Britain decides to leave the EU: How will this impact Caribbean tourism?

The Brexiteers have succeeded. Britain is officially making arrangements to leave the European Union. The consequences of the leave vote will be felt worldwide, and some British voters say they now regret casting a ballot in favor of Brexit.  But how does this relate to the Caribbean, considering that the UK is still a major trading partner for many Caribbean countries? In relation to commodities-exporting economies such as Guyana, Belize, and Suriname, the U.K. is within their top 5 export markets.

The U.K. is also a major source market of tourist arrivals for many member-countries of the Caribbean Tourism Organization (CTO). The CTO’s State of the Industry Report released in February of this year reported that the Caribbean received 1.1 million U.K. visitors in 2015. For the tourism-dependent Caribbean countries for which the U.K. is the major source market, their economic well-being is directly related to the health of the U.K. economy and the strength of Sterling. This was exemplified by the slowdown many tourism-dependent economies in the region experienced while the U.S. and U.K. were in recession during the global economic crisis. So with Brexit already having an effect on global markets, what can we expect the impact to be on the Caribbean?

What alarms will Brexit set off, and which ones should tourism planners pay particular attention to?

Here are some possible outcomes to consider.

Consumer Reactions

How will our consumers react to Brexit?

ABTA, a U.K. travel trade association for tour operators and travel agents, assures that there will be “no immediate changes to travel regulations after the EU vote”. However, ABTA also outlined that the decline in the value of the pound would have an “immediate impact on holidaymakers and their spending power overseas.”

Nadine Rankin of AMG, a U.K. sales representation and tourism marketing agency, thinks that U.K. travelers may be concerned about the cost of buying dollars for vacations to the Caribbean and the USA, but Sterling has not decreased significantly against the Euro. U.K. travelers might stay put due to their inability to afford overseas travel as the pound decreases in value. This can also have an impact on the Caribbean Diaspora living in the U.K. who may find it more costly to visit ‘home’ in the Caribbean.

Brian Major of TravAlliance Media in the U.S. posits that in the short term, spending among middle-class and even some high-wage U.K. residents will likely be impacted in significant fashion by Brexit.

A Reuters report from Friday found city workers in London, where residents voted overwhelmingly to remain in the EU bloc, generally worried their jobs would be at risk. One technology worker expressed the fear that “If money goes out of the system and big businesses freeze up, my job is gone.” These economic concerns will weigh on potential U.K. travelers, who may seek to delay or alter travel plans in the face of great uncertainty. The same uncertainty may also generate an economic recession in the short run, as U.K. businesses and consumers take a wait-and-see approach. However, the British public is renowned for its resilience and its determination not to allow circumstances like these to prevent them from enjoying their overseas holiday.

According to the Washington Post, the British pound fell 8% overnight after Britain voted to exit. It was the currency’s worst day on record. The pound is now worth less relative to the U.S. dollar than it has since 1985.

If the pound stays low against the dollar, Americans will seize the moment for that long-awaited chance to visit Britain or to snap up some other British export – like a luxury vehicle perhaps – while the going is good. As important as the U.K. is to the Caribbean as a source of tourist arrivals, the U.S. is many times larger, so there can be little doubt that a shift in Americans’ spending habits will have an effect on Caribbean tourism.

Travel Trade Reactions

What should Caribbean tourism planners be prepared for after Brexit?

Should there be any prolonged softening of demand for Caribbean vacations among British holidaymakers and a measurable shift by Americans away from the region, the packagers and sellers of Caribbean vacation products will likely turn to the region’s decision-makers for a solution; a financial one, no doubt. Requests for increased marketing dollars and decreased accommodation rates to counteract the problem could start to appear.

It’s still very early to tell. Rankin also suggests that all-Inclusive hotels will be the most attractive offering at this point as prices have been fixed against forward-bought dollars, and therefore less “holiday money” will need to be converted by the consumer at the new, low exchange rate.

How will airlines respond?

Will there be enough demand for travel from the U.K. to the Caribbean? Airlines may have to adjust their prices and routes. The U.K. outbound travel industry is reacting carefully to the news, but airlines such as Easyjet and British Airways have indicated that it should not immediately hurt their business, although profits may decrease slightly. The priority for them will be that the negotiations for the U.K.’s departure from the EU over the next few years must include a favorable policy to retain the Open Skies Agreement.

Market watchers will no doubt be paying close attention to the profitability of the U.K.-based carriers as they navigate their way around a possible combination of lower demand and higher ticket prices.

Caribbean UK Overseas Territories & Other Countries Reactions

The London-based Caribbean Council has a view on this. According to David Jessop, for the U.K. Overseas Territories including Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat, and the Turks and Caicos Islands in the Caribbean region, although they are linked to the EU through the member state to which they belong, as well as by their membership of the Association of Overseas Countries and Territories of the European Union (OCTA) and the EU’s 2013 Overseas Association Council Decision, they are not part of the European Union. This signifies that the five Caribbean Overseas Territories’ are considered “third countries” in their communication with the European Commission, the EU and its many institutions. This demonstrates that there is no automatic process that enables EU decisions to be applied to them.

Jessop also highlights that the main challenge for the U.K.’s Caribbean Overseas Territories would be discovering a way to secure funding from the European Development Fund (EDF), and continuing access to its Investment Facility and to the European Investment Bank, in addition to sustaining access to other European programs that would benefit the environment, education and training.

Alicia Nicholls from the Caribbean Trade Law & Development’s blog states that it is likely that the U.K. will negotiate a type of preferential arrangement, similar to what occurs between the EU and Turkey, given the strong trade and investment ties to the continent. This would ensure U.K. businesses and exporters are not disadvantaged and still have favorable access to the EU single market once the transition period ends.

Fingers Crossed

As vulnerable and unpredictable as the tourism industry can be, it has a strong record of resilience. Ultimately, consumers will exercise their right to travel; and the Caribbean’s penchant for resourcefulness in times of crisis will no doubt continue to serve the region well in attracting its fair slice of the tourism pie. Still, we must be realistic.

Brexit presents a potential risk to Caribbean economies. Of what size, no one yet knows. The nature of the risk will depend on several factors, including the kind of withdrawal arrangements the U.K. negotiates with the EU and the impact on the British economy during the period of transition.

Brexit’s negative impact on the global financial markets has been swift, but hopefully temporary. Many analysts are saying there is no need to panic.

In these early days there are certainly more questions than answers. For sure the CTO will find the answers and keep you informed on what can possibly happen next.  Working closely with the Caribbean Hotel & Tourism Association (CHTA) and other strategic partners we will provide you with relevant, up to date information. Keep watching this space for the latest.

Also keep your eye on the cost of attending World Travel Market in London in November. With a little luck, that overall bill should be somewhat less than in previous years.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s