Westminster, London Bridge, Manchester: too many times lately, the UK has made international front-page headlines for all the wrong reasons. So what impact is the heightened terror threat likely to have on visitor numbers and behaviour? What does it mean for the holiday lettings sector — and how can landlords respond? We take a look…

 

London’s Resiliant

2017: the year that turned sour?

This was meant to be a golden year for UK tourism.

On the one hand, there’s the continued “Brexit bonus” for visitors from abroad. With the pound trading around 15% lower against the dollar and losing around 12% against the euro compared to before the referendum, last summer suddenly saw the UK became a much more enticing prospect as a great value destination. This favourable currency climate has continued.

Alongside this, the accommodation marketplace itself is changing. In the five years up to 2016, we’d seen a 150-fold increase in the number of London residential properties listed on Airbnb. As a growing number of ordinary homeowners find new ways to put their properties to work, 2017 was expected to see this exciting new part of the accommodation market go from strength to strength.

Just a few months ago, the figures looked rosy. Official figures showed that there were 37.3 million visits to the UK in 2016; the highest since records began and a 3% increase on the previous year. North American and Chinese visitors were leading the trend. Visit Britain predicted another bumper 4% increase in visitor numbers for this year.

But then came a series of tragic events: an attack in the vicinity of the Palace of Westminster, the bombing of a music event in Manchester, the London Bridge attack and, most recently, a rampage in London’s Finsbury Park area. All have occurred within a three-month period.

As CNN noted shortly after the Manchester incident, there’s a clear risk of this being viewed by would-be visitors as “part of a pattern of bad stuff in Europe” that may be enough to put many of them off visiting altogether. Meanwhile, Merlin Entertainment, operator of Alton Towers, Madame Tussauds and other attractions has already seen a fall in demand at its sites.

For operators within the private holiday lettings sector, three questions are worth considering:

· Should we expect a fall-off in demand?

· If so, how long is it likely to last?

· How should landlords factor in the terror threat in areas such as cancellations policies and insurance?

What to expect: we’ve been here before

Up until this year, the last multiple-casualty terror episode on UK soil was the ‘7/7’ attack in 2005. Looking at this alongside the 2004 Madrid train bombings and attacks in Paris and Brussels, analysts at STR examined accommodation occupancy rates in the months following those incidents.

A similar broad pattern emerged: an immediate drop-off in demand in the month of the incident, followed by a steeper decline in the month immediately afterwards. The next three months tends to see a gradual stabilisation — before reverting back to normality.

UK attacks in perspective

Data from the World Travel & Tourism Council suggest that the more “random” the attack, the shorter and less severe the impact on the domestic tourist market.

As an illustration, the UK still has bans in place on flights to Sharm el-Sheikh more than 18 months after the bombing of a Russian holiday flight. Both the Egypt passenger flight bombing and the attack on the Sousse resort in Tunisia the same year were deliberately targeted at those countries’ tourism industries. When it comes to visitor numbers, recovery in those resorts will ultimately be measured in years rather than months.

By contrast, where it’s clear that tourists are not the main target, (as in Madrid and 7/7), the impact beyond the few months after the incident is usually negligible.

How should landlords respond?

Rate reductions could be the wrong strategy to follow

The STR research showed that although occupancy rates fell off in the aftermath of terrorist incidents, room rates were not cut to any meaningful degree. Hoteliers recognised that if visitors had made up their minds not to travel, slashing prices wasn’t going to change their minds. There’s a potential lesson here for part-time holiday landlords: cutting your rates might simply mean less revenue from those guests who are still willing to make the trip.

Marketing: look beyond North America

In the year of 7/7, the number of North American tourist visitors dipped by 3%, while visits from many European markets actually increased. So there’s some evidence to suggest that North American visitors are more likely to be put off visiting compared to visitors from other regions.

To maximise occupancy rates in what are difficult times, consider optimising your property listing to appeal as strongly as possible to other markets. For instance, although lettings platforms tend to have an auto-translate function, it might be worth by-passing this and creating your own descriptions in various languages. Making the listing ‘sparkle’ in those languages could really make it stand out in a more diverse range of markets.

Formulating the right cancellation policy

Airbnb enables you to set one of three cancellation policies: flexible (providing a full refund if the reservation is cancelled within 24 hours of check-in), moderate (refunded if cancelled within 5 days) and strict (a 50% refund if cancelled seven full days prior to check-in).

For landlords, there’s always a balancing act to think about here: the more sought after the property and the more established your reputation, the more viable it becomes to opt for a stricter cancellation policy, while still achieving the occupancy rates you desire.

The stricter your policy, the lower the chances of being left significantly out of pocket by a visitor who suddenly feels uncomfortable making the trip. Then again, what happens if someone approaches you direct, asking for a refund because of fears over terrorism — even if they are not strictly entitled to it under your policy? The value of goodwill shouldn’t be underestimated: depending on the circumstances, don’t rule out offering a credit to travel at a later date — when things have settled down.

Insurance

While big players in the hospitality market would typically expect to have extended cover in place to cover losses caused by a terrorist act, options open to smaller operators are limited. Typically, while it’s possible to obtain ‘enhanced terrorism cover’ as part of a policy, such cover generally only applies to losses stemming from damage to the insured property. This wouldn’t include the situation where an attack has occurred somewhere in your city and you’ve suffered a loss of bookings as a result.

So the obvious answer would involve applying an element of self-insurance; recognising that a temporary loss of bookings is a very real possibility and budgeting accordingly. At the same time, it’s worth looking at loss mitigation strategies — especially when it comes to attracting more European visitors.

Finally, think positive: history shows that we do bounce back to a state of ‘business as usual’ — and we do so remarkably quickly.

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