Wednesday, 6 February 2013

Reviving the tourism market

There is evidence that the dramatic drop in tourism since 2008 has plateaued. We are still however bumping along at the bottom.
The long recession hasn’t helped of course, but people can get tired of feeling poor, particularly when they haven’t felt any real hardship themselves. Asset rich folks can be persuaded that the meagre returns on their savings justify spending on indulgences.

One element holding back the long haul tourism business is the much-hated Airline passenger duty.

Now the four leading airlines in the British Isles have published a report by Price Waterhouse, which calls for scrapping this ‘green’ tax. Using a model favoured by the World bank it examines the impact of one such element can impact on other sectors of the economy.

PWC claim that scrapping APD will stimulate the economy, create up to 60,000 extra jobs, encourage in-bound tourism and reduce business costs. Moreover the income lost will be made up by extra revenue from income tax and Vat. 

This APD tax has not been as lucrative as the Chancellor had hoped. The ‘Laffer’ effect works here as well. However George Osborne may take comfort in the fact that the fewer Brits who go abroad aids the tourism deficit. We earn less from in- bound tourism than we spend abroad.

And our new Visa rules make it more difficult to attract the new middle classes from China and India. We couldn’t even persuade more tourists to visit during the Olympics, though this may have been a marketing blunder.

We must create conditions to kick-start our tourism business. This means greater capacity at our airports and a better understanding of the benefits tourism deliver to the economy.

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