Brexit: what it means for the business travel sector

As the dust from the EU referendum continues to settle, BBT asks what the result means for the industry…

ROUGHLY TEN WEEKS AGO, the UK – and most of Europe – was plunged into a fog of Brexit bewilderment. In roughly eight weeks’ time, that fog could turn into what used to be known as ‘a real pea-souper’. On November 8, the US will go to the polls to elect a new president.

Like her husband before her, Hillary Clinton has her faults but, on the evidence to date, she seems unlikely to upset too many international apple-carts. Donald Trump’s foreign policy is less predictable (unless you happen to be Muslim or Mexican) – in his case, there could be apples everywhere.

Since the early hours of June 24, when the UK’s European Union (EU) referendum result finally became clear, business travel leaders have been holding forth about the ‘new normal’ and ‘the certainty of uncer­tainty’. Come November 9, we could be looking at an entirely new ‘new normal’. ‘Uncertainty’ may well turn into ‘opacity’. Roughly translated, that means we can’t really see where we’re going now; in two months’ time, we could all be blundering around in pitch darkness.

STABILITY OR SLUMP?

Post-Brexit, one of the more extensive as­sessments of the UK’s prospects came from hospitality analysts STR and its Oxford Economics forecasting partner Tourism Eco­nomics, which pointed out that the slump in the value of sterling – against most major currencies – began to stabilise within days.

“Nonetheless, considerable uncertainty remains as the details of Britain’s exit are worked out, and it could be two years or more before these issues are fully resolved,” their report said. “For the travel industry, the prolonged uncertainty will influence both the magnitude and persistence of the economic impacts. While is it impossible to quantify the exact extent of the Brexit, it most likely would have some impact on current hotel performance in the UK.”

It continued: “Most of the impact is likely to be on travel confidence, especially busi­ness travel, driven by the uncertain environ­ment, although the depth of the negativity is difficult to gauge. On the other hand, the sharp drop in currency exchange rates would make London more affordable… pos­sibly enough to offset the negative impact from weaker domestic demand.”

For multinational corporations, most currency fluctuations are a matter of swings and roundabouts – if sterling stays low, ex-UK travel budgets will be stretched, but inbound business trips will become comparatively cheaper. Smaller companies will be hit hardest.

However, there is no real way of knowing – yet – whether the pounding of the pound will continue. That will depend, to a large degree, on the terms and conditions of the UK’s eventual departure from ‘Club Europe’.

The two principal cast members are adopting rather different approaches. German chancellor Angela Merkel is taking a pragmatic ‘take your time’ line. French president François Hollande is more hostile, but his grip on the reins of La République looks increasingly tenuous.

Clearly, it is in the UK’s interests to negoti­ate, ideally with the EU as a bloc, an ‘orderly exit’. However, persuading all 26 remaining member states to agree terms is certain to be an uphill struggle, made all the more dif­ficult by last month’s news that a cross-party coalition of peers is hoping to persuade the House of Lords to block any legislation that would trigger Article 50, the mechanism by which the Brexit would be initiated.

Nobody can say that new prime minister Theresa May isn’t doing her damnedest to make friends and influence EU people. In her first 14 days in office, she visited Edin­burgh, Cardiff, Berlin, Paris, Belfast, Rome, Bratislava and Warsaw – a multi-sector itinerary that might have driven even the most unflappable of travel managers to consider an alternative career.

ON THE FENCE

Theresa May cannot afford to ‘wait and see’: once Article 50 is invoked to open the door to official Brexit talks, she has just two years to negotiate an orderly exit – but travel management leaders are sitting firmly on the fence.

Michael McCormick, executive director of the Global Business Travel Association (GBTA), says: “The outcome of the UK’s refer­endum heralds a period of change within the EU. During this time, GBTA and its partners across Europe and in the UK will continue educating its members on the impact for the business travel sector, and will work together to promote and defend the interests of the business travel industry.”

He adds: “While it is impossible immedi­ately to assess the implications of the result on the UK, European and global economy, and on international relations and world order at this point, GBTA remains commit­ted to the same principles it always holds strong: ensuring that business travellers maintain freedom of movement, business is not disrupted, travel infrastructure remains strong and programmes and bilateral agreements that facilitate safe and secure travel, like the EU-US visa waiver exemp­tion, continue.” The GBTA will advocate for these principles as the Brexit process moves forward, he says.

This ‘keep calm and carry on’ mentality is echoed by Anthony Rissbrook, manag­ing director at Hillgate Travel. “Of course there was an initial shock when the Brexit vote was cast – I’m not sure many people expected it and, as such, many didn’t have a plan in place for this eventuality,” he says. “But despite an initial blip in day-to-day busi­ness, we have settled back into ‘business as usual’ and are advising our clients to do the same. Activity levels remain positive and on track for this time of year.”

Over at the Association of Corporate Travel Executives (ACTE), executive direc­tor Greely Koch says: “The Brexit issue is clouded with uncertainty, which extends through the fragile business travel envi­ronment. There are dozens of questions regarding work regulations, border control, passport and visa issues, the potential for new tariffs and taxes on flights out of the UK, and implications for duty-of-care. Legisla­tive deadlines and industry pressure for fast resolution will compound these issues.”

He says that the upcoming ACTE-CAPA joint summit in Amsterdam this October (see p127) will bring together “some of the finest minds in the industry” to debate the issue, adding: “One thing we do know is that the UK is, and will remain, a trading partner to the world.”

One of ACTE’s European travel buyer members comments: “I see no risks for the travel industry considering Brexit, as long as the economy is growing the same way in the UK – although maybe a few minor travel agencies can visualise a reduction in traffic.”

THE EFFECT ON HOSPITALITY

Meanwhile, the UK hospitality sector is expected to see a 30 per cent year-on-year jump in room nights sold in the second half of 2016, according to Tourico Holidays. In July the travel brokerage firm said its data showed some source markets such as China and Germany increasing daily UK reserva­tions by more than 100 per cent since the vote.

At one point, the British Hospitality Asso­ciation (BHA) expressed concern that current hotel industry employees from EU countries might face deportation once the UK was no longer bound by freedom-of-movement rules. Quite why the BHA thought this was even a remote possibility remains a mystery – why would any UK government irreparably damage a thriving sector and antagonise its European partners?

However, the association did have a setback in the post-Brexit weeks: speak­ing at a summit meeting, organised with exemplary speed by the BHA just days after the referendum result, John Whit­tingdale, the UK’s secretary of state for culture, media and sport, a portfolio which includes hospitality and tourism, said: “If we wanted, for example, to abolish VAT on accommodation or attractions, we could now do so. We couldn’t have done when we were in the EU.”

Three weeks later, Whittingdale was sacked from the cabinet by Theresa May.

PRAGMATIC REACTION

The UK’s serviced apartments sector which, like the wider hospitality industry, relies heavily on workers from the EU, has reacted with pragmatism to the referendum result which could – potentially – see a tightening of immigration rules.

Prior to the UK’s June 23 referendum, a poll by trade website Serviced Apartment News suggested that apartment companies favoured a Remain vote – by a margin of three to one. However, the sector has quickly come to terms with the new reality.

Shaun Hinds, Bridgestreet Global Hos­pitality’s managing director for just about everywhere except the Americas, said: “The serviced apartment industry is built on the principles of mobility, and free movement of talent and skilled workers. It’s a bad day to be British when the population has voted in this way.

“Our immediate priority is business as normal. I don’t think anybody really knows what’s going to happen over the next two, three or six months, so the way through it is to stay focused and to keep doing everything we do every day to drive business forward.”

Meetings Industry Association (MIA) chief executive Jane Longhurst was equally forthright – and urged her members to maintain relationships with EU countries, as well as exploring new revenue streams from farther afield. “We know that uncer­tainty over the result of the EU referendum has contributed to a lack of confidence in the stability of the industry and the wider economy in recent months,” she says.

“We need to embrace the referendum result. We can’t sit back and rest on our laurels and expect consumer confidence to return and business to just flood in – par­ticularly from outside the EU.

“Instead, organisations need to re-evaluate their business plans and develop creative ways to actively encourage cross-border relations and inbound tourism.”

This analysis opened with a timeline of sorts, so it seems appropriate to conclude by extending that into 2017. There is just over six months to go before the French presidential elections, and around one year to go before the Germans head to the polling stations. François Hollande’s popularity is ebbing fast, and some reports say two-thirds of Germans want Angela Merkel out at the next election.

That apple-cart is beginning to look increasingly wobbly.

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