The Future of British Tourism

University Degree Business and Administrative studies

Content

Introduction………………………………………………………………….. 2

Section 1. PESTEL………………………………………………………..... 3

Section 2. Impact/Uncertainty model……………………………………... 6

Section 3. Developing scenarios………………………………………….. 7

Section 4. Analysis of organisational impact…………………………….. 8

Conclusion…………………………………………………………………… 9

References………………………………………………………………….. 10

Bibliography…………………………………………………………………. 11

Appendix 1………………………………………………………………… 13

Appendix 2………………………………………………………………….. 14

Appendix 3…………………………………………………………………... 15

Introduction

Tourism is currently the UK’s fifth-largest industry (Mintel, 2008). The importance of tourism cannot be underestimated. Directly and indirectly the sector employs over 2.7 million people - 8.6% of the whole UK’s workforce (Deloitte, 2008). A recent report by Deloitte revealed that the direct and indirect benefits of tourism taken together were worth 8.2% of GDP, equivalent to around £114 billion (Deloitte, 2008). Tourism provides stability and prosperity in such areas (South West of England and Highlands of Scotland), where without it would risk economic deprivation (Donoghue, 2009). Further, tourism gives an opportunity for Britain’s entrepreneurs and small business people to fulfill their ambitions and dreams. In a global economy that is dominated by multinational businesses, tourism is one of the few industries that can easily accommodate start-up businesses, allowing people to take that vital first rung on the ladder to entrepreneurial success (Donoghue, 2009).

The last decade, however, has been one of missed opportunity and decline. The percentage of international passengers coming to UK has fallen, despite an increase in the global number of tourists. There is also a growing £20.5 billion deficit between what British holidaymakers spend abroad and how much foreign visitors spend in UK. Unfortunately, the economic downturn has not bypassed tourism industry, even though the weakness of sterling has made the UK a leading value destination (British Chambers of Commerce, 2009).

There are three segments in Britain’s tourism sector: domestic, inbound and outbound (Appendix 1). The UK currently lies in 6th place in the world’s tourism rankings in terms of international arrivals and receipts and 3rd largest generator of international tourism expenditure. London dominates inbound tourism - 49% of inbound spend. The South West is particularly important in terms of domestic tourism - 18% of domestic spend (Team Tourism Consulting, 2008).

This essay will discuss the future developments in British tourism using wide range of scenario planning models, discover sector-specific drivers and analyse organisational implications.

Section 1. PESTEL

The nature and patterns of tourism are constantly changing and evolving and will continue to do so in the future.

According to the report of Team Tourism Consulting (2008), two factors have probably influenced UK tourism more than any others in the last decade. Firstly, the development and growth of low cost carriers (LCC), and secondly, an economic-political factor related to the accession of a number of Eastern European countries into the EU.

The development of LCCs has created a significant increase in air travel to and from the UK, although the balance of this has been from the UK. The development of LCCs has also facilitated second home ownership overseas and the permanent movement of Britons overseas, which is in turn has created tourism demand – both inbound and outbound (TTC, 2008).

The emergence of Eastern Europe and Poland in particular, as a generator and destination has been another major factor in the last decade with the development of a sizable Polish community in the UK.

The British Tourism in the future will be subject to a range of other influences, such as:

Political. The image abroad is increasingly likely to be linked to security. In the 21st century, bringing to us so many advantages, globalization made the world less secure. Terrorism became the threat number one for everyone. September 9/11 and London bombings in July 2005 proves that. As higher country will be secure, as more tourists will prefer travel there and spend there. Nobody wants to have their holidays in Afghanistan, even though it has beautiful nature. The chart (Appendix 2) shows the fall in revenue generated by tourists in relation with terrorism and conflicts.

Another political driver is brand image of the county. All countries, at some level, get the reputation they deserve, and the only sure way to a good reputation is to become a fair, prosperous, well-run and successful country (Donoghue, 2009). Thus its primary purpose is to encourage visits; better reputation means more tourists, as simple as that.

Other political factors that will have an influence on tourism include capacity (of airports, water, sanitation etc.) and migration (TTC, 2008).

Economical. Britain becoming more expensive can have a number of outcomes – some potential visitors might simply decide not to come, ...

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Other political factors that will have an influence on tourism include capacity (of airports, water, sanitation etc.) and migration (TTC, 2008).

Economical. Britain becoming more expensive can have a number of outcomes – some potential visitors might simply decide not to come, but others may still visit but spend less than they otherwise have done (Deloitte, 2008).

However, when sterling is strong and foreign currency is expensive for inbound tourists it also becomes cheaper for British tourists to holiday abroad, rather than in Britain, so the effect is twofold (Deloitte, 2008).

Rising GDP will gradually create new destinations and source markets. Over the next decade or so, Europe will remain the most important market for itself (generating over 80% of arrivals). However, the growth in emerging markets, most notably India and China, will play significant role in generating trips to Europe and UK (TTC, 2008).

Well developed health care systems and improvements in technology have supported the growth of medical tourism, with consumers travelling specifically to receive medical treatments (such as surgery, dentistry, cosmetic surgery and infertility treatment) (Donoghue, 2009).

Social. Events within the UK such as the 2010 Ryder Cup in Newport, the 2012 London Olympics, 2013 Rugby League World Cup, 2014 Glasgow Commonwealth Games, 2015 Rugby Union World Cup, and potentially hosting the 2018 Football World Cup offer enormous opportunities for UK tourism. In procurement terms alone, the Olympics will offer over 50,000 contracts to companies. The Olympic Delivery Authority has already awarded over £3.5 billion worth of contracts to over 880 businesses, with 45% of the authority’s direct suppliers based outside of London (BCC, 2009).

Furthermore, a recent Oxford Economics Study (2007) estimated that the gain to UK tourism would be 32million UK-wide extra visitor nights as a result of the Games. With the opportunities that the Olympics in 2012 will clearly deliver, the industry should absorb benefits from future sporting events. Another factor of social change affecting tourism is wealth – e.g. the purchase of second homes and the emergence of an Asian middle class (TTC, 2008).

One of other indirect drivers is an ageing population, which has more disposable income and ability to travel in low season. The 50–64 age group spends more per household on holidays than any other (Yeoman, 2004).

Technological. British-based airlines such as British Airways, Virgin and BMI have become respected international carriers, building route networks which make Britain one of the most easily accessible destinations for business and leisure travelers alike (Donoghue, 2009).

On the railways, private investors have completed the new high-speed Eurostar link from St. Pancras in London to the Continent. In 2007, there were 1.2 billion passenger journeys on the passenger railways, generating 30billion passenger miles. This is a record, the highest ever for normal passenger service in the UK. ATOC, the Association of Train Operating Companies, is enthusiastic and optimistic for growth (Donoghue, 2009).

Another sector specific driver includes more fuel efficient aircraft progressively reducing the real costs of international travel, larger capacity aircraft flying non-stop routes (TTC, 2008).

Advances in online booking systems are re-shaping distribution channels and instant and interactive access to tourism product offerings is giving tourists unprecedented control over how and when they spend their time and money (TTC, 2008).

Environmental. Climate change is possibly one of the largest long-term issues facing the tourism industry globally. Many low-lying coastal regions of Britain are at risk from rising sea levels and extreme weather conditions (e.g. flooding, tsunami, heat waves) (TTC, 2008).

The development of sustainable tourism is another important driver. Eco-tourism is the fastest growing sector of the tourism industry. The UK government’s target is to reduce CO2 emissions by 60% from 1990 levels by 2050. Aviation accounts for more than 6% of all UK CO2 (c.f. 2% globally) and ‘holiday air travel’ accounts for about 12% of individual UK CO2 emissions. Although these numbers are small compared with the emissions from power-generating facilities and vehicles, the rapid growth of travel means that aviation is a growing contributor to Greenhouse Gas emissions. The IPCC estimates that aircraft fuel efficiency is growing about 1 to 2 percent a year, while annual air traffic is growing at 5 percent. This results in growth of 3 to 4 percent a year in CO2 emissions (TTC, 2008).

Legal. The logistical difficulties of obtaining a visa – having to visit a visa office in person with all visa applicants and having the visa application form only available in English – quite apart from the price (£65 for a UK visa as compared to an average price of £47 for entry to all 21 countries of the Schengen area) means that we are internationally uncompetitive right at the point that our potential visitor decides that they would like to confirm their travel plans (Donoghue, 2009).

Turning back to China again, it is often there to exclude Britain from a European tour due to the extra cost of obtaining a British visa and as a result, France and Germany welcome well over 500,000 Chinese visitors each year, while the UK receives less than 150,000 (Donoghue, 2009).

A 2002 study by WTTC indicated that visitors to the UK paid the second highest amount of tax of any destination in the world. Since then, there have been further increases in taxes and charges. For example, with the new long haul rates of Air Passenger Duty announced by the Chancellor in November 2008, it will now cost a family of four from India, travelling to London to see the 2012 Games, £560 in APD and visa charges before they even pay for their flights to the UK (Donoghue, 2009). The tax burden on visitors has now reached a level where it is adversely affecting the UK travel industry’s ability to compete in the international market.

Section 2. Impact/Uncertainty model (Appendix 3)

There is no doubt that human activity is pumping CO2 into the atmosphere, and that this has caused a sustained year-on-year rise in CO2 concentrations. The warming itself is real enough, however that doesn't necessarily mean that human activity is to blame. Skeptics say that the warming could be natural (Pearce, 2005). The real impact of CO2 is not discovered yet, thus we positioned it on the crossroads between medium uncertainty and medium impact.

There is also no debate anymore that climate changes. Pearce (2005) defined it as “most crucial scientific question of the 21st century…, will shape economic, political and technological developments for years, even centuries”. It is unquestionable that changes in climate will have a huge effect on every part of our lives, however the research conducted by Cardiff University shows that British public has become more skeptical about climate change and the weather disasters it may bring. Half of the people surveyed believed the media was too alarmist (Chand, 2009). Thus, the chart above shows weather disaster as a highly uncertain occasion, which can have high impact on tourism market.

Threat of terror attack in Britain reduced and now the lowest since May 2005. The new threat level set by the MI5, means that a terrorist attack is no longer regarded as "highly likely" (Travis, 2009). Thus in a chart above the terrorism has medium uncertainty.

According to Jonathan Essner (2003), “the impact of terrorism on a state’s economy may be enormous, leading to unemployment, homelessness, deflation, crime and other economic and social ills”, and that is why the chart above describes terrorism as it may high impact on tourism.

Winning the bid for the 2012 Games has already had a positive impact on UK tourism. According to a recently published survey conducted by VisitBritain one third of those who said they wanted to visit the UK, stated to watch the Games as their main reason for coming.

“This research shows that the tourism benefits of hosting the Games will not just be realised in 2012; they have already started and will continue long after the final race has ended.” (House of Commons Culture, Media and Sport Committee, 2007) Thus Olympic Games were positioned between low uncertainty and relatively medium impact.

Section 3. Developing scenarios

“Olympic glory”

After the Olympic Games 2012, London became number one visiting place in the world and left behind even Paris. The huge amounts of money that were generated by visitors have been sent to development tourism sector in poor regions, especially to South West of England and Highlands of Scotland. Many new Aqua and Luna parks have been open since that time. Low cost carriers started to offer special one day tours to UK. Families from all over EU love to spend their holidays in UK. Moreover, for non-EU residents the visa restrictions and tax charges became less. Nowadays Union Jack is more and more associated with leisure, enormous amount of sights and therefore great holidays. Children from Italy start to save their money on lunches, now they can spend more on weekends in UK.

“Green Britain”

Eco-tourism is the fastest growing sector of the tourism industry (Darowski, 2006). The UK becomes truly the kingdom of sustainable tourism. People from over the world became aware of environment. There is many large ecotourism resorts already built, using best practice energy and waste minimisation technologies. There is a great opportunities for local communities as now they matters. Promoting a more responsible environmental attitude eco-tourism became a calling card of UK. There is a high growth in inbound and domestic sectors.

“Climate disaster”

Changes in climate result in warmer summers and winters, accompanied by more rain. An increase in levels of rainfall will impact upon UK’s outdoor activities, making people think twice whether come or not. The warm winters mean end of skiing and snow sports in Scotland. The sea levels are rising. There is a high risk of flood in low-lying coastal areas. In order to stop gradual temperature growth, strict emissions limitations has been applied. Travel has been identified as tourism’s greatest environmental impact and air travel is particularly carbon intensive. The number of international and domestic flights is highly reduced. Such restrictions, however provides opportunities for domestic tourism. There are many tourists in Wales. People from all over the UK enjoy their weekends in London.

“Closed borders”

Because of a high risk of terrorist attacks UK’s borders are closed for visitors from some countries. The world’s safety concerns bring disruption to tourism and aviation. Extremely strict control upon arrival became a routine. For those who haven’t past the “test of peaceful visit”, based on polygraph, the immediate deportation is required. Governments of developed countries recommend to the citizens avoid travelling to “the bombing risk regions” and the Great Britain is on the list. There is enormous decline in inbound and outbound sectors. Some tourism agencies in UK are becoming bankrupt. National airways are running out of money, but still operate only because of the huge monetary support from the government. The high rate of unemployment occurs. Sterling became weak. As a consequence low and medium class can’t afford to go abroad.

Section 4. Analysis of organisational impact

We are the tourism agency that operates in British market. Different scenarios have changed our approach to business:

Conclusion

Britain is a globally attractive and popular destination with a range of enviable tourism assets, from stunning landscapes to vibrant cities, with a rich history of tradition, heritage and culture, living alongside modern design, music, theatre and architecture (Donoghue, 2009). But UK is losing its share of international visitors. Whilst Britain has unquestionable strengths – in “brand name”, reputation and our international transport connections – it also has some weaknesses, such as high APD and visa charges.

With regard to the future of UK tourism, nothing is absolutely certain, but one thing at least appears to be sure the UK’s visitor economy is presented with an enormous opportunity to benefit from the 2012 Olympic Games and place the UK firmly on the domestic and international visitor map.

References

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Chand, S. (2009) UK climate skepticism more common. [Online]. Retrieved from: [Accessed 03.12.2009]
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Essner, J. (2003) Terrorism’s Impact on Tourism. [Online]. Retrieved from: [Accessed 02.12.2009]
House of Commons Culture, Media and Sport Committee (2007) London 2012 Olympic Games and Paralympic Games: funding and legacy. [Online]. Retrieved from: [Accessed 02.12.2009]
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Yeoman, I. and Lederer, P. (2004) Scottish tourism: Scenarios and vision. [Online]. Retrieved from: [Accessed 03.12.2009]

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