The results are now in and the UK has voted to leave the European Union. For many of us that sentence still doesn’t quite feel real. This certainly isn’t the result that most people had expected, and it’s not the one that many had wanted, particularly in the hotel industry.
The hope was that the end of the EU referendum campaign would mean an end to the market and political uncertainty in the UK, which has persisted for most of 2016. Instead, things look more uncertain than ever, with the UK’s politicians yet to negotiate the terms of Brexit. There is very little precedent for what lies ahead and to say that people are making it up as they go along would be an understatement.
So where does all of this leave the hotel industry, and specifically, what might Brexit mean for the lucrative business travel market in both the short term and long term around the world?
We carried out research amongst 500 frequent business travellers in the UK in the lead up to the referendum which might give us some clues as to what lies ahead. When we asked them about the prospect of Brexit, a third said that they were already concerned about what it would mean for their business trips. 1 in 4 polled said that they were worried they would have to spend longer applying for visas to enter countries both inside and outside the EU, and 1 in 5 said that they were worried about having to wait longer at passport control.
The problem for business travellers in the short term is that we still don’t know how the Brexit vote might impact these factors. Much of this hinges on whether the EU offers, and the UK accepts, a deal which maintains the free movement of people with the EU. If they do, then UK travellers shouldn’t have to worry about visas or any significant change to passport control as they adopt a situation close to that of Norway or of Switzerland. If freedom of movement is ended though, the worst fears of these business travellers may well be realised.
Until the UK formally triggers Article 50 which begins the two-year process of leaving the EU, nothing should change. This is something that many business travellers may not realise. Hotels looking to attract business travellers from the UK at this, more unstable, time should make sure they properly communicate that for now at least, business travellers should be able to book and carry out their business trips the same as before.
What certainly has changed in the short term, however, is the UK’s volatile exchange rate. As the pound has plunged in world markets, winners and losers have quickly emerged. Hotels based in the UK can expect a bounce as business travellers upgrade their hotels and spend more during their stay, with perhaps a higher proportion of cardholders opting to use Dynamic Currency Conversion to lock in today’s more favourable rates. However, for the business travellers we surveyed in the UK, they will now be feeling much less well off. Those with essential business trips will likely still travel, but they will spend much less in hotel restaurants and bars. If the pound continues to drop or settles at its current low, it will also negatively affect the amount UK business travellers spend and the hotels their companies are willing to pay for, for years to come.
There is little that the hotel industry can do to fight against these huge geopolitical and economic shifts. While some will lose out, others may well benefit. What is important is that the hotel industry remains calm and provides clear and concise information and advice to keep business travellers well informed in turbulent times.
About the author
Jennifer Conneely writes on behalf of the DCC Forum. The DCC Forum has been created by a group of 5 international companies, all of whom work within the Dynamic Currency Conversion (DCC) and financial services sector. Members of the DCC Forum have elected to adhere to a set of Forum Principles advocating best practice of DCC and ensuring it is operated in line with all card scheme rules.