The British decision in the referendum of June 23 will have consequences in many different areas, and the very important tourism industry will also be affected. The British perceive their holidays as a need rather than a luxury, and the economic situation will affect the number of trips they can make every year and their duration.
The British market is the fourth largest outbound travel markets in the world, only behind China, the United States and Germany. For countries like Spain it represents almost 20% of international tourist arrivals, the biggest feeder market, and total expenditure of over 14,000 million euros. Spain is the favorite destination for the British, the undisputed leader in both the summer and winter seasons. Almost one in four tourists from the UK visit Spain.
For summer 2016 the impact on the Spanish tourism industry will be minimal given that most British tourists had already booked their holidays and the difficulties faced by alternative sun and beach destinations. However, industry analysts agree that the medium and long-term uncertainty about the possible impact of Brexit, above and beyond the impact that the devaluation of the pound will continue to have (a 7% fall since the referendum and more than 16% over the last twelve months), is likely to provoke a reduction in the number of Brits travelling abroad and especially in their spending.
Other predictable consequences with a potentially significant impact on tourism are an increase in the price of flights mainly due to an increase in the cost of fuel after the devaluation of the pound against the dollar. There is also a cost for airlines based in the UK being left out of the European Common Aviation Area.
For Meliá Hotels International, the leading hotel company in Spain and the third largest in Europe, the UK is the second largest feeder market after Spain, contributing 14% of all guests and approximately 10% of all hotel revenues. In addition, the company currently operates three hotels in the country, the ME London in Covent Garden, the Melia White House in Regent Street, both in London, and the Innside Manchester. The company is also preparing the opening of the future Innside Glasgow and Innside Birmingham.
While it is true that predicting the medium-term effects is complex, the company is monitoring the situation from a long-term viewpoint and evaluating any possible impacts on operations, assessing possible scenarios in order to make the best decisions. The Company will focus its analysis on the small group of hotels that currently have moderate risk exposure, with more than 30% of its room and board revenues generated by the British market in 2015.
These hotels are mostly in the Balearic Islands, a destination in which the company has the means and experience required to act on the current market segmentation and reduce exposure to Brexit-related risk.
The current geographical diversification of Meliá Hotels International and our global distribution channels, particularly our direct melia.com channel, allow us to react quickly to potential problems in demand from specific markets, which will hopefully not materialize in the case of a market so dear to us as the UK.
In any case, the next edition of the World Travel Market to be held in early November in London, the first major Travel Trade Fair of the season in Europe and internationally, will certainly bring greater visibility on prospects for the 2017 season and the eventual effects that Brexit may have on the tourism industry.
