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04 Jun 2020

Will domestic tourists compensate for steep drop in number of overseas visitors due to COVID-19?

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A projected rise in the UK domestic tourism market could compensate for the steep drop in visits from tourists from overseas, but Government support will be crucial, says Boodle Hatfield, the leading private wealth law firm.

Plans for a mandatory 14-day quarantine period for those entering the UK is likely to be a deterrent for overseas tourists. However, this could be partly offset by an increase in domestic tourism, with UK residents reticent to travel abroad opting to holiday in the UK instead. UK tourists spent £47.8bn overseas in 2019 – compared to £25.2bn spent by overseas visitors in the UK*.

Boodle Hatfield says that if domestic tourism is to thrive post lockdown, the Government should consider taking the following measures to support the industry:

  1. Hospitality and leisure businesses with outdoor spaces should be prioritised for early re-opening
    Rural leisure businesses that have considerable outdoor space that would allow them to easily implement social distancing, should be allowed to re-open for business as early as possible. Local authorities should temporarily ease planning rules to enable leisure operators in urban areas to open temporary sites in the countryside. These measures would enable businesses to benefit from early Summer trade, providing income that would go some way to compensate for the revenue lost as a result of lockdown.
  1. Extension of CBIL scheme for travel and tourism businesses
    The Government should ensure that travel and tourism businesses can access Government backed loans for the duration of the economic downturn that follows the crisis. The Government should also consider extending the timeframe in which hospitality and leisure businesses may repay loans taken out under CBIL from five to 10 years. 
  1. VAT reductions for businesses in the tourism sector
    Tourism and travel businesses are charged VAT at 20%, double the rate charged in both France and Spain. By temporarily lowering the VAT rate within the travel and tourism sector to 5%, the Government would be providing much needed relief to businesses. This would also help to boost consumer spending. Greece’s Prime Minister announced that VAT on flights, rail travel and bus journeys would be slashed by 11% in a bid to make travel more affordable.
  1. Subsidise accommodation and travel costs for domestic tourists
    Japan and Taiwan plan to subsidise travel and accommodation costs for domestic tourists in an attempt to stimulate consumer spending. Cyprus has offered to cover the costs of holidays for any visitor to the country who contracted COVID-19.

If the British Government were to follow suit and offer subsidies for domestic travellers, for example, in the form of a free night accommodation for every three-five nights booked, this would be extremely beneficial to UK businesses.

Adam Chamberlain, Real Estate Finance Partner at Boodle Hatfield says: “The leisure industry has taken an enormous hit as a result of the pandemic. Despite lockdown restrictions beginning to ease, businesses will have to comply with social distancing guidelines for the foreseeable future.”

“The Government must take substantial measures to ensure that businesses are in a strong position to survive this period of economic uncertainty.”

“UK tourists have traditionally been high spenders whilst abroad. If the capital they’d have otherwise spent on foreign travel, is redirected to the domestic market, this would help the industry weather the current crisis.”

“We would hope that the promise of a stronger domestic tourism market would encourage both UK and overseas investors to inject some much-needed capital into the sector.”

*ONS

A section of this article was first published by The Telegraph on 4 June 2020.