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How the Brexit Affects Travel and Tourism

After Britain voted to leave the European Union, global markets tanked, and many people across the world are wondering what the Brexit will mean for them. The implications, both economic and political, are bound to be far reaching. Peak travel season is set to begin, and those looking to travel to Britain and countries in the European Union must now consider new financial effects on their travel plans due to the Brexit decision.

U.S. Travelers

Britain and Europe are popular tourist destinations for many American travelers, and as a result of the Brexit, it will be much cheaper to visit. On Friday, the Great British Pound (GBP) fell to its lowest level in 31 years, with £1=$1.38. As for the euro, €1=$1.11. Fortunately for American tourists, these exchange rates could fall even further.

According to The Washington Post , "Nearly 10% of tourists in Britain last year came from the United States [citing government statistics] and Americans spent more than any other nationality-an average of £3,010, or $4,418." These numbers could certainly increase, and for now, Americans travelling to the United Kingdom won't have to dig quite as deep into their pockets to catch a show in the West End or to visit Buckingham Palace.

Vacation Cost

As mentioned above, British and European vacations for American travelers are bound to be much cheaper, as tourists will be able to stretch the dollar farther. On the flip side, however, British and European travelers will find themselves spending more money on everything from food and drink to hotels.

The increase in cost depends on what levels the euro and GBP settle at. According to The Independent , "The [euro to pound] rate is crucial because [the British] take the majority of [their] foreign holidays in the single-currency area…[and] prices in destinations including the U.S., Dubai and China will rise in proportion with the strength of the dollar relative to sterling (GBP)."

The dollar to pound rate is also important to consider, especially because oil and airlines are priced in dollars. Any drop in the GBP will push up the price of oil, diesel, and aviation fuel, as well as the cost of airline flights.

Travel in the EU

Since 1994, any EU airline has been free to fly between two points in Europe thanks to the "Open Skies" policy, which is one of the best things about visiting Europe.Cheap, no-frills airlines like EasyJet EJTTF and RyanAir RYAAY grew into lucrative businesses, forcing legacy carriers like Air France AFLYY , British Airways, or BA, and Lufthansa DLAKY to cut costs and fares in.

The "Open Skies" policy, however, could face bureaucratic hurdles going forward, especially for British airliners. "It is likely that airlines will restructure into separate UK- and EU-based corporate entities, adding complexity and cost, and reducing flexibility," writes the Evening Standard .

New air service agreements will most certainly have to be made, but because London is both a key destination for many airlines as well as a top business and tourist city, it is unlikely that many routes to and from the U.K. will be affected. The future of low-cost, wide-choice airline routes for customers will depend on results from these upcoming negotiations.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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