U.K. Holidays Industry - Article Example

U.K. Holidays Industry The UK tourism industry has been affected in the recent past by several challenges, such as the foot and mouth epidemic in 2001(www.bbc.co.uk) and the London bombings of 2005, as a result of which tourism figures which were surging ahead at 12% more than 2004, dropped to just 4% more than 2004 (Tourism Annual report, 2006). As a result of such crises, the growth in the holidays sector is considerably less than it should be. One of the barriers for the incumbents of the holiday industry in the UK is the taxation structure wherein tourists in the UK have to pay 50% more of tax on products and services, as compared to Europe (Tourism Annual report, 2006). Another significant challenge being faced by the industry is increasing inflation, which has resulted in the average expenditure per visitor falling from 320 pounds per visit in 1996 to 250 pounds per visit in 2005. Another challenge that is posed to incumbents in the industry is the competition from other tourist destinations overseas. There has been a rise in the number of people leaving the UK. In 2005, the number of UK residents leaving the country on visits abroad was 2.3 million and their expenditure rose by 1.9 billion pounds. This has resulted in a tourism deficit, with UK competitiveness reducing in comparison with the rest of the world.(Tourism Annual report, 2006). This is further exacerbated by the high taxation rates mentioned before, which makes UK products and services 50% more expensive as compared to comparable services in other European countries. As a result, tourists prefer to visit other destinations in Europe rather than visiting the U.K. The UK Government has also increased the cost of licenses from alcohol sales from 30 pounds for three years to about 300 pounds per annum, which has made it difficult and uneconomical for many incumbent players in the tourist industry, such as small bed and breakfast units, to provide alcohol to their customers (Tourism Annual report, 2006). Key Factors for Success: Companies in the industry that wish to succeed must ensure that appropriate standards of quality are met. Visitors to the UK are looking for a high quality tourist experience at reasonable prices. Therefore, innovative products and services must be introduced without sacrificing environmental protection (Tourism Annual report 2006). Companies in the holidays industry that are able to develop innovative tourist packages and plans are likely to benefit. For example, the opening of the Eden project neat St. Austell in Cornwall has had a positive impact on the tourist industry .(www.cornwall.gov.uk). Eden, together with other attractions such as the Tate Cornwall Art Gallery in St. Ives and the National maritime Museum in Falmouth are new quality tourist attractions. (www.cornwall.gov.uk). The inclusion of such attractions within a tour package will enhance the tourist visitor’s holiday experience, ensuring a high degree of exposure to the cultural heritage that is so popular among tourists who visit the U.K. Secondly, there is a shortage of skilled labor in the industry. The tourism industry contributed about 6% to the country’s GDP and this industry has created about one in five of the million jobs that were created from 1997 to 2001.(www.bbc.co.uk). The labor turnover in the industry is high, especially among junior staff, therefore one of the essential factors that could ensure success for companies in this industry is to hire and retain a highly skilled labor force. In the Cornwall area for example, the growth of festivals allows the tourist industry to extend the tourist season and thereby provide more permanent employment opportunities to workers in the tourist industry and attract highly qualified staff. Threats and Opportunities: One of the major threats to the holidays industries arises due to the fiscal and regulatory barriers of operating the business sin the UK. Goods and services are taxed at 50% more than other European countries. There are also regulations that have purportedly been implemented for customer protection, however while their range of effectiveness is limited, they are contributing to increased costs associated with running the business and also reducing the flexibility of the businesses to respond to changes in the global environment, (Tourism report, 2006). The industry is also fragmented and there are many small businesses within a particular area which affects the promotional activity within the UK. For example, one business may choose not to advertise their facilities because of the existence of another facility in the area that has already advertised its facilities, as a result the nature of the structure of the UK holidays industry causes advertising and promotional activity to suffer.(Research paper, 2000:15). Due to the absence of such information, customers also find it difficult to collect information and compare facilities in order to assess the value that may be derived for their money. A further threat to the UK holiday industry is the recent increase in visa fees, which is deterring visitors from availing of holiday tours in the U.K. According to the European Tour Operators Association, such a rise in fees means that a family of four which is touring Europe may have to pay as much as $348 just to enter the UK and stay there for two to three days (www.balinesia.com). A major opportunity that exists for the holidays industry is the Internet, which makes it possible for businesses to advertise their products and services cheaply and effectively. The Internet also provides access to a wider customer base in the international market. It provides potential tourists the opportunity to compare prices and services; therefore businesses can gain an advantage by advertising their products in a cost effective manner over the Internet. This may help to partly offset the higher costs associated with licenses and taxes on goods and services offered by the holiday industry. Another opportunity that exists for the holidays industry is to capitalize on the emergence of the European Union that allows European visitors to move and work freely within the European Union. From 2000-2005, there has been an increase in shorter haul visitors to the UK from within the European Union, especially with the proliferation of low budget airlines (Tourism report, 2006). However, these short haul visitors also spend less money, therefore effective advertisement and promotion to capture additional business from the increased number of short term visitors may allow businesses to thrive and capitalize on the increased tourist traffic. Is the industry attractive to new entrants: On the basis of the above, it may be noted that while the UK holidays industry has continued to grow and thrive, there have been setbacks in past years. There is an increased flow of traffic through the UK in recent years, especially from other European countries, while the Internet also affords the facility for small businesses in the tourist sector to attract tourists from abroad. But the increased taxes on UK goods and services make it an uneconomical venture from the point of view of a new entrant into the industry. The regulations that must be adhered to, as well as the increased licensing fees make it uneconomical for small businesses to survive profitably. Tourists are looking for quality destinations where they can receive value for their money, however with the increased cost of products and services, as well as via fees, UK ranks as an uneconomical holiday destination. For a new entrant, setting up a business would in itself be expensive because of the need to pay licensing fees, etc. Moreover, the response in the form of tourist traffic would also not be large enough to justify the expense, since tourists may prefer other holiday destinations in Europe which are more economical. On this basis therefore, it is best for a new entrant not to enter the business until Government has refined some of the regulations and reduced taxes in the holiday industry. However, if a business should choose to enter the industry, the best strategy would be to start small Bed and Breakfast facilities, which may be advertised over the Internet in order to capture customers. Moreover, it would be better for a new business to set itself up in London or the surrounding areas, where there is already a high inflow of traffic rather than the north east and Cumbria where business activity has been declining in recent years. Places like Cornwall, which offer cultural festivals, as well as historical and cultural benefits will be more attractive to visitors, therefore a business should set itself up in such areas where there is likely to be a high incidence of tourist traffic. References: * Madslien, Jorn, 2001. “UK tourism industry in crisis”, Retrieved November 3, 2007 from: http://news.bbc.co.uk/1/hi/business/1409881.stm * Research Paper, 2006. “The Tourism Industry” retrieved November 3, 2007 from: http://www.parliament.uk/commons/lib/research/rp2000/rp00-066.pdf * “The Holiday Industry” Retrieved November 3, 2007 from: http://www.cornwall.gov.uk/index.cfm?articleid=2036 * Tourism Alliance Annual report 2006. Retrieved November 3, 2007 from: http://www.tourismalliance.com/attach.pl/161/168/TA_AR06_FINAL.pdf * “Visa Price rise hitting UK Tourism.” Retrieved November 3, 2007 from: http://www.balinesia.com/news.html?tit=189&month=12&year=2005 Read More