Travel companies TUI and Carnival were among the worst performers among the FTSE 250 set today, fitting in nicely with sobering news emerging from the all-important China market.
Long-haul airlines such as BA owner International Consolidated Airlines Group SA (LSE:IAG) and engine maker Rolls-Royce Holdings PLC (LSE:RR.) were also in the red but saw their losses pared later in the session.
More than half of Chinese travellers have not made plans to travel overseas this year, with 31% of them rejecting international travel altogether, according to a Dragon Trail survey shared with Bloomberg.
The data, released on the eve of China’s May Labour Day holiday week, put a dampener on travel companies expecting a strong recovery from a country that was the largest source of outbound traffic before the pandemic.
Dragon Trail International carried out the survey from April 4 to 7 in 49 cities and included 1,012 mainland Chinese travellers.
Easing restrictions have failed to entice Chinese tourists abroad, with the top factor considered when deciding on a trip being safety, overtaking financial concerns and a lack of free time.
Only 10% of respondents reported having outbound trips booked for 2023, and only half of those who were undecided hope to book international trips before the year's end.
The survey came out on the same day that Heathrow Airport reported ongoing losses, despite the London hub welcoming almost 17mln passengers in the first three months of the year, compared to 9.7mln a year earlier.
It blamed landing fees for part of the reason, with taxes also being claimed by UK companies as another factor holding Chinese tourists back.
Sunak’s tourist tax
The government recently went ahead with scrapping VAT reliefs for international visitors, despite protestations from discretionary brands like Burberry, Mulberry and Harrods.
Most major European Union countries allow shoppers to claim 20% back on their purchases, making the UK an outlier in yet another area.
Burberry chair Gerry Murphy attacked prime minister Rishi Sunak’s decision to scrap the 20% VAT break at Monday’s Business Connect event, aimed at building bridges between the government and UK PLCs.
Unfortunately, it turned acrimonious when Murphy accused Sunak of scoring a "spectacular own goal".
He noted that while Burberry had observed growth in Paris and Munich following Covid, the UK's recovery was the weakest among major markets globally, though Murphy did concede that the Sunak administration “is obviously more business-friendly than some predecessor administrations".
There is no way of knowing to what extent the tourist tax will deter would-be destination shoppers, but Sunak’s tourist snub has made “UK the least attractive shopping destination in Europe”, in Murphy’s view.
M&S head Machin joins the chorus
Now, Marks & Spencer boss Stuart Machin has joined the chorus of disapproval.
Writing in the Evening Standard, he said: "The High Street which is meant to be the jewel in London’s crown today is a national embarrassment, with a proliferation of tacky candy stores, antisocial behaviour and footfall remaining in the doldrums.”
Machin said high street footfall is down 11% on pre-pandemic levels, “and the scrapping of tax-free shopping for international visitors only holds London back further. Meanwhile other cities are beginning to thrive again. It pains me to see our great city like this”.
Burberry closed Wednesday's session 1.8% lower at 2,594p.