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Five months have passed since the UK’s historic Brexit vote and still we know almost nothing about what life will be like when the country leaves the European Union.
Aviation, the sale of holidays, and perhaps the most importantly the free movement of people are all tied in with the other 27 member states. Leaving is going to be very messy and given the benefits that the travel industry gets (including certain taxes) there is a lot to lose.
Uncertainty is terrible for the economy, terrible for business, and terrible for the public. Beyond banal platitudes about “the best possible deal” Prime Minister Theresa May has given little away.
Negotiations are either being carried out behind closed doors or they are not being carried out at all.
This all puts the travel industry in a a very difficult position.
At the recent WTM London trade event, a panel discussion took place to debate the impact of Brexit.
On stage were senior representatives from four businesses: Thomas Cook, Monarch, JacTravel, and Cox & Kings. Collectively they represent companies generating billions of dollars in revenues from interests in the UK, Europe, and the world.
Despite the dark clouds gathering on the horizon, everyone seemed relaxed.
Of the panellists, only Monarch’s CEO Andrew Swaffield said his business had suffered from the vote, with the others insisting that it was pretty much business as usual.
“I am still exceptionally positive about this industry, both outbound and inbound,” said Terry Williamson, CEO of hotel consolidator and inbound service provider JacTravel.
Thomas Cook’s UK boss Chris Mottershead, went further still. “There are actually more impactful areas that we have to deal with on a daily basis, whether it’s a terrorist attack, or a volcano, you name it. There is always something this industry has had to deal with over the years and actually has done remarkably well in dealing with it,” he said.
“I don’t think this is any different in reality I don’t see the significance of the impact of Brexit having the same impact as some of the others.”
Wishful thinking
The relaxed attitude of the WTM panel contrasts markedly with two recently released studies.
Research company Euromonitor predicts that a “disorderly Brexit” i.e. a scenario where the UK and EU cannot agree on departure terms, has the potential to put the UK into a recession in 2017 and would have more of an impact on GDP than either a President Trump-induced downturn or problems in China.
And even though the devaluation of the pound has made the UK more financially attractive to visitors, Euromonitor also warned that VisitBritain’s target of 40 million international tourists by 2020 would also be in jeopardy.
Further warnings about the dangerous new territory the UK now finds itself in were contained in a separate report by Mintel.
A survey of 2,000 Internet users found that 54 percent believe that travelling aboard would become more inconvenient with 31 percent saying they would holiday at home in the UK as a result.
Good news for the UK domestic market but not great for tour operators selling package holidays to the Mediterranean.
Fly and flop
One area where the UK has benefited substantially from being part of the European Union is in air travel.
The old system of monopolistic national carriers was effectively broken up in 1992 by the creation of the single market for aviation, enabling new airlines such as EasyJet and Ryanair to flourish.
Airfares within the EU have fallen in that period and it seems likely that stepping outside this network would lead to price increases.
Unsurprisingly, airlines offered some of the most vocal support for remaining in the EU and after the vote have been quick to identify the negative impact leaving is likely to have on their businesses.
Ryanair’s outspoken CEO Michael O’Leary is one of the few travel leaders who has spoken candidly since the Brexit vote about the problems the industry faces.
The government is not blind to the problems facing the air industry and recently David Davis, Secretary of State for Exiting the European Union, chaired a discussion with aviation industry leaders, to get their views.
Many have already said they effectively want the status quo, which puts the government in a bind: How does it negotiate a better deal than airlines already have?
A joint statement between Davis and the CEO of trade body Airlines UK said that market access remained a “top priority” and that it was important to secure “liberal access to European aviation markets.”
However, it added that government and industry would explore “opportunities for further liberalization,” highlighting the fact that the UK would have more freedom to do this with certain other countries, including possible bilateral agreements with the U.S. and Canada.
The problem is that the UK as part of the EU already has extensive open skies agreements with both the U.S. and Canada. It is hard to see how this could be improved.
Warning signs
A point that the panel of industry leaders at WTM London mostly agreed upon was the issue of freedom of movement for workers.
The ability to freely move and work in another member state is one of the founding principles of the EU and the travel and tourism industry in the UK has been one of the chief beneficiaries of this freedom.
According to the British Hospitality Association, EU nationals make up around 15 percent of employees in the hospitality and tourism industry, which equates to around 700,000 people. The ratio in London is even higher at an estimated 35-40 percent.
Both Patrick Richards, Chief Commercial Officer at Cox & Kings and JacTravel’s Williamson pointed to freedom of movement of labour as being critical.
Monarch’s Swaffied stressed this point, saying: “For me the whole thing hinges on the free movement of people. From a political point of view if we can get clarity that we can live with that in the European Union, then you can say we can keep liberal air travel, you can keep visa free travel, we can allow things to just keep moving without putting friction in. And if you say no its hard to see how that works anymore.”
The problem for these travel companies and for the entire sector is the government has made several hints that controlling immigration will be its key focus in Brexit negotiations, meaning that free movement of people into and out of the UK is likely to be curtailed.
Obviously this will have an impact on inbound and outbound travel as well. British holidaymakers could even end up being hit with a small fee for traveling to Spain or France. But of far higher consequence is the impact on employment.
A new world
Skift recently wrote about how the travel industry needed to re-think its place in the world given the multiple challenges facing the world.
Zika, terrorism, climate change, and Brexit are all to a certain extent about travel.
“The geopolitical realities of our world are worth embracing by the travel industry, instead of ignoring them or, worse still, wishing them away,” we said.
The June 23 vote has changed just about everything for the UK and Europe with huge implications for both politics and the economy.
Source: skift.com