Tourist Numbers up, Sales down

Despite higher arrival numbers currency fluctuations mean this is no longer translating into higher sales

Despite a 9% increase in arrival numbers, retail sales to overseas customers in the UK declined by 9% in September, as a number of headwinds start to affect sales in the UK. Firstly, the relationship between arrivals and sales provided a contrasting picture in 2016, as the number of arrivals declined by 2%, but the Brexit effect saw an increase in sales with growth of 21%, therefore making growth comparisons inherently more difficult.

Secondly, the importance of Qatari tourists to the UK market and the embargo on this nation also influenced, where in September 2016, these tourists were the fourth most important nationality in the UK, and sales to these tourists saw the largest fall in absolute sales terms amongst all nationalities, relegating these tourists to sixth position in September 2017. 

Thirdly, the impact of terror attacks had been seen to be fairly muted, with many tourists having already booked summer vacations at this time, however with the most recent attack on the 15th September, this could now be a deterrent for the High Net Worth travellers. These factors, along with a moderately strengthening Pound, are currently likely to affect the remainder of 2017.

The dollar has also weakened. At the start of 2017, a number of commentators had predicted that the Euro to USD rate of exchange would reach parity in 2017, which was not a particularly bold claim given the low of 1.04 seen in December 2016.

Since then, although the Dollar initially rallied and spiked following the Trump election, the legislative failures, in particular in implementing the proposed tax reforms, has seen this euphoria replaced by a weakness in the value of the Dollar. 

In the Eurozone there has been a strengthening of the economy, and an absence of potential political upheaval following elections in the Netherlands and France. This has seen the renewed confidence in the Euro, with an easing concern about the break-up of the Eurozone.

In more recent times, the elections in Germany and the political movement in Spain have served to apply some downward pressure on the Euro, whilst Sterling has recently strengthened since the Bank of England suggested increasing interest rates with economic data bordering on encouraging.

There has therefore been considerable fluctuation and uncertainty in recent times, however as the arrivals outlook suggests, the insatiable appetite to travel remains, but it remains to be seen how this might affect Average Transaction Values, or for that matter, the volume of sales.

Anonymous