The UK tourism industry will directly contribute 4.6% of GDP by 2025, according to a report from Deloitte.
The figure is a 0.5 percentage increase against this year and underlined the importance of tourism to the economy. The study warned that the UK suffered in relation to its competition when it came to value in the hotel sector.
The group said that the total economic contribution of the tourism economy to the UK, including the impact of businesses in the supply chain, was GBP126.9bn this year or 9.0% of total GDP. Total tourism spending estimated for this year is GDP113bn, up 6% on the year. The direct contribution of tourism this year is GBP58bn, or 4.1% of GDP.
One of the key drivers for future growth is rising international demand, which Deloitte predicts will increase at a rate of 6.1% a year, reliant in part on Sterling’s strength. The report acknowledged that one of the reasons why the UK has been so attractive to foreign visitors of late has been the recent depreciation of the pound. Deloitte cautioned that the UK “continued to be viewed as a relatively expensive destination”.
On arrival, the study also picked out the perceived value of hotels. The study said that VisitBritain – which commissioned the report – noted that while the UK’s luxury hotels were world-leading, it is rated less well than competitors on value for mid-range hotels.
This may to some extent reflect the more expensive London hotel market, as well as Britain’s reputation as a relatively higher cost destination.
There has been a shift in the structure of supply with an increase in the supply of budget chain hotels and a subsequent increase in demand for this type of accommodation at the expense of other types. Recent Deloitte research showed that the budget/mid-scale hotel sector experienced slower growth in early 2012 compared with other segments.
The report said that there was likely to be a continued shift in demand for towards mid-market and budget products which cater more for the growing middle classes of domestic travellers within highly populated emerging markets as demand from these countries grows.
The future success of the tourism sector is also reliant on a number of factors within its control. The study warned that organisations in the tourism economy “must” invest in technology and that the assessment of projected returns on that investment would need to be “more rigorous than ever”.
In the future it is anticipated that technology would segment and understand customers and offer them more relevant choices, affecting both business and consumer behaviour. Advances in digital capabilities are likely to drive more activity at a global scale as geographical boundaries are broken
One of the most important factors in making more money is making more visitors. For this, the study looked at emerging markets, much as every developed market is currently doing. Some inroads into this have already been made by the UK government, with the applications for Chinese visitors entering the UK being simplified, allowing more effective competition with destinations such as Paris.
The overall contribution of emerging markets is not, in the short term, expected to be significant. Deloitte described it as being “relatively small” up to 2020, compared with established markets.
However, the UK government is looking long term and is said to recognise the significant potential of emerging markets over the next 30-plus years.
Deloitte said: “In these countries, knowledge and perceptions of Britain as a holiday destination are weaker and time and resource-intensive engagement with the travel trade will be key to increasing visits. However, there is potentially less interest from the private sector in match-funding promotional activity. This poses strategic challenges for tourism promotion of Britain – how to balance resources to ensure continued revenue is delivered in the short-term while building a long term position in markets that are key to Britain’s future prosperity.”
Once here, there is also the matter of how tourists get around. The infrastructure of the UK, as is frequently noted by its commuters, is in need of investment. One of the fastest rail lines currently leads out – to Paris. However, visitor arriving via routes other than air is a relatively small consideration. For the emerging markets, enhanced airport capacity is critical, with the Deloitte report pointing to the need for aviation and general infrastructure policy to also be environmentally sustainable.
Less easy to influence is the UK’s position as a desired destination. The study says: “the UK attracts significant numbers of high-spending visitors from regions such as Russia, the Middle East and North Africa. These visitors are generally attracted by London as a cosmopolitan centre of consumer culture. They are likely to remain a significant presence at the elite end of the tourism market, although such visitors are inherently globally mobile and influenced by fashions and trends, and their future behaviour is therefore difficult to predict with certainty.” As long as the government doesn’t have any more bright ideas along the lines of Cool Britannia, all should be well.
HA Perspective: Should the UK Government ever resolve its issues with extra airport capacity and HS2, it is not just a case of ‘build it, and they will come’ as far as those lucrative international travellers are concerned. The UK may punch above its size in the political arena, relying on its heritage, but it cannot rely on this to deliver future guests.
Gone – almost – are the days of cheesy adverts from tourism boards from around the world, played to an accompaniment of students in native dress at WTM. Global marketing is getting ever-more sophisticated.
As the Deloitte study says: “Advertising the UK as a destination is little different than advertising any other product or service to end-consumers. At the extreme, if competitors advertise and the UK does not, market share will be lost”.
With the relaxation of visas for Chinese travellers, the UK government has shown that it can play the long game, now it needs to be encouraged by the sector to maintain momentum. The tourism sector in the UK is very fond of moaning about how it doesn’t get enough government backing and this study will no doubt be used as tool to bang over the heads of ministers to make them understand how much of a contribution it makes.
Their likely response is to point out that, if there’s so much money swilling around, then maybe the sector could put its money where its mouth is. And while it’s there, maybe a few less small campaigning groups and associations in favour of a few larger ones would help get a more cohesive message across.