The COVID-19 outbreak has caused mass cancellation of corporate events, international congress meetings, sports and social events. International travel bans in addition to the UK’s lockdown and social distancing measures are expected to severely impact the hospitality industry in the UK, says GlobalData, a leading data and analytics company.
The hospitality and leisure industry contribute 5% of national GDP and accounts for 10% of employment in the country, according to UKHospitality. The main tourism source markets for the UK are major European countries including Belgium, France, Germany, Ireland, Italy, Spain, the US and Australia. These source markets together account for more than 60% of total inbound visitors, according to VisitBritain, while China and Canada are among the top 10 nationalities in terms of expenditure. Impending job losses in these countries will slow demand for leisure travel, thereby affecting tourism in the UK.
Aditi Dutta Chowdhury, Economic Research Analyst at GlobalData, says: “If the EU-UK negotiations fail to reach Free Trade Agreements, Brexit will multiply the challenges to the food and drink industry in the UK. In addition to this, the COVID-19 outbreak will reduce tourist inflows to the UK as people will be skeptical of travelling owing to the fear factor, which will severely erode the tourism and hospitality sector’s earnings.”
COVID-19 will leave deep scars on the hotel industry
Several crises in the past have had a significant impact on inbound tourism in the UK. In 2001, a 11.7% decline in earning from inbound tourism was reported owing to the security threat from terrorism. Subdued growth in earnings was reported during the 2003 SARS outbreak and a 0.3% fall in 2007 at the onset of the global financial crisis. Furthermore, uncertainty looming over the UK’s economic prospects since the Brexit referendum has undermined business confidence, reflected in the fall in shares of international business visitors from 24.6% in 2015 to 21.8% in 2019.
Aditi continues: “The COVID-19 crisis will have a profound impact on the UK’s inbound tourism market and cities including London, Manchester and Liverpool will be the most exposed to this impact as Europe and the US are the worst affected by the outbreak.”
The full impact of COVID-19 on international travel will depend on the extent of the pandemic and the duration of related travel restrictions. The response of the public will also influence the total impact, particularly in respect to the short-term period after travel restrictions are lifted. GlobalData predicts that UK inbound tourist will fall by around 35% compared to 2019, due to impacts created by COVID-19.
As part of government stimulus measures, businesses in the leisure or hospitality sectors in the UK are eligible for a 100% discount on business tax. The government is also adding liquidity to the sectors. A hospitality and leisure business with a tax value of £15,000 or less is entitled to receive a grant of £10,000. Businesses with a tax value of between £15,000 and £51,000 are entitled to receive a cash grant of £25,000.
Aditi adds: “The present health crisis combined with a no-deal Brexit may pose a significant downside risk to the hospitality sector in the UK. Policy advisers, parliamentarians along with hospitality industry association are working together to adopt favorable migration policy and business rates in response to the economic needs of the sector.”