Will Hawkley, KPMG’s head of leisure and hospitality, explains how Brexit is already affecting the sector.
Well, it has not been a great week for the sector overall. After an already difficult start to the year, share prices have fallen by an average of 10 percent this week. Only two companies in the sector saw a share price increase, Compass and Edenred, with IHG unchanged. Compass is seen as a safe haven and IHG derives a large proportion of its revenue in US dollars.
Even Merlin, with CEO Nick Varney talking of the benefits to UK in bound tourism due to the fall in the pound, and increased stay-cations, saw a decline in its share price.It is impossible to predict the implications of the Brexit vote and that won’t change for some time: Article 50 has not been triggered, the process is unknown and it’s still unclear what the new prime minister’s strategy will look like in negotiations with the EU.
This uncertainty is the main issue facing the sector overall, as it impacts negatively on consumer confidence leading to declines in discretionary consumer spend. This will likely negatively impact the eating out market and leisure hotel spend. Corporate hotel spend will be impacted by a potential slowdown in investment and corporate decision making, tour operators will also be impacted by the decline in the pound and online gaming will be concerned in regard to their Gibraltar licences.
Read the full article on the KPMG EU Referendum Forum.