Last updated: 12:10 PM ET, Fri June 24 2016

Brexit and the UK's Hotel Industry

Impacting Travel | Patrick Clarke | June 24, 2016

Brexit and the UK's Hotel Industry

PHOTO: Langham London Hotel. (photo courtesy of Langham Hospitality) 

The United Kingdom voted to leave the European Union Thursday, prompting the resignation of Prime Minister David Cameron and the British pound to plummet to its lowest level in more than three decades. 

While there are still plenty of questions that must be answered in the wake of the Brexit decision — it'll be a minimum of two years before the U.K.'s exit is complete — it's clear Britain's impending departure from the EU is bound to have an impact on its hotel industry.

The recent fluctuation of the British pound highlights the Brexit's potential long-term impact on the U.K.'s economy, which would ultimately affect the region's hotels. An uncertain economic environment has the potential to stifle business travel, according to STR and forecast partner Tourism Economics.

That's notable considering business travel composes a significant portion of the London hotel market.

On the flip side, a weaker British pound could make London and other U.K. destinations more affordable to foreign travelers. STR noted that since the Brexit could potentially spur higher unemployment, weaker consumer spending and weaker domestic hotel demand, the potential increase in international hotel guests looking for a deal could offset the negative impact.

READ MORE: What Does British Exit From the EU Mean for Airlines?

However it also remains to be seen what if any travel restrictions will result from the U.K.'s exit from the EU. 

"Assuming we see tighter immigration restrictions, we'll see less travel and so less demand for existing accommodations," wrote business travel expert Gary Leff. "In the medium term, that should reduce hotel costs."

As it stands right now, there are many possible effects the Brexit vote could have on Britain's hotel industry. But it's far too early to pinpoint one scenario. "...Many changes that follow — predictive markets aside — will happen slowly," added Leff. "Today is no different than yesterday except in terms of expectations."

The early indications are that a weaker exchange rate could make the U.K. a more affordable destination. With a potential dropoff in business travel and decreased domestic demand for hotel rooms, it's possible international guests could benefit from lower room rates.

Nonetheless, perception matters, and any turmoil resulting from the U.K.'s move could hurt its image as a premier travel destination.


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