Select Committee on Culture, Media and Sport Minutes of Evidence


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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