TAKING A POUNDING.....
Marmite and PG Tips have made the headlines recently - they are both Unilever brands which have been dragged into the spotlight because of a high street supermarket price dispute. The supplier Unilever said that the goods had increased in price because of the effect that Brexit has had on the pound. Tesco disputed this and threatened to remove the products from the shelves if the price increases were implemented. It's all been smoothed over with both sides claiming a victory of sorts, but it got me thinking about effect that the weak pound will have on the travel business.
There is no doubt that the pound has bombed against a whole raft of currencies, but the Euro and US Dollar have been particularly bad, with a devaluation in the region of 20%. This effectively means that in real terms anything purchased in Euros and Dollars will cost us 20% more. Aircraft fuel is priced/purchased in US Dollars and the majority of hotel or ground products in Europe are paid in Euros. Can we realistically expect hotels and other suppliers abroad to drop their prices because the pound is worth less? Don't think so.......
So what does this mean for holidays in the not too distant future? Well unless the pound bounces back quickly (which is pretty unlikely) - they are going to cost more. Given the small margins that the travel industry works on, nobody can swallow a 20% differential in costs, so the costs will ultimately need to be passed onto the customer. Does this mean that people will travel less or that the travel industry will sell less holidays?
That remains to be seen, but I have a prediction on how things will pan out. Given the potential extra costs in resort, more people will look for a 'fixed price' all-inclusive holiday, where they know exactly what they will be paying for their entire holiday. Cruising lends itself particularly well to this kind of holiday with fluid pricing and various offers where drinks packages are often included as an incentive to book. I also predict that certain long haul holidays where there is still value even with the relatively poor exchange rates will also do well. The Far East, South Africa and Canada are still looking attractive.
So despite the recent fall in the pound, it's not all doom and gloom - just as people won't give up Marmite or PG Tips, people will still travel and it's up to us in the travel business to advise and guide our clients to the best deals and find the holidays that are the most suitable for them.
