Ian Bell, RSM’s head of travel and tourism, looks ahead to what 2018 has in store for the sector.
1.The generation games
Move over Millennials, Generation Z have reached maturity. Born between the mid-1990s and mid-2000s, these ‘digital natives’ have never experienced a world where the internet and social media wasn’t an ever-present.
We will see innovative operators create more personalised, interactive experiences that continuously reflect the latest digital advances. Ethical and sustainable experiences also feature high on the agenda. Businesses that don’t adapt risk failing to build relationships with a demographic that holds more buying power than the millennials before them and places greater significance on brands which they can interact with and contribute to.
2. Monitoring and reacting to unprecedented regulatory change
With the arrival of the second EU Payment Services Directive (PSD2) on 13 January 2018, surcharging on credit and debit card payments will be a thing of the past. Whilst most businesses will have already made some tough decisions on how they will mitigate charges and fees from card acquirers, businesses will want to monitor the response from both consumers and competitors.
2018 will also see the UK apply the new Package Travel Directive (PTD) from 1 July 2018. With confusion over the current ATOL scheme following Monarch’s collapse and rumoured delays to the new package travel regulations in Spring 2018, businesses will have precious little time to make the necessary commercial changes to plan and comply with the regulations effectively.
3. The focus on data
Businesses will see the full impact of GDPR (General Data Protection Regulation) in 2018. Significantly smaller mailing lists will make it more difficult to target customers through traditional means, leaving operators and agents to undertake smaller, more frequent, marketing initiatives and make more effective use of social media and influencers. Businesses are going to have to be increasingly creative to connect with their customers.
Whilst we are expecting a ‘soft-landing’ in May 2018 when GDPR goes live, getting your house in order in respect of key aspects such as contracts with suppliers, consent, the right to be forgotten, and subject access requests, will be vital.
4. People matter
We see a focus on staff retention being a key theme amongst operators in 2018, particularly through creating career ladders, training programs and education opportunities. The Apprenticeship Levy, introduced in April 2017, should be viewed as an opportunity here rather than another overhead. Understanding how levy funds can be accessed will be important for employers.
With several businesses in the sector recently being identified by HMRC as failing to meet the requirements of the National Minimum Wage, ensuring continued compliance should be a focus. Whilst some of those may have been technical infringements, the automatic naming and shaming of companies that inadvertently fall foul of the complex rules will damage reputations.
5. The shift from buying to doing
Today’s consumers crave brag-worthy experiences over everyday necessities and have replaced buying with doing. So, while consumers stop buying beauty products, they’re increasingly splashing out on wellness retreats. The experience economy is now in full swing.
While the travel sector is likely to be a net winner in the experience economy, success is not guaranteed, particularly if the value of sterling pushes up holiday costs further. Operators should continue to innovate – expect health and wellness, retro experiences, bucket list destinations and the Blue Planet II effect to feature. Highlighting unique and customised experiences will be important ways to pull in customers.
6. Customer confidence
ABTA reported in their Holiday Habits Report 2017 that over 30 per cent of people are planning to spend more on holidays in 2018, with Millennials being the most likely. Nearly a quarter cite getting the destination/experience right as the reason they’ll spend more.
Pressures are, however, emerging. Looking ahead, we predict consumers are unlikely to slash their spending, but they will become more discerning.
7. Will 2018 sparkle with Markle?
With Kensington Palace announcing the date of the royal wedding in May next year, the eyes of the world will be on London and we predict this will be a further boost for UK inbound tourism, bolstering the attraction already generated by the weakness of Sterling. With the worldwide appeal the Royal Family generates, and the matrimonial link to the US, businesses will want to plan accordingly to capitalise on our strengthened Special Relationship.
8. And so to Europe
The UK’s relationship with the EU single market and customs union will be under the spotlight throughout 2018. The government will be pushing through regulatory changes to develop the UK’s customs and trade position to build on the principles outlined in the recently published Taxation (Cross Border Trade) Bill which outlines the UK’s vision of its standalone Customs, Excise and VAT position post Brexit.
At this stage, the view is that if the UK remains part of the Single market, the VAT system should remain, with of course the potential for any transitional period.
However, RSM is aware of the draft consultation bill that is with the government for consideration. That implies the Tour Operators Margin Scheme (TOMS) will continue, having had representations that if TOMS was abolished in favour of a UK only regime, circa £120m of revenue would be lost.