Sterling decline sees rise in North American visitors to the UK

A study by STR and Tourism Economics indicates that the United Kingdom’s tourism and hospitality sectors have benefited from an increase in arrivals from North America, brought on by the devaluation of the British pound following the June EU Referendum. UK-sterling

According to the International Passenger Survey (IPS) conducted by the Office for National Statistics, U.K. arrivals from North America were up 6.8% between July and October 2016 when compared with the same period in 2015. From January to June, the “pre-Brexit” vote period, arrivals from North America increased at a more modest rate (+0.5%) compared with first six months of 2015.

Meanwhile, arrivals from Europe have dropped off slightly following the referendum, down 0.1% between July and October 2016. Overall during the first 10 months of 2016, international arrivals to the U.K. were up 1.7% to 31.4 million.

October 2016 year-to-date figures also show that holiday arrivals to the U.K. were down 3.7% overall. But between July and October, this rate of decline slowed somewhat to 2.9%. Meanwhile, business trips to the U.K. still showed growth in 2016, but slowed from 4.3% between January and June to 1.8% between July and October.

“While we’ve seen a recent slowdown in business travel to the U.K., it’s important to put it in perspective that 2015 was a standout year for business arrivals, up 7.1% compared with 2014,” said David Goodger, Director for Tourism Economics in Europe. “What remains to be seen is how holiday travel will be impacted in summer 2017. As the referendum vote occurred towards the end of June, when many already had July or August vacations planned, we’ll see how a favorable exchange rate for holiday visitors from North America will play out this coming summer.”

For U.K. hotels, performance growth has been mixed between London and Regional U.K. (U.K. excluding London). In 2016, hotels in Regional UK recorded a 3.1% increase in revenue per available room (RevPAR), driven solely by an increase in average daily rate (ADR) as occupancy remained flat. London, on the other hand, recorded a 0.9% decline in RevPAR, brought on by flat ADR coupled with a 0.9% drop in occupancy. STR analysts attribute the decline to an increase in supply and a slow start to the year.

The most recent market forecast report from STR and Tourism Economics projects that hotels in London will be affected by shifts in demand throughout 2017, which will likely bring down both occupancy and ADR growth throughout the year. On the other hand, hotels in Regional U.K. are expected to post RevPAR growth within the range of 2% to 6% from month to month throughout 2017.

“While the capital has faced challenges in 2016, we have certainly not seen a slowdown in development,” said Robin Rossmann, STR’s international managing director. “London currently has more than 15,000 hotel rooms under construction or planned for development, which is more than all countries in Europe except Germany and Russia. This supply growth will put downward pressure on occupancy levels, but recent signs are showing the weak Sterling may help to grow arrivals sufficiently to offset this. For Regional U.K. hotels, an increase in ‘staycations’ should boost performance, as outbound travel has become more expensive for U.K. residents given the current exchange rate.”

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