Tourism UK: The missing millions
Britain's tourism industry is suffering as the high pound turns away Americans and Japanese. Those who do come are staying near the airport and shunning the beauty spots. By Rob Griffin
Published: 18 May 2007
These are worrying times for Britain's tourism industry. The headline number of overseas visitors may be steadily increasing, but the underlying trends indicate that it could end up being a disastrous summer season for many resorts.
Not only has the UK become an expensive place for the all-important American and Japanese tourists because of the pound's strength against the dollar and yen, but it is also facing fierce competition from rival European destinations.
Official figures illustrate the point. Although the UK welcomed an extra 200,000 overseas visitors in the first three months of this year in comparison to the same period in 2006, those from North America fell 7 per cent to 750,000.
The number of visits from the Japanese, meanwhile, currently stands at 323,000 - well down on its 1995 peak, when 619,000 trips were made. Back then, these visitors were generating £539m for the economy. Today, the figure is little more than £200m.
Elliott Frisby, spokesman for VisitBritain, the national tourism agency, blamed the situation on a combination of factors, including terrorist attacks, currency problems and economic issues, such as the fall-out from the Asian crisis of the late 1990s.
"The fact visitor numbers from North America are down could mean we're starting to see the initial impact of the dollar-pound situation, but it's by no means the only issue," he said. "Americans have increasingly been going to Italy instead of London."
But the fightback is already underway. VisitBritain has launched a campaign extolling the virtues of different parts of the country, illustrated by its latest drive aimed at the US market called: Be a Brit different.
The idea is to emphasise how many things there are to see in the country. A quick visit to the website www.visitbritain.us and you can see everything from information about the East Midlands to a preview of a forthcoming cheese-rolling competition.
"We still anticipate a good year in 2007 for British tourism and expect total inbound visits to reach 33 million," added Mr Frisby. "In addition, the total amount being spent by these visitors is expected to be around £16bn."
So if the numbers of tourists from key markets such as the United States are declining, where are all the visitors coming from?
The greatest increase has come from the 12 "accession" countries which joined the European Union in May 2004. Visits from these places, which include the Czech Republic, Hungary and Poland, have risen from 740,000 in 2002 to 2.7 million last year.
However, Bob Cotton, chief executive of the British Hospitality Association, said the strong overall visitor numbers masked the real picture. While London is extraordinarily strong, he says, many other parts of the country are suffering. Most overseas visitors are now unwilling to explore the rest of Britain, he claimed, unless a city has direct airline access. While London, Manchester and Edinburgh are on the tourists' itinerary, therefore, smaller towns and English country regions such as the Lake District and the Cotswolds are too often ignored.
"The size and dominance of the capital makes it look as if things are good, but in reality London is exceptional, the regional cities are okay and rural areas are starting to have problems," he explained. "Gone are the days when people flew into London and then spent a week touring in the car."
Liz Hodges, chairman of the Exeter and Heart of Devon Hotels Association and boss of the Globe Hotel, has first-hand experience of this problem.
"We don't have a huge number of overseas visitors as I don't think many have found this far South-west," she said. "Exeter has been buoyant because it's got an airport, but leisure businesses in some of the more rural areas have struggled in recent years."
The coming months, she conceded, could be a struggle on all fronts, with interest rates affecting the number of UK-based visitors and exchange rates hitting the tourists.
"We have had some Canadians staying that have absolutely loved it, but unfortunately the costs of living are twice as high as their home market," she pointed out. "There's no doubt it [the exchange rate] will put people off coming here, and that's a shame."
Britain's tourism industry hasn't only got to grapple with the prospect of lower overseas visitors. What about UK residents? Are they going to stay in this country or take advantage of the exchange rate to head abroad?
The number of visits abroad by Britons has rocketed in recent years, from 59.4 million in 2002 to 68.6 million last year - an increase of 15 per cent, according to figures compiled for the International Passenger Survey. Just over 17 million visits were made during the first quarter of this year - 280,000 more than the same period last year, and 822,000 up on the corresponding three months in 2005.
Anecdotal evidence also indicates that thousands of us are cashing in on the weak dollar, with travel agents reporting a 35 per cent increase in the number of bookings between January and April, compared to the same period last year. According to a spokeswoman for the Association of British Travel Agents there will be plenty of cut-price seats made available by airlines on flights to the United States to ensure they have enough passengers to fill the plane.
"There is likely to be strong bookings to countries whose currencies are pegged to the dollar as they will be potentially cheaper for us to visit," she said. "It will be good for Britons going abroad because they will be getting more for their money."
It's not just the number of trips being made by overseas residents that will dictate the amount of success enjoyed by tourism-related businesses; the amount these visitors spend while they're over here is also vitally important.
By far the biggest spenders are the Americans. The £2.7bn splashed out by them in the UK last year represented nearly a fifth of the overall total spent by visitors. Whether or not this pace will continue in 2007 following sterling's staggering rise to just over two dollars remains to be seen.
For operators of tourist attractions, the exchange rate issues are particularly depressing given that 2006 had started to see a recovery from the dark days of 2005 and the terrorist strikes. The Victoria & Albert Museum, for example, enjoyed a 24 per cent increase in visits to 2.4 million last year, while the number of people climbing on board HMS Belfast increased 12 per cent to almost 270,000.
Robin Broke, director of the Association of Leading Visitor Attractions, said most attractions appeared to be holding up well this year, although operators were facing pricing pressures. "Retail and catering sales figures [from these attractions] are also up, which shows that people are still prepared to spend," he said. "However, market forces still dictate, and if they push prices up too high then people will go elsewhere."
Bob Cotton at the BHA, however, believes the full impact of the dollar weakness will not be felt until 2008. "It probably won't cause a problem this year as people tend to make plans a year to 18 months in advance," he warned. "They might think about giving London a miss."
Visit Britain's Elliott Frisby remains upbeat. Increasing competition between airlines on transatlantic routes and the concerted public relations push, he believes, can help to keep North American visitors coming: "We can't do anything about exchange rates, but we can make sure the marketing is right."
Americans stay away from the Lakes
The hoteliers Colin and Vicky Monk have already noticed a downturn in the number of visitors from the United States this year, and fear the trend is likely to continue.
The couple, who run the Glenburn and Howbeck hotels in Windermere, Cumbria, believe Americans are simply finding it too expensive.
"The number of bookings has dwindled over the past few months and the only thing we can put it down to is the exchange rate," said Mr Monk. "We also have holiday cottages popular with Canadians and we're waiting to see if they're also affected."
Fortunately the currency problems are yet to have an impact on the flow of Japanese tourists who account for up to a quarter of bookings at the Howbeck, many of whom come to explore the area's links with Beatrice Potter. But Colin is concerned this could change if the yen weakens. "It's obviously a worry, and that's why we're trying to find new markets," he added. "For example, we weren't getting anyone from Russia a few years ago, but now it's an expanding area."
The Monks, who bought the Glenburn in the late 1990s and the Howbeck last year, are also benefiting from their decision last year to carry out a major refurbishment programme in a bid to move upmarket.
"It has definitely paid off," said Colin. "We're not necessarily getting more bookings but we are getting more money."
Also in this section
- The Week Ahead: Another week, another deal - now Tchenguiz targets M&B
- Hedge funds get the bug for benevolence
- Market Report: Oil titans climb on revived merger rumours
- A Day In The Life Of: Hargreaves Lansdown chief Peter Hargreaves
- The Investment Column: Hold on to SABMiller for emerging market growth
