travel Overview Eleventh Edition, European travel grew 5% in 2015 to 264 billion euros and was expected to gain another 3% this year. The U.K. travel market was projected to grow slightly faster at 4% this year (to £44.8 billion). European tourists were just starting to get more optimistic, with travel incidence at a four-year high for Germany and France1, although U.K. travelers were already starting to pull back.
But with the crashing British pound (which fell to a seven-year low on Friday), the question remains how confident Britons will be in traveling abroad – and what the repercussions will be throughout Europe itself. One of the markets that might suffer most is France. With the U.K. as one of its top feeder markets, there could be some impact on holidays this summer (though most plans are likely made already). On the flipside, the U.K. does stand to benefit from inbound tourism as the pound weakens against the dollar. But European travel will be rattled, at least temporarily. The Independent sizes it up well: The €:£ rate is crucial because we take the majority of our foreign holidays in the single-currency area; the Spanish coasts, the French countryside, the cities of Italy and the islands of Greece. Even temporary fluctuations matter.
Significant longer-term issues are still to be sorted out: visas, passports, and customs and border control in general, which could put a crimp in inbound and outbound travel for the country. Already British Airways owner IAG SA lowered its 2016 profit target in anticipation of a drop in demand.
Any disturbance to European open skies, which resulted in the rise of low-cost carriers and lowered inter-EU fares, could affect the number of inbound and outbound flights (and potentially cause fares to rise). Not good news for Ryanair or easyJet – it's no wonder Ryanair lowered its fares so expats could fly to the U.K. and vote to remain.
U.S.-based online travel giants were also rustled by the chaos. Stock price declines for Expedia (-7.4%), Priceline (-11.4%) and TripAdvisor (-6.2%) on Friday signify the breadth of casualties that day as the market reacted to the potential impact on tourism.
These are just some of the big issues the travel industry will face in the days and months to come. However, while it is a natural reaction to contemplate the worst in the immediate aftermath of surprising events, it is also essential to remember that travel – both as a journey as well as the pursuit of leisure – are deeply ingrained in Europe's social fabric. Economic confidence and uncertainty will come and go, but travel will remain a central part of European life.
No referendum is going to change that.
1 Upcoming Phocuswright's European Consumer Report Sixth Edition, 2016
Lorraine Sileo launched the research division of Phocuswright Inc. in 1998. Phocuswright's global marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. She is quoted frequently in consumer and trade media and has authored numerous publications (including Phocuswright's U.S. Online Travel Overview reports. Lorraine has testified at hearings held by the National Commission to Ensure Consumer Information and Choice in the Airline Industry, charged by Congress to examine the impact of online distribution on the travel industry. Lorraine was previously an adjunct professor at New York University's Graduate Center for Hospitality, Tourism and Sports Management. She has analyzed the business and consumer electronics marketplace for various publications and media companies for over 20 years.
