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Exploring Brexit’s impact on hospitality

With Brexit on the horizon, there’s still a huge amount of uncertainty about where negotiations are going. We take a look at what implications it might have for the travel industry and some of the possible outcomes

Brexit: two syllables, a whole world of arguments and counter-arguments.

In June 2016, the UK held a nationwide referendum on its future membership of the European Union. The British people voted – by a slender margin of 51.9% to 48.1%, and with a turnout of 71.8% – to leave the EU. The result was widely seen as a shock, and continues to be a contentious topic.

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'The overriding mood is therefore one of uncertainty.' Photo: Getty Images

The UK is due to exit the EU in March 2019. Both parties are currently negotiating the terms of the withdrawal: an immensely complex task, given the UK has been part of the European legislative framework since the early 1970s. Some issues, such as how much the UK will have to pay the EU as a “divorce settlement” (estimated at £35bn-£39bn), have largely been resolved, but countless other areas are still under negotiation. Their outcomes are often far from predictable.

The overriding mood is therefore one of uncertainty. This is as true for the hospitality and travel industries as it is for any other. The potential repercussions could impact everything from the aviation sector (will UK-based airlines be able to replace their current arrangements?), to border controls (will UK travellers need visas to reach mainland Europe?) as well as exchange rates (will prices alter dramatically?). It also raises questions about on-holiday health treatment (exactly how will the EHIC reciprocal healthcare system now work?) and even overseas roaming charges.

The main problem, at present, is that no one has a crystal ball.

The main problem, at present, is that no one has a crystal ball

“More than 18 months since the UK voted to leave, the reality for many travel brands is that they are still no further forward on what Brexit will actually mean for their businesses,” says Jamie-Lee Abtar, Founder of Be Distinctly Different, a marketing agency for the travel industry. “They want to know how Brexit is going to impact their UK customers travelling to destinations like Spain, France, Portugal, Cyprus and Greece. And they need this information soon.”

In the immediate aftermath of the referendum, the British Pound slumped in value. It has broadly regained its worth against the US dollar, but remains approximately 15% down against the Euro. This has had a positive effect on the cost of travel within the UK for European tourists, and an adverse one for UK tourists and business travellers heading to Europe.

Air travel

It’s also contributing to the level of EU migrant labour in the UK, a destination where many hotels and hospitality businesses have regularly employed EU workers. “We’re seeing a significant fall-off in the number of EU migrants to the UK,” says David Hearne, Researcher at the Centre for Brexit Studies at Birmingham City University. “We’ve seen a drop in the order of 100,000 migrants per annum since the Brexit vote, and that’s a net figure. Going forward, that will be a big issue.”

There are also possible implications for air travel. The UK will automatically leave the European Common Aviation Area when it departs the EU, although worst-case scenarios of planes being grounded and routes being cancelled are improbable. “I feel that an agreement will be found, because it’s so clearly in the interest of both parties,” says Mike Edwards, Managing Director of flight consolidator Aviate. “I don’t expect any UK airline to be prevented from flying into Europe at all.”

As a Brit, he also points out that the UK travelling public are unlikely to be deterred from holidaying overseas, regardless of how the cards might fall in the Brexit negotiations. “I think the British public have a determination to go on holiday,” he explains. “Whether it’s been 9/11, the economic crisis, tsunamis, hurricanes in the Caribbean – you name it, we still go.”

Whether it’s been 9/11, the economic crisis, tsunamis, hurricanes in the Caribbean – you name it, we still go - Mike Edwards, Aviate

This positivity is shared by operators like Party Hard Travel, which is poised to handle around 15,000 trips from the UK to EU beach destinations in 2018. “I’m not saying that Brexit is going to have no impact,” says Co-Founder Barry Moore, who points out that the exchange rate fluctuation after the Brexit vote contributed to a 25% profit loss for his company in 2016. “There may be an added layer of bureaucracy or two to comply with EU laws, but it’s in the interest of the EU to make things as easy as possible for Brits to continue to visit its countries.”

The travel industry as a whole has, to a large degree, adopted a business-as-usual approach post-Brexit. This in itself can be taken as a positive sign, although the hard facts are that the final implications of the referendum are a long way from being resolved.

“We’re in the process of trying to disentangle more than 40 years of legislation,” concludes Birmingham City University’s Hearne. “You face a situation where from an academic angle, it’s very difficult to offer prognostications on the future when there’s a huge amount of uncertainty about where these negotiations are going.”

You might also like to read Spotlight on the staycation opportunity.

Hero photo: credit to David Dibert

Takeaway
  • In a referendum in June 2016, the British people voted to leave the European Union
  • The UK is set to leave the European Union formally in March 2019
  • Negotiations are currently underway between the UK and the EU regarding the terms of the withdrawal
  • Areas that could potentially be impacted include air travel, holiday costs and visa arrangements
  • A considerable degree of uncertainty hangs over the eventual deals that will be struck

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