Examination of Witnesses (Questions 355
- 359)
TUESDAY 8 JANUARY 2008
MR STEPHEN
DOWD
Chairman: I would like to welcome Stephen
Dowd, the Chief Executive of UKinbound, and invite Mike Hall to
start.
Q355 Mr Hall: Good afternoon. In
some of the information that has been provided to the Committee
we see that inbound tourism is outstripping domestic tourism.
The latest figures for 2005-06 show real growth whereas in the
seven years previous to that the inbound tourism market was virtually
static. What is the reason for that?
Mr Dowd: I think this was really
a rebound from the period 2000-01, where we had the foot and mouth
epidemic, followed by the 9/11 event, so you saw immediate growth
from there onwards. The period 2005-06 was pretty much the peak
of that recovery. We had quite a bright start to 2007 but the
second half has been much more difficult and we are now looking
at a much more difficult situation.
Q356 Mr Hall: You have almost anticipated
my second question. Do you have any more up-to-date figures for
2007?
Mr Dowd: The latest IPS figures
that came out for October showed that the three months prior to
that were about 1% down on the previous year. Looking at the whole
figures now, we estimate that this year we are looking at a drop
of about 400,000 long-haul visitors for this year, with a small
gain of about 100,000 extra short-haul visitors from Europe; so,
net, about 300,000 less, which is about a 4% drop in the total
numbers.
Q357 Mr Hall: What do you think the
reason for that is?
Mr Dowd: There are many reasons
for that, I am afraid. First of all, the value of sterling against
the dollar is vitally important. For most of last year it was
over two dollars to the pound and this severely curtailed the
North American market, which is our largest single market, but
those countries where the currency is linked to the US dollar
also suffered quite badly. That is why the long-haul markets have
been particularly hard hit. Secondly, there was a doubling of
air passenger duty in February this year. Particularly for long-haul
flights, where it has now gone up to £40 per passenger, we
have found that has had a great impact on long-haul travel. Initially
the impact was not too great but we have seen it increase as the
year has gone on, with other factors coming into effect. Also,
we had the credit crunch -which you all know about. That has damaged
the North American market significantly, where consumer confidence
is at a 30-year low. When Americans are nervous about their finances,
they do not travel. Add to that the fact that it is an election
year, which also impacts on what is happening in the next 12 months,
we think that is going to curtail things as well. That is part
of the reason why the second half of this year has not been so
good and why we think that 2008 is also going to be a very difficult
year.
Q358 Mr Hall: Will there be some
compensation from the fact that the pound is weaker against the
euro?
Mr Dowd: Absolutely. Yes, the
same trend that we have seen this year will continue into next
year. There is some hope that the euro will continue to appreciate
against the pound next year and that should bring more European
visitors. The problem we have is that the average short-haul visitor
spends less than half the amount of money here than one long-haul
passenger spends. If we are losing 300,000 long-haul passengers
and we are gaining 100,000 short-haul passengers, we end up with
a net revenue reduction.
Q359 Mr Hall: In terms of controlling
the variables, that is quite difficult, is it not?
Mr Dowd: Yes. Most of these are
way beyond anything we can do as an industry to influence. All
we can do is to try to offer our products at the best possible
prices. That is what we have been doing for a number of years.
As you have probably seen, there has been quite a bit of consolidation
going on. Businesses have worked very hard to strip out all extraneous
costs and to reduce their margins to make sure they can still
attract visitors here. That has become increasingly difficult.
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