How the weak pound is driving tourism in the UK

The UK has recently seen the biggest single jump in interest rates for 33 years and the downturn of the pound, so this combined with the cost-of-living crisis, means Brits are becoming ever more conscious of their spending and luxuries, as even small ones are now becoming out of reach. One such luxury is undoubtedly holidaying abroad, and as people tighten their belts, many will be looking for an alternative option. In view of this, UK staycations could experience a spike in popularity. Instead of expensive foreign travel, people are likely to favour more affordable holidays closer to home. 

Staycationers are likely to evaluate their choice on three main factors: value, quality, and location. The latter plays an important role in the decision-making process and will typically be the key driver to attract potential guests. It’s vital there are enough activities and attractions surrounding a hotel for guests to truly make the most of their holiday. Hoteliers must clearly demonstrate the benefits of their hotel location from the very first website viewing, along the guests’ journey through to the guest walking in through the hotel front door. 

Some hoteliers have seen the benefit of offering discounts or complimentary entry to nearby attractions, or electronic guides emailed to guests advising on options of how they can spend their few days away. In terms of quality and value, the devil lies in the detail and hoteliers must not forget about essential parts of a great customer experience, including pre and on-arrival communication, ease of booking, seamless check-in and an exceptional sleep experience. 

If hoteliers can successfully marry a strong guest experience with a hotel close to a range of leisure activities appealing to all types of staycationers, then the possibility exists to benefit from the expected staycation demand. 

Recently, it hasn’t just been British tourists walking through the doors of UK hotels; foreign tourists have been taking advantage of the weak pound, which in turn has been providing a welcome boost for many city centre hotels. The Q3 results from major brands demonstrated hotels in popular hotspots achieved a significant increase in their room revenues and occupancies, while tour operators have been calling Q3 2022 their best trading period for bookings since October 2019. Notably, the industry has experienced a huge influx of US tourists, taking advantage of the downturn of the pound, and in turn, providing a much-welcomed boost to the sector. Whilst many had suggested a return to 2019 levels would not be seen till 2024, the luxury sector and the economy sector in Q3 performed as well as 2019 at the revenue level.

Although increased demand is welcomed within the industry, we cannot ignore the economic crisis the UK is experiencing. This is impacting the bottom-line performance despite the higher room rates.  With ever-increasing inflation, the costs of running the business are at the highest point for over 30 years.  The impact of paying higher wages, higher supplier costs and a raft of other increases in running the business means profit conversion to the bottom line is under significant stress, and in many cases, below 2019. The cost of debt has and continues to increase, if indeed it remains available. For any business needing to refinance, the opportunities are limited and the debt ratio to value has shrunk. Whilst we have seen some activity on the sale and acquisition side, it would appear to be a mix of foreign investment, and in more regional areas, local longer-term buyers. 

Remaining profitable and staying open to welcome guests is ever more uncertain. We hope to see the Q3 2022 performance replicated in Q4 and onwards, and we remain optimistic that business in 2023 will gradually improve.