In the week that followed the shock EU referendum outcome, the UK has reeled in surprise, anger, despair and confusion.
In travel industry terms, the timing of the referendum was a little awkward. Perhaps November would have been better. November is typically travel’s quietest month for booking activity and the response of the financial markets would have had time to settle long before the January booking rush rather than right before the summer getaway. But that’s all hypothesis.
What a Brexit outcome means for summer holidays in 2016 is the here and now. But what a finalised Brexit deal might look like is what really matters to 2017 overseas holidays and summer holidays in 2018.
There are largely two factors that affect the travel industry and the cost of travel for consumers regarding the EU referendum result: the Pound’s strength against other currencies, notably the US Dollar and the Euro, and whether or not the UK remains a part of the European Economic Area (EEA).
We’ve pulled together the highlights for you in this graphic. More details below.
Currency fluctuations
The immediate fallout from the success of Vote Leave was the to-be-expected reaction of the financial markets. The Pound fell to a 31 year low against the US Dollar and stumbled as much as it could against an already poorly perceived Euro.
Travelling to Europe this summer?
Your hotel room, restaurant bill, coffee, ice cream and sunlounger just got a tad more expensive that you planned. For now, you’ll likely notice a slight increase in in-destination and in-resort costs, but Sterling is rallying the further out from the result we get. Financial experts predict a resurgence to around €1.25 to the £1 come peak ski season.
Booked with a tour operator?
If you’ve already booked and paid for your 2016 holiday with a tour operator, those costs are pretty secure. Tour operators are allowed to apply a surcharge to your booking if their costs significantly increase (a not-to-be-sniffed-at 10%), but the Association of Independent Tour Operators (AITO) has said that their members won’t need to do that this year.
Travelling to the USA?
Ouch. Well right now at least you’re going to get an awful lot less for your money in the US and that extra large caramel macchiato with extras of everything just got a whole lot more expensive.
“I need dollar, dollar. Dollar is what I need.”
Aloe Blacc probably didn’t foresee the parallels of his song lyrics to the possible Brexit situation but quite why we haven’t heard more of that song played in the last week by those in the ever so slightly hysterical Remain camp is ponderable.
Back to the point - the significance of the US Dollar in travel and tourism is that airlines buy fuel in dollars. And although oil can be a somewhat volatile commodity at the best of times and therefore unpredictable to forecast the price of, we can’t fly without it.
What we won’t see is an immediate shift in flight prices because of the devaluation of Sterling against the Dollar. Why? Because airlines also buy their fuel in advance, at least 6-9 months ahead of when you’re actually flying. That’s why, when oil prices plummeted earlier this year consumers saw no immediate benefits either. Keep an eye on spring 2017 prices though…
Time to do your family tree?
There have been reports of passport application forms running dry since last Friday and I’ve personally seen people asking for advice on contacting various embassies to enquire as to the viability of claiming descendancy from a.n.other EU country. Why? For fears that Brits will lose their right to freedom of movement across continental Europe and have to queue with the Commonwealth et al at airport border checks. Sacre bleu!
Unless or until (depending on your perspective) Brexit is finalised and depending on how Westminster negotiations Article 50 of the Lisbon Treaty, we won’t really know on this. Ideally, to negotiate that the UK remains within the European Economic Area (EEA), like Iceland and Norway, would retain the right for British passport holders to move freely throughout the EU and continue to use the EU queue at the airport.
Low cost flights could be a thing of the past
That’s a rather provocative subheading but it is a realistic consideration. The ability for low cost carriers to establish and exist is a benefit of being part of the EU and the European Common Aviation Area (ECAA). That the likes of Monarch and easyJet offer such cut-price flights is because the open skies arrangement that applies to EU airlines doesn’t restrict their capacity, frequency or pricing. British airlines like BA and Thompson may also find that the fees to use EU airports (as airlines bases or just for taking of and landing) increase, which would naturally be reflected in ticket prices.
So what about a staycation?
Fill your boots. For the imminent school summer holidays you might have to search high and low to find family friendly accommodation availability. Although if you do, it's likely you'll bag a bargain booking at such short notice.
There have been mixed reports from UK travel companies in the last week. Some have reported significant booking increases compared to the same period in 2015 while others have reported a general traffic stalemate with even aspirational holiday browsing activity stalled.
But we're still stuck in a reactionary place of unknowns and for at least 48% of the UK that's proving problematic for future plans. Time will tell but for now at least UK summer holidays are certainly offering a known entity that overseas travel and currency exchange cannot.
The future of overseas travel for Brits?
In general terms, the impact of Brexit on your travel plans will be minimal until at least 2018 - the estimated date for completion and application of EU exit law and process changes. Until then, keep an eye on the currency markets and hedge your bets. And in the meantime watch (whether) the government invokes Article 50 and what it negotiates as the UK’s future relationship with the EU.