Tom Jenkins, CEO of the European Tourism Association, weighs in on how Brexit might impact the luxury travel market.
By Tom Jenkins
The most important thing that you can learn about Brexit is that at any point, the prospects are unclear. Even if Teresa May’s ‘agreement’ were to be passed by the House of Commons, we would still be looking at up to five years of complicated resolutions governing every aspect of how we do business with Europe. Continued uncertainty is the only certainty for the foreseeable future.
One area that is unlikely to change dramatically is tourism in general, and luxury tourism in particular. In terms of mass tourism, the Euro may appreciate against the Pound. But the UK is a sufficiently large market that prices will follow demand. The UK is either the leading or the second most important source market for all the main European destinations. Any suppression in demand from the UK is unlikely to be met by other markets: we can expect prices to follow any reduction in demand in the medium term. Comparatively low-cost holidays in destinations such as Spain will continue.
In the luxury travel market, we foresee little overall impact. Whilst in this area the UK does not make up the biggest market, it is unlikely that a declining Pound will be offset by price-cutting. Yet the top end of the luxury market is notoriously nothing like as price-sensitive as the mass tourism market. This is not to say that it is wholly price insensitive – you don’t get to be very rich by spending lavishly – but this is one area where people don’t cut back. So we should be confident that Brexit should have little immediate impact on luxury travel.
The one area where there might be major disruption is if there is a ‘no-deal Brexit’. The European Commission has made it acidly clear that, in the event of no agreement, the UK will be treated as a ‘third country’. In these circumstances the UK would, upon leaving, naturally cease to be a member of the European Union. Its citizens would not be entitled to use the EU/EEA lanes upon entry. UK citizens would be subjected to formal immigration checks: their passports will have to be scrutinised (and cross-checked against databases), they will be asked the purpose of their journey, the purpose of their visit, and how they will afford to sustain themselves. This process takes between 45 and 90 seconds. This equates to a short delay if you are the first in the queue, but if you are one of 200, the line will stretch for hours. A delay of one or two hours is tiresome. For airports that receive a flight from the UK every five to ten minutes, the congestion will be intolerable, both for those caught up in it and for the logistics of the airport.
The main destinations for UK citizens have surprisingly said very little. Portugal has made it clear that it will create new express lanes for UK citizens. Malta has said it intends to impose no changes. Others have said nothing. The Commission appears, in this instance, to be intent on ensuring disruption.
The likelihood of this occurring is, of course, small and the ramifications of a no-deal Brexit run much further than the impact on outbound tourism. Were it to happen, delays at European airports would be a photogenic coda to widespread disruption at ports and within industry.
There are also longer-term implications for the tourism industry which may affect the luxury traveller. We are starting to see the migration of investment by tour operators away from intermediation in the UK. Eastern Europe has, for many years, been generating graduates who are fluent in English and who can run operations at a fraction of the cost in centres such as Prague and Bucharest. The luxury tourism industry in the UK is, like many of the service sectors, heavily dependent on non-UK EU workers. Hotels, restaurants, attractions, and the logistical companies that supply them have more than 50 percent of their workforce from the EU. We are already seeing a shortage of staff, and the proposed introduction of Tier 2 visas on EU staff would see a dramatic curtailment in demand. Anyone with experience of these visas knows that they are expensive, extremely bureaucratic, subject to delays, and force employers to pay a minimum salary. You can expect major resistance from industry to these measures.
We do not know that this is going to take place. The good news is that if Brexit were to happen it is not likely to have a dramatic impact on the outbound luxury travel sector. Unless of course there is a no-deal Brexit. No-deal means all deals are off.