the impact leaving the european union will have on the british tourist industry

Northern Powerhouse Developments Limited, K3, K Mill, Dean Clough Mills, Halifax, HX3 5AX Company Number: 09940469

Compiled by Helen Bickerton Head of Compliance


JUNE 2016

A REPORT ON THE IMPACT LEAVING THE

EUROPEAN UNION WILL HAVE ON THE

BRITISH TOURIST INDUSTRY


It will go down as the day Britain woke up to a new dawn; a new beginning and the realisation that independence was upon us.

June 24th 2016 was the day that saw Britain vote to leave the EU and while it is a decision that has sent the financial analysts into a frenzy of uncertainty, it could well turn out to be the best possible result for the British Tourism industry.

While many from the ‘remain’ side continue to speculate on the negatives the result brings, the decision to quit the shackles of EU legislation will both, in the short and long term, be a positive move for British tourism and those looking to invest in lucrative hotel and leisure opportunities.

While concern over our withdrawal from the EU and how it might affect tourism is understandable, it is totally misdirected and any negative effects on tourism we believe will be far outweighed by the advantages.

Reasons leaving the EU will NOT affect UK tourism:

• The number of foreign visitors to the UK will increase due to the weakening of the pound.

• More Brits will opt to ‘stay at home’ for their holidays to get more for their money.

• As property prices are set to dip, it is the perfect opportunity for foreign and UK investors to buy into UK hotel and leisure market.

• Tourists coming to Britain routinely cite Britain’s unique history and culture as a prime reason to choose Britain as a destination.

• Holidaymakers from both within and outside the EU recognise that Britain is different than the rest of the EU.

• Britain does not share the Euro currency, Schengen agreement or other features of the EU that impact most on tourists, so withdrawal will have no significant impact on the tourism experience. .

• Leaving the European Union might actually make Britain a more attractive tourist destination.

Why leaving the European Union will further boost British tourism


It is worth remembering the UK has endured sharp devaluations in sterling before, notably following the ejection of the pound from the European Exchange Rate mechanism and in the aftermath of the banking crisis. While painful at the time, both were followed by periods of economic expansion and we believe that this will again be the case when the dust on our exit settles.

With the pound set to slump against the euro in the short term, the number of foreign visitors to the UK is expected to soar with Britain now seen as a very attractive financial option for holidaymakers to visit.

If the economy, as predicted, does stutter and the pound falls, then overseas travel will also become much less affordable for many Brits and there is expected to be an increase in the number of ‘stay at home’ British holidaymakers as the cost of travelling abroad rises.

From an investment point of view, it will also be the perfect time to invest in the UK hotel and leisure market.

With a predicted short-term property slump of between 8 and 10 % over the next two year, it is lucrative opportunity for savvy investors to buy into the British hotel and leisure market at a very attractive price.

Likewise for those British investors contemplating adding to their property portfolio it could also be the time to take advantage of the lower UK prices with an eye on the long-term gains when the country finds its feet again.

Add the theoretical possibility that British nationals may require a visa to use a property in Europe, then investment in the UK is seen by many as a far safer option in the short-term while questions are answered and negotiations take place.

The table below shows the drop in exchange rates and what savings could have been made in the past 24 hours for foreign investors on a typical £85,000 unit.

Currency Yesterday’s Rate Today’s Rate

Euro 1.3091 1.23841

US Dollar 1.4893 1.37783

Chinese Yuan 9.7956 9.10347

Russian Ruble 95.3837 89.8162

Emirati Dirham 5.4658 5.0714

Japanese Yen 158.0672 142.29188

Singapore Dollar 1.9962 1.87230

Taiwanese Dollar 48.016 44.983

Currency Cost at Yesterday’s Rate Cost at Today’s Rate % Saving

Euro 111,273.50 105,264.85 5%

US Dollar 126,590.50 117,115.55 7%

Chinese Yuan 832,626.00 773,794.95 7%

Russian Ruble 8,107,614.50 7,634,377.00 6%

Emirati Dirham 464,593.00 431,069.00 7%

Japanese Yen 13,435,712.00 12,094,809.80 10%

Singapore Dollar 169,677.00 159,145.50 6%

Taiwanese Dollar 4,081,360.00 3,823,555.00 6%

Currency Exchange Rates per one Great British Pound

Savings on an £85,000 unit over the last 24 hours

Data compiled from www.xe.com and www.exchangerate.org.ukToday’s exchange rates were valid at 09:00 on the 24th June 2016

Savings based on one unit bought at a price of £85,000


WHAT THE LEAVE VOTE MEANS FOR INVESTMENTS

While the UK’s vote to leave the European Union may well whip up storms in financial markets in the short term, experts believe that the long-term investment outlook remains positive.

In response to our exit, Coutts Head of Financial Advice and Investment Solutions, Mohammad Syed, said: “Yesterday the British people decided to exit the European Union in a landmark political decision. We believe that this will continue to impact global markets in the short term, but don’t believe it will have a major effect in the long term.”

Our historical analysis suggests that while big political events can generate a lot of controversy and media coverage, they generally have only a minimal effect on long-term market performance as Coutts Head of Investment Strategy Terence Moll explains: “Big moves in markets are driven by major economic and financial events. We believe that while the vote to leave the European Union is a significant political decision, it will have relatively little effect on long-term investment returns.”

Michelle McGrade, chief investment officer at TD Direct Investing, said: ‘I urge investors not to panic by the initial shock and focus on the longer term because it’s never been right to sell at bottom of markets.

‘The world isn’t ending, it’s changing with new challenges and opportunities – let’s today not forget the opportunities. Markets are forward looking, the dust will settle and investor confidence will return.’

Adrian Lowcock, head of investing at AXA Wealth, said: ‘Times of uncertainty will knock investor confidence as they see falling share prices and panicked experts predict doom and gloom. This leads to making quick and often irrational decisions, such as selling after the market has fallen.

“Companies will adjust and the British economy will adapt. Investors need to look through all the noise and remain focused on their personal goals. Any sell-off will produce opportunities for prudent investors looking at the big picture and focused on the longer term.

“A weaker sterling will help the UK become more competitive and could boost the earnings of many of UK’s large companies where the bulk of profits are made overseas.”


SO WHY WILL PEOPLE CONTINUE TO VISIT BRITAIN?

While the question is valid and some of those working in the tourist industry see it as a genuine concern, there is a false idea being implanted in the minds of British citizens that Britain will become the Black sheep of Europe now we have left the EU.

The fact is Britain is already ‘separate’ and has been for some time, the divide existed long ago, Britain routinely downplayed its part in the EU and there is an argument that now we have left it might even make it more attractive to tourists.

Britain like every other state in the EU has its own culture which is unique to itself. We have always been seen as drastically different from most other European

countries and our appeal comes from having our own unique culture, history and attractions.

That will not change now we have left the EU and if anything will make us an even more attractive place to visit.

Certainly those coming to Britain from the Commonwealth will not be put off. Many people in the Commonwealth – Australia, Canada, New Zealand, India and Pakistan in particular – have family in the UK and when paying a visit they routinely stay for a while to visit different parts of the UK.

Inbound travel from Commonwealth and former-Commonwealth countries is predicted to remain high, as are numbers from the USA, meaning demand will remain strong for hotels beds throughout the UK. The UK’s Treasury recently predicted that sterling could lose 12% of its current value in the wake of the leave vote, which would make holidaying more affordable for foreign nationals.

People came to Britain before we joined the European Union and will continue to come now we have left and if anything our new found independence will be seen as a huge appeal for more people to come and visit.


UK ECONOMY CONTINUES TO SHOW SIGNS OF SUSTAINED RECOVERY

Global uncertainty may currently prevail, with the EU continuing to face economic challenges and the ongoing tension caused by the Ukraine-Russia conflict and the Greek crisis. Despite this rather gloomy scenario, there is still plenty of light at the end of the tunnel, with the US economy forecast to grow over 3% in 2016, in turn providing fresh impetus for the expanding UK economy.

The UK market has continued to recover in its own right and has steadily grown over recent years, driven by low inflation, strong consumer spending and its traditionally vibrant services sector, remaining one of the most robust economies in the developed world and providing real opportunities for smart investors.

Falls in global oil prices have kept inflation at record lows, hugely enhancing both consumer and business confidence. A welcome knock-on effect has been lower air fares, creating a welcome boost to the tourism industry and an increase in visitor numbers to all parts of the UK, particularly outside of London.

The hotel sector faces a number of challenges but major industry players remain confident in its ability to adapt and succeed, as overall prosperity increases in the wake of the banking crisis. Room occupancy rates in the UK regions are predicted to rise to record highs in 2016, following unprecedented increases over the previous five years, when the UK’s regional hotels actually experienced a higher overall growth rate than those in London.

UK HOTELS EXPECTED TO BENEFIT FROM PREDICTED ECONOMIC UPTURN IN 2016/17

London, predictably, continues to lead UK recovery in 2016 with economic growth of up to 3% projected by many economists, but other regions in England, Scotland and Wales are close behind with expected rises of up to 2.3% per annum, as various investment schemes improve local infrastructure and tourism facilities.

Overall consumer spending is forecast at a healthy 3% per annum and the UK sits in a creditable 2nd place in a table of growth rates among G7 countries, while the UK unemployment rate is at a 10-year low. Combine these figures with expected inflation of 0.5% and you have genuine cause for business optimism.

• The British Chambers of Commerce (BCC) has upgraded its UK GDP growth forecast for 2017 to 2.6%. The upgrade mainly reflects stronger than expected growth in household consumption and services.

• UK business investment is predicted to grow 7.2% in 2016 and 7.4% in 2017.

• Exports are expected to increase to 2.6% in 2016 and 2017.

Many of the signs are there that the UK is in an increasingly strong position, making it fertile ground for those looking to invest in the hotel and leisure industries.


BREXIT UNLIKLEY TO NEGATIVELY IMPACT UK VISITOR NUMBERS FROM EU MEMBER STATES

Because the UK has always remained outside the border-free Schengen Area and opted to retain strict passport control at airports and seaports, inbound travelers are unlikely to experience much change in processing on arrival in the country. It is certainly not considered to have any significant impact on visitor numbers.

Due to its proximity to mainland Europe, the UK will remain a supremely attractive destination, due to relatively short journey times and the availability of budget flights across the region. It is also possible that sterling could be weakened by the vote to leave the EU, thus making Britain a more affordable destination for Europeans. Numbers of travellers visiting friends and family will remain high, due to historic links and immigration between many European countries and the UK.

The draw of Britain’s outstanding visitor attractions remains. The National Parks, historical sites and cultural attractions remain popular with visitors from not just Europe but all over the world.

BRITISH TOURISM ALREADY PERFORMING STRONGLY IN 2016

2016 has already witnessed major growth in inbound tourism compared to 2015, which has had a hugely positive impact on the UK hotel trade. Inbound UK visits in the first quarter of 2016 were 6% up on the first three months of 2015, setting a new record for this period of over 7 million visits. Growth is also a feature over the rolling 12 months to March 2016 – at 36.5 million visits this is the highest yearly result since records began.

Overall UK visitor figures for the first quarter 2016 stood at 2.2 million, which represents a substantial increase of 2% over the first quarter of 2015. Europe remains the main market for inbound tourism.

Holiday visits to the UK also saw a healthy increase of 2% in March 2016 compared to March 2015. Over the first three months of 2016 there were 2.26 million inbound visits – 5% up on the same period last year and representing a record start to a calendar year. There was also a rolling 12-month record of almost 14 million holiday visits in the twelve months to March 2016.

UK HOTEL OCCUPANCY SET TO BREAK FURTHER RECORDS

The positive travel trade background continues to drive hotel demand and create genuine optimism in the hotel industry, particularly in the regions, many of which had suffered in the severe floods of 2015.

Revenue per available room (RevPAR) is expected to rise markedly across the UK with a particularly encouraging 4.2% increase predicted for the provinces, which is almost 2% higher than the prediction for London.

Hotel room occupancy outside the capital is forecast at 77% which is up 0.6% and represents the highest level ever, as hoteliers in rural areas of England, Scotland and Wales enjoy a welcome resurgence in visitor numbers. Higher occupancy rates also mean that hotels are able to leverage their room rates and reap extra financial benefits.


WELSH TOURISM CONTINUES TO GROW

2015 saw Wales continue to build on 2014, which was a record-breaking year in terms of hotel occupancy for this scenic part of the UK. Its combination of spectacular coastlines and mountain ranges, including the Pembrokeshire Coast and Snowdonia National Park, plus numerous castles and other historic sites, ensure many repeat visitors.

Beaches such as Tenby, Rhossili and Barafundle are regularly voted Britain’s best. The 870-mile Welsh Coastal Path was declared the world’s first uninterrupted example when it opened in 2012. A coastal tourism strategy has been developed under the ‘Wales Spatial Plan’ and identified a clear way forward in realising the economic potential of this unique area and improving visitor experience.

A Trip Advisor piece recently singled out Llandudno, on the north coast, as the third best place to visit in the UK, just behind London and Edinburgh. Its combination of immaculate seafront and proximity to Snowdonia make it a year-round resort. Nearby Conwy is a World Heritage Town. Both Llandudno and Colwyn Bay match the environmental gold standard as Blue Flag beaches.

Up to June 2015 Welsh hotels reported occupancy rates of 74%, up 2% on the previous year. South-East Wales enjoys the highest occupancy rate but figures have gradually risen throughout the country, giving real cause for optimism among owners and investors.

The top four markets for inbound Welsh tourism are the Republic of Ireland, France, Germany and the USA.


SCOTLAND WELL POSITIONED FOR CONTINUED DEVELOPMENT

It is too early to assess the impact of the exit vote on Scottish tourism, although the prospect of Scotland rejoining the EU in the wake of the rest of the UK’s departure has already been discussed by politicians and remains an option further down the line. A surge of nationalism could serve to make the country an even more attractive holiday destination in future.

Scotland has carved out its own niche at the luxury end of the hotel market, thanks largely to its incomparable scenery and availability of high-end country pursuits such as salmon fishing and game shooting, often outperforming many of the world’s more established tourist centres.

The cities of Edinburgh and Glasgow also draw huge numbers of tourists, thanks to a combination of fascinating history, world-class entertainment and dynamic arts scenes. The Edinburgh Festival Fringe attracts visitors from across the globe and hotels run at full capacity throughout the event. Glasgow has benefited greatly from being nominated Cultural Capital of Europe in 1990 and maintains a proud legacy in its sponsorship of the arts.

First quarter reports for 2016 suggested that its hotel sector continues to thrive and remains an active area for investment. Since 2010 Scottish hotels have returned an average 9.5% year-on-year, comfortably outstripping other European markets, with the exception of other areas of the UK. In 2015 there was a healthy rise in visitor numbers to over 15 million, which is a 10% increase over the previous 12 months.

• Visitor spending — estimated at over £5 billion for the year

• US visitors — spending grew by 16 percent to £488 million

• European visitors — 6% growth in numbers, and seven per cent spending growth

• n 2015 Both Glasgow and Edinburgh airports recorded their busiest ever years with a 13% increase

Scottish Development International has been proactive in helping potential investors to access funding and other support, and in 2014 Scotland was the top-ranked UK region for direct foreign investment. This was also its third consecutive record year for FDI.


UK HOTEL ACQUISITIONS ENJOY EXPANSION DESPITE THE LEAVE VOTE

Optimism in the UK tourism industry prior to the EU referendum led to total deal volume in the hotel trade exceeding £5.5 billion in 2014, which far outweighed expectations. 2015 continued the upward trend with regional transactions the most prevalent. Total transaction volumes in 2015 eventually reached £8.1 billion, the highest level since the £8.3 billion record set in 2006.

Investors continue to seek good investment opportunities in prime regional locations outside of London and the South-East. The reduction in UK inflation meant that owners enjoyed reduced operating costs and increased profitability, a trend set to continue in 2016/17. With the operating landscape in the UK’s regional markets continuing to improve and a significant amount of equity looking to deploy into the sector, 2016 is expected to be another strong year for investment into the UK hotel market. Many estate agents are still experiencing growth in demand for regional assets from investors seeking higher returns, plus they report a marked increase in private equity clients coming into the market.


Activities Visits which involved activityNights spent in UK*

Amount spent in UK*

No. of visits (000)

% of all visits

% of holiday visits

No. of nights (000)

£(m)

Visited museums or art galleries

8,299 27% 43% 86,146 £6,255

Went to theatre / musical / opera / ballet

2,796 9% 14% 33,838 £2,748

Visited castles or historic houses

8,874 29% 48% 91,245 £6,506

Visited religious buildings 6,738 22% 35% 74,920 £4,948

Visited parks or gardens 11,081 36% 54% 114,312 £7,826

Went to countryside or villages

5,336 18% 22% 72,418 £4,205

Went to the coast or beaches

3,582 12% 15% 54,292 £2,853

Went shopping 17,668 58% 71% 162,275 £12,092

Went to the pub 13,886 46% 50% 122,645 £9,393

Went to bars or nightclubs

3,842 13% 14% 42,495 £3,412

Attended a festival (e.g. music, food, arts)

949 3% 4% 16,810 £1,003

Went to a live sport event (e.g. at stadium)

1,325 3% 4% 14,673 £1,128

Took part in sports activities

707 2% 3% 10,989 £730

ACTIVITIES UNDERTAKEN IN BRITAIN

International visitors participate in a number of activities whilst they are in Britain. Visits across the country very commonly include activities such as eating out, shopping and cultural attractions.

Destinations offering rural locations or outdoor activities appeal to particular groups of visitors as do those where it is possible to watch football or other live sport. Those visiting Britain on holiday are often particularly likely to include activities such as visiting castles, museums or to explore the countryside or coast. In 2011, Visit Brirtain sponsored specific questions in the International Passenger Survey (IPS) to find out how many visitors from overseas undertook particular activities whilst in Britain.

The results were as follows:

Activities undertaken by visitors to Britain

Source: International Passenger Survey, 2011. * By those whose visit included the activity. Nights and spend are not specifically whilst under-taking activity but throughout visit to UK


Activity All SW SE LON EE WM EM YKS NW NE WL SC

Shopping 69% 69% 72% 81% 68% 69% 72% 69% 71% 62% 75% 74%

Shopping clothes or accessories

66% 64% 60% 70% 53% 51% 52% 63% 60% 60% 47% 70%

Shopping for souvenirs 58% 54% 57% 60% 42% 49% 45% 55% 43% 66% 57% 68%

Dining in restaurants 79% 71% 59% 83% 69% 58% 80% 70% 68% 79% 78% 89%

Going to pubs 48% 53% 42% 53% 45% 55% 61% 56% 66% 77% 58% 70%

Socialising with the locals 38% 54% 47% 30% 47% 59% 57% 39% 61% 38% 62% 56%

Going to bars/nightclubs 15% 7% 6% 17% 8% 15% 11% 23% 30% 36% 12% 25%


Famous monuments or buildings

64% 55% 57% 70% 48% 45% 38% 44% 36% 41% 46% 73%

Parks or gardens 52% 59% 52% 64% 48% 37% 46% 38% 25% 23% 35% 56%

Castles 34% 38% 42% 30% 24% 21% 17% 36% 8% 30% 37% 67%

Religious buildings 33% 38% 37% 40% 35% 18% 20% 35% 20% 16% 22% 41%

Historic houses 29% 36% 34% 30% 28% 23% 18% 28% 15% 12% 14% 35%

Museums 48% 32% 42% 55% 39% 26% 16% 37% 28% 14% 23% 45%

Art galleries 26% 11% 15% 32% 11% 14% 3% 15% 14% 7% 9% 23%

Theatres 18% 7% 6% 24% 8% 9% 4% 3% 9% 4% 2% 5%

Live music 11% 8% 6% 11% 7% 7% 9% 9% 19% 14% 12% 14%

Festivals 4% 5% 4% 3% 6% 6% 6% 5% 9% 2% 1% 11%

Locations (e.g. literary, film)

3% 4% 2% 3% 4% 2% 2% 6% 2% 1% 1% 3%

ACTIVITIES IN UK NATIONS AND REGIONS

Shopping, going out to eat, drink or socialise British shops, restaurants and pubs are major draws for international visitors and are included in most holiday visits.

Visiting heritage/culture attractions London and other urban areas attract many overseas visitors with the most popular holiday activities including visiting famous buildings, parks, gardens, and museums.

Source: International Passenger Survey 2006-2011




Countryside 20% 51% 38% 9% 31% 25% 34% 55% 22% 24% 49% 52%

Villages 19% 55% 39% 9% 32% 26% 20% 44% 16% 28% 42% 42%

Coast / beaches 11% 48% 37% 3% 16% 9% 14% 22% 14% 31% 53% 35%

National parks 7% 26% 11% 4% 4% 8% 8% 26% 9% 16% 30% 25%

Walk in countryside 24% 58% 45% 12% 27% 33% 32% 37% 24% 26% 50% 52%

Walking by coast 8% 37% 25% 2% 9% 4% 4% 15% 8% 35% 38% 29%

Playing golf 2% 3% 4% 0% 3% 3% 3% 5% 1% 0% 3% 7%

Going cycling 1% 7% 2% 1% 3% 2% 2% 2% 0% 4% 1% 2%


Going on a tour 25% 23% 23% 26% 14% 13% 19% 18% 19% 8% 19% 36%

Learning activities 9% 20% 17% 8% 6% 3% 4% 4% 10% 12% 8% 8%

Zoos, aquarium, other wildlife

7% 9% 7% 8% 5% 5% 8% 11% 7% 1% 4% 6%

Visiting a spa / beauty centre

3% 6% 2% 2% 3% 3% 4% 5% 4% 1% 1% 4%

Researching ancestry 2% 1% 3% 2% 1% 2% 1% 4% 0% 3% 5% 4%

Going to watch live football (at a stadium)

2% 1% 1% 2% 3% 3% 3% 2% 8% 19% 0% 0%

Visits to rural/coastal locations & participating in outdoor activities/sports In more rural areas such as Scotland and the South West holidays are very likely to include visiting castles, villages and walking in the countryside.

Our report on inbound tourism to Britain’s nations and regions (PDF, 2.47MB) covers the profile of international visitors in different areas of Britain and the activities they do there.

Other activities/attractions Football, nightlife, contemporary culture and shopping are especially popular in Northern cities which often attract short breaks.



the impact leaving the european union will have on the british tourist industry

Economy & Finance