The British Pound dropped more than 3% against the dollar to a fresh 31-year low of $1.322 – the largest fall in history – and the Euro rose more than 2% to 83.25 pence – the highest in over two years1.
US and Chinese online travel sites have reported record spikes in online queries about travel to the UK since the vote. Ctrip.com, China’s largest travel agency has seen searches on more than triple in less than a week. Similarly, popular online agent Kayak saw a 54% increase in US searches for travel to the UK. Similarly, flight searches from the UK to the US rose 46%. No doubt, there has been a short term spike in interest for travel to the UK but the long term implications remain to be seen2. On the other side of the coin (literally), the US has seen a significant drop in inbound travel, even before Brexit, due to the strength of the US dollar3.
Here’s what’s happening in some of the world’s outbound travel markets…
CANADA: Travel by Canadians to overseas countries increased 3% year-on-year in April, from 941,000 in 2015 to 972,000 in 2016. Outbound travel to the United States increased 0.2% from March to April 2016, however declined 13% compared to outbound travel in April of 2015. Overall outbound travel from Canada declined 7% year-on-year in the month of April4.
Unemployment in Canada edged down 0.2% from 7.1% in April to 6.9% in May. The rate remains nearly unchanged from May of 2015 when it sat at 6.8%5. For the fourth consecutive month, consumer confidence in Canada rose 7.4% in May to reach 101.8. A glimpse back to May of 2014 had consumer confidence at 1006.
UNITED STATES: With the strong US dollar, travel by Americans continues to grow. In the first 2 months of 2016, US outbound travel was up by 10.1%; the big winners are South America (up by 18.7%) and Canada (up by 15.5%). The WTTC predicts that both US travel and expenditure will grow by 5% annually until 20257.
Unemployment in the United States declined by 0.3% to 4.7% in May from 5% in April, the lowest reading of national unemployment since November of 20078. But more work is a double-edged sword for tourism in this case – more than 55% of US workers left vacation time unused in 2015. The US Travel Association blames technological connectivity – intensifying their attachment to work and reducing their ability to break free for a vacation9.
US consumer confidence, which registered 94.7 for the month of May, edged down to 93.5 in the month of June, just slightly below preliminary expectations of 94.310.
The European travel market was beginning to make marked improvement in 2015, as it slowly recovered from the 2008/9 recession - European travel jumped 5% last year and was anticipated to grow another 3% this year. However, the results of the Brexit referendum in England will no doubt significantly change travel to and from Europe, at least in the short term.
UK: As the world’s fifth strongest economy, the UK also has one of the highest outbound travel rates in the world, growing 5% in the first quarter of 2016 from 15.8 million in 2015 to 16.59 million in 201611. UK travel market was projected to grow by 4% this year to £44.8 billion. However, will Brexit de-rail the UK’s positive travel trajectory? The answer is probably yes, so projections for the remainder of the year remain uncertain12.
GERMANY: For the second consecutive month, unemployment in Germany remained at the lowest rate in 35 years at 4.2% in April, down from 4.7% in 2015. April saw declines of 0.6% in the number of unemployed and an increase of 0.1% in employment from March.13. The German economy grew 0.7% in the first quarter of this year, ahead of the projected 0.6% and the fastest growth the country has seen in two years and twice the growth of 0.3% in Q1 of 201514.
FRANCE: Economic growth in France is anticipated to reach 1.4% in 2016 and 1.5% in 2017 in large part due to lower energy prices, tax cuts on labour and low interest rates. Despite these tax reductions, lower debt-servicing costs and some spending restraint is projected to bring the fiscal deficit down to 3% of GDP in 201715. Unemployment in Q1 stood at 10.2% and is anticipated to sit at 10.1% by the end of Q216.
CHINA: Though no official outbound travel numbers have been published in China in 2016, the China Outbound Tourism Research Institute (COTRI) reports that 30.2 million Chinese travelled internationally in Q1 of this year, an increase of only 2.4% from the 29.5 million of Q1 last year. This is the slowest growth rate reported since 1997 and the first single-digit growth rate in the current decade17. 120 million Chinese embarked on international travel last year spending over 104.5 billion USD18.
After weakening its currency 2% last August, followed by another 0.5% in January, China’s Central Bank further devalued its currency by 0.3% last month, putting the yuan at the lowest valuation it has seen in five years. Amid speculation, China’s Communist Party maintains that the country is growing 6.5% to 7% per year, whereas Capital Economics, like many other independent forecasters, believe the number to be closer to 4.2%19.
JAPAN: After steady growth in the number of outbound travellers in Q1 and April, numbers declined 1% in May 2016 compared to May 2015. A total of 6.63 million Japanese left the country for international travel January to May of this year, an increase of 3.1% from the same time five months last year20.
In the wake of Brexit, the Australian dollar has climbed in value against the pound. However, its value continues to plummet against the US dollar which may well have an impact on the overseas destination Australians choose, at least for the short term. 21
WORD OF MOUTH
Regarding the Brexit vote; “…it is a historic moment, but not a moment for hysterical reactions.” Said Donald Tusk, President of the European Council. The main concern now seems to be the timely and efficient separation. EU Officials have said there will be “no renegotiation” and that any delay to the exit would “unnecessarily prolong uncertainty”.
Recommendations have been made that the official parting of ways take no longer than two years and the distinct undertone to all discussions is that there is no going back on the vote, this decision is final22.
- “The British Pound Just Hit a 31 Year low”. Reuters, June 27, 2016 [↩]
- “Interest in UK Travel Soars After the Brexit Vote”. Fortune, June 28. 2106 [↩]
- US Travel Association, Press Release, July 5, 2016 [↩]
- “Travel Between Canada and Other Countries”. Statistics Canada, June 20, 2016 [↩]
- “Labour Force Statistics”. Statistics Canada, June 10, 2016 [↩]
- Desormeaux, Marc. “Index of Consumer Confidence: May 2016”. The Conference Board of Canada, May 26, 2016 [↩]
- “US big spenders to keep travel & tourism buoyant into 2016”, eyefortravel, February 16, 2016 [↩]
- “United States Unemployment Rate”. Trading Economics, June 3, 2016 [↩]
- US Travel Association, Press Release, June 14, 2016 [↩]
- “United States Consumer Sentiment”. Trading Economics, June 24, 2016 [↩]
- “Number of monthly visits abroad by residents of the UK from January 2015 to March 2016”. Statista, May, 2016 [↩]
- Sileo, Lorraine. “Will Brexit Derail Europe’s Travel Recovery?”. Travel Daily News, June 28, 2016 [↩]
- “German Unemployment Rate”. Trading Economics, June 29, 2016 [↩]
- “Germany Economic Outlook”. Focus Economics, June 28. 2016 [↩]
- “France – Economic Forecast Summary (June 2016). Organization for Economic Cooperation and Development, June 2016 [↩]
- “France Unemployment Rate”. Trading Economics, June 29, 2016 [↩]
- Georg Arlt, Wolfgang. “30.2 million Chinese Outbound Trips in the First Quarter of 2016”. Forbes, May 23, 2016 [↩]
- “China Outbound Tourism in 2015”. Travel China Guide, 2015 [↩]
- Long, Heather. “Warning Sign – China Sets Currency at 5-year Low”. CNN, May 25, 2016 [↩]
- “2016 Foreign Visitors & Japanese Departures”. Japan National Tourism Organization, June, 2016 [↩]
- “Brexit Referendum: Australians to Enjoy Cheaper British Holidays”. The Sydney Morning Herald, June 27, 2016. [↩]
- Rankin, Jennifer, et al. “EU Leaders Call for UK to leave as Soon as Possible”. The Guardian, June 24, 2016 [↩]
Mahon Jones & Associates is a tourism consulting firm, based in Canada, with special focus on cultural tourism and attracting the cultural tourist. The information above has been compiled via desk research of the internet for clients and key contacts, primarily located in Canada. It is intended to provide contacts with a quick snapshot of currently available market information.
For more information about our services or to discuss how we can assist your organization, government agency or business visit our website at www.mahonjones.com or contact us.