Destinations Face Up to Travel Disruptions

By Caroline Bremner, Euromonitor International

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The political sands have shifted greatly in the US and UK in less than 12 months. The Trump presidency and Brexit are expected to impact not just the forecast economic performance of both countries, but will also shape future tourism demand. So, where should destinations and travel brands seek out new sources of demand?

Myriad of demand drivers impact and shape travel

Sound growth prospects for global travel flows thanks to Asia

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Brexit perpetuates uncertainty, dampening UK economic growth

A No-Deal Brexit scenario (run on Q1 2018) points to further economic slowdown in 2018, whereby the UK is unable to find agreement with the EU, and trade relations revert to the WTO as default. This scenario has a high probability of 40–50% over the next two years. A No-Deal Brexit will take nearly 10 years to recover to the baseline forecast.

UK Macro-Economic View in a No-Deal Brexit Scenario

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UK inbound expects to reap the benefits of a “Brexit bounce”

Under a No-Deal Brexit scenario, thanks to further currency depreciation making the UK more affordable, there could be a further 3.8 million arrivals, amounting to 7.1 million trips in total over the three year period, to reach 45 million total arrivals by 2021. To accommodate this potential, it will be essential for key questions about air capacity, connectivity and immigration to be cleared up, to ensure that travel to the UK is seamless and hassle-free.

UK Inbound Arrivals in a No-Deal Brexit Scenario 2018–2021

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UK outbound slowdown to cause shockwaves

European destinations braced for UK deceleration

Impact on UK Departures in a No-Deal Brexit Scenario 2018–2022

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The US economy powers on, despite uncertainty

There are downside risks to the US economy, due to uncertain trade tariffs and immigration restrictions following the Trump presidency and populist rhetoric. On the other hand, the travel industry will benefit from the investment in infrastructure from the USD1 trillion stimulus package announced by Trump.

Travel ban: Separating fact from fiction

Combined, the six countries affected by the ban — Iran, Somalia, Sudan, Yemen, Syria and Libya — account for less than 0.1% of inbound arrivals to the US, which was around 80,000 arrivals in 2016. Ultimately, any changes to the immigration policy towards Mexico will have the biggest effect, given that it is the second largest source of tourists after Canada.

In the event of a Trump Trade War scenario, where Mexican imports face a 35% increase in tariffs and the US pulls out of NAFTA, the negative impact on Mexico’s GDP would be significant, reducing GDP to -1.3% in 2017 and -3.1% in 2018, acting as a drag on Mexico-US travel flows.

US Inbound Arrivals by Key Source Market 2017

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For further insight, please contact Caroline Bremner, Head of Travel, Euromonitor International.

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