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Travel Leaders UK Travel Markets – What to Expect in 2019

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As the clock continues to count down to the UK’s official Brexit day, on 29 March 2019, the negotiations between the United Kingdom and the European Union continue to unfold with stops and starts. Politicians grapple with the magnitude and complexity of implementing the 2016 referendum result so that the UK to leave the EU, in a way that is acceptable to all.

The signs of what shape or form Brexit will take remain unclear. However, Theresa May’s government has released a series of technical notices on the potential impacts of a No-Deal Brexit and how UK businesses should prepare, including warnings of potential disruption to air travel.

Due to the uncertainty, consumer confidence declined in 2018 for the EU, with the UK witnessing a faster deceleration, but with the rate remaining above the historical average. Weak consumer confidence is forecasted to translate into growth halving for UK outbound travel, slowing to 2 percent for UK departures in 2019 in the case of a delayed Free Trade Agreement (FTA), which is the scenario with the highest probability of taking place.

Under a delayed FTA, inbound tourism to the UK is expected to perform better than outbound. This resilience comes from favourable exchange rates thanks to the depreciation of the pound, helping the UK to remain competitive - barring any major changes to visas in the short term. UK inbound arrivals growth is expected to be 3.3 percent in 2019, thanks to demand from key European and North American source markets.

In the case of a No-Deal Brexit, where UK-EU negotiations break down, the UK would leave the EU in 2019 without making a trade deal which would default to World Trade Organisation conditions with significantly higher barriers. The repercussions of such a scenario would lead to a fall in outbound demand in 2019 and cause a ripple effect across many destinations, dependent on UK demand. Spain would feel the hardest hit, expected to suffer from USD1 billion wiped off potential inbound receipts over 2019-2025.

Looking beyond Brexit, destinations like China are poised for a successful performance in inbound tourism, with China set to overtake France as the leading destination worldwide by 2030. Asia is transforming into a global tourism powerhouse, producing some of the best growth performances, and regional receipts will grow on average by 6.6 percent compound annual growth rate (CAGR) over 2018-2023, double the rate of Europe.

Along with China, Thailand, Hong Kong, Macau, Japan and Malaysia will deliver the strongest increases in leisure arrivals. On the other hand, several Caribbean countries will struggle to produce strong results, suffering from weaker demand from countries like the UK, as well as other factors such as natural disasters. For countries that have suffered at the hands of terrorism, the outlook looks positive, with increases in leisure arrivals for Egypt, France, Turkey and the UK over the next two years.

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