Personal Finance

London calling, as Brexit makes pound cheaper

Seetharaman R | Updated on January 18, 2018 Published on July 31, 2016

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As the value of pound drops, inbound tourism industry will prosper

Although the referendum was closely fought, the people of Britain have voted to be out of the EU. Financial and currency markets fell sharply following the surprise results.

While economists are now forecasting a deceleration or even a recession in Britain, inbound tourism could be the beneficiary of a pound depreciating around 12 per cent against the rupee.

Indian tourists who visit Britain could figure high on the agenda for tour operators.

Tourism industry in India, being a highly competitive market, is expected to pass some of the benefits to the tourists through reduced price points for their packages.

The total number of Indian tourists visiting the UK and Europe is around 1.5 lakh and 3.5 lakh respectively in 2015.

The duration of a typical Europe tour can vary from a week to 20 days with prices ranging anywhere between ₹1 lakh and ₹3.5 lakh per person. The period of stay, financial wherewithal, luxury of hotel chosen and its alignment with the tourism package, generally decides the number and choice of countries a tourist wishes to visit.

The 15-day tour package is the most sought-after; this comes at around ₹2.5 lakh.

Due to the high cost of living in London relative to other European destinations, London is usually covered in just two days and one night.

The cost effect

To start with, tourist visa to Europe’s Schengen area — comprising a handful of countries such as Germany, Sweden, Poland, Spain, France, Italy, and Greece — costs €60 or about ₹4,500. Similarly, tourist visa to the UK alone costs £87.

A drop in the value of the pound has brought down the UK visa price to ₹7,700 from ₹8,700.

The tourist operators consider the UK to be very expensive compared to Europe.

A small scale tourist operator, Anand, from ShankarTreks says “The ticket to enter the Eiffel tower in France is €17; visiting the Louvre museum in France, that has one of the best art collections, costs is €15.

In contrast, to see Madame Tussauds in the UK, that has a good collection of wax statues, you need to pay £24. The UK gives a double-whammy effect of being a pricey destination with a costly currency”.

For instance, the average price of a hotel for a night’s stay in London is £120 compared to €75 in Germany. Karan Anand, Head of Relationship, Cox and Kings says “The drop in pound will help tourists who customise their travel and itinerary with focus on the UK much more than those who have an overarching plan to visit many parts of Europe”. This should also benefit small-scale operators who offer customised attractive group packages.

With the average cost of stay per person per day in the UK and Switzerland close to ₹14,000 earlier compared to around ₹10,000 in other European destinations, the fall in the value of the pound will mean a meaty savings for tourists.

Schengen treaty

Few European and non-European countries entered into an agreement to allow passport-free movement for citizens belonging to these countries.

As part of the agreement, non-EU citizens should obtain a Schengen visa for this purpose. So, once the visa is obtained, a tourist can enter any of the member countries in this Schengen region.

The reason to cheer may be short-lived if the ripple effect by the UK to exit EU starts influencing other countries that are part of the EU.

If the popular fear that Brexit will fuel other EU members to exit the EU materialises, the Schengen treaty may be declared void.

If this happens, European tourism industry will take a hit. Also, the laborious cost and time involved to obtain visas for individual countries may discourage tourists taking Pan-European tours.

Published on July 31, 2016

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