Chris Photi, partner, White Hart Associates
The majority of us crave stability. Stability breeds confidence and when a consumer is confident they spend money on discretionary items.
Sadly, since June 23, politicians have fallen some way short of giving us all confidence. The Prime Minister resigned. The UKip leader resigned.
The Brexiteers ran for the hills after their “schoolboy jolly japes” touring the UK in a bus. The opposition leader has been totally undermined and his party is in disarray.
This leaves us with Tim Farron! In recent weeks many people have been asking who is running the country?
Hopefully, with the appointment of a new Prime Minister and a new Cabinet there will be greater clarity in this regard and perhaps confidence can be re-established.
Simply that is what the country and the travel industry needs – confidence. At the moment the industry is experiencing dramatically reduced demand due to the lack of consumer confidence.
How should a travel business react? My advice has been to not slash your wrists, but to certainly tighten your belt.
Notwithstanding there are many real and immediate problems facing the industry, not least decreased demand and of course the evil spectre of a devaluing pound.
The effect of exchange rates will probably not impact the travel industry so much in 2016, as most prudently run businesses would have been hedged.
However, there could be a profit and loss impact for 2017. However, the industry has experienced exchange rates at the current levels in the recent past and will respond accordingly.
Uncertainty will prevail with regards to the future and the future of the EU Package Travel Directive.
My view is that little will change as far as the PTD is concerned in relation to regulations that will be implemented in the UK – revised Package Travel Regulations and Atol regulations.
However, the ability to trade from the UK to other EU markets will be significantly hampered. A licence issued in the UK will, after Brexit, no longer entitle you to protect consumers in other EU markets.
Bluntly, this has been the case historically anyway due to a wholly inadequate scheme of consumer protection to enable UK companies to sell in other EU markets.
Expect travel groups, if the do not already have one, to establish a subsidiary in another EU country.
Companies will also be concerned with regards to VAT and the EU’s special scheme for travel agents (“TOMS”).
Broadly, I do not expect much to change in this area, although there is a degree of uncertainty with regards to the wholesale option and the levels of VAT that will be payable going forward.
Certainly a trade deal with the EU is not going to permit the UK to treat EU destinations as it currently does other international destinations, namely zero rating.
Speculation is what it is. The key to any travel business now is to respond to the current market conditions, rationalise and look at every penny of spend.
I think the new Prime Minister’s cabinet appointments are crucial, not least who will be at No. 11. We need to see the government take control and the country to gain confidence.
Our underlying economy will only be undermined if a lack of confidence remains for a prolonged period of time.
An area of concern not directly related to Brexit is destinations availability. Western Med destinations are virtually full and the industry is crying out for more capacity for the winter within a four to five hour flight time.
Lets hope the foreign office can get their finger out and become satisfied with flights to Sharm, as there is still significant demand for that destination.
The travel industry has seen many significant geo-political and financial issues in the recent past and there is sufficient resilience and talent to override these problems, providing the government gets to grips with national and international confidence.
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