Introduction
Overview
The UK’s hospitality and tourism sector has advanced from strength to strength over the years. The sector has witnessed exponential development, making it one of the biggest drivers of economic recovery in the country (Khizar et al., 2023). The United Kingdom, Department for Business, Energy & Industrial Strategy (2021) detailed that the country has one of the most diverse and dynamic tourism and hospitality sectors globally.
The country receives a significant number of tourists each year thanks to the varied sectors that offer magnificent experiences to the visitors. In 2022, the UK’s inbound tourists totaled about 31 million, nearly five times the previous year’s figures (Statista Research Department, 2023). The sharp increase in international visitors translates into increased revenue (Organisation for Economic Co-operation and Development, 2020).
Tourists from the U.S. contributed significantly to spending, with approximately 6 billion pounds spent, exceeding 2019 levels by about 42 percent (Kronenberg and Fuchs, 2021). Domestic tourism also shows significant numbers, with approximately 80 million pounds spent in 2022, representing 74% year-over-year growth (Statista Research Department, 2023). This highlights the sector as one of the most significant contributors to the economy.
Contribution of the UK’s Tourism and Hospitality Sector to the Economy
Tourism and hospitality contribute to direct and indirect employment in the UK. Figure 1 shows the UK’s hospitality and tourism sector as the third biggest employer in the country. Moreover, Figure 2 shows that the sector created about 3.0 million jobs through indirect employment in 2022 and 3.5 million jobs directly in the same year (Ignite Economic, 2023). Direct employment opportunities are found in hotels, travel agencies, restaurants, museums, monuments, photography, cruise lines, guides, scouts, and resorts (Soja, 2022). These jobs can be family-owned, individually managed, or handled by various multi-chain operators.
The UK’s hospitality and tourism sector also provides indirect employment in various areas. The World Travel and Tourism Council (2022) report shows that the UK’s tourism and hospitality sector is anticipated to create at least 700,000 new jobs over the next 10 years, translating to about 70,000 jobs every year.
Employment in the sector is also anticipated to grow by about 0.5 percent, adding approximately 4 million jobs nationwide (World Travel and Tourism Council, 2022). The significant beneficial impact of the sector has compelled the country to strengthen its efforts to grow and sustain the industry to draw maximum benefits (Thommandru et al., 2023). This shows that the sector is critical to generating employment, whether direct or indirect.
Hospitality and tourism also contribute significantly to the UK’s economy. Ignite Economics (2023) analytics show that in 2022, the hospitality and tourism sector’s contribution to the UK’s gross domestic product increased to about 237.1 billion pounds. Although the figure was 4.6 percent lower than in 2019, it illustrates a substantial recovery from the distressing impacts of the COVID-19 pandemic (United Nations World Tourism Organization, n.d.).
Moreover, the World Travel and Tourism Council (2022) findings show that the UK’s tourism and hospitality contribution to gross domestic product is projected to grow by approximately 3 percent annually between 2022 and 2032. This is almost twice the 1.7 percent development rate of the net economy, with more projections pegged at about 286 billion pounds. Therefore, the tourism and hospitality sector’s contribution to the UK’s economy is significant.
Moreover, the sector also generates significant revenues for the economy. In 2022, the tourism and hospitality sector generated more than 93 billion pounds of gross value injected directly into the United Kingdom economy and a further 121 billion pounds indirectly (Ignite Economics, 2023). The advent of the pandemic destabilized the booming tourism sector (Deloitte, 2020). The industry has shown resilience post-COVID-19; however, labor shortages and cost pressures are affecting the sector (World Economic Forum, 2022). The latest economic data point to greater efforts to bounce back toward a resilient, sustainable future.
Factors That Motivate Tourists to Select the UK as Their Destination
Motivations
Tourism has both direct and indirect impacts on the UK’s development and growth. The sector contributes significantly to the country’s gross domestic product and employs millions of people across various businesses (Business Visits and Events Partnership, 2020). While the sector provides economic and employment benefits to the nation, the industry is highly competitive and dynamic, and was primarily impacted by the recent COVID-19 pandemic.
Both intrinsic and external factors influence the holiday destination. Selecting a preferred holiday destination is a complex activity influenced by various motivations (Brahimi, Benlaib, and Rouaski, 2023). Douglas, Hoogendoorn, and Richards (2023) highlight the myriad factors that influence tourists’ destination selection. The factors include available activities, security, weather, anticipated depth of experience, fascination, food, cultural attractions, relaxation, beaches, contemporary culture, accommodation, and more (Gidebo, 2021).
For example, Lu et al. (2021) discussed that activities and precise destination-linked characteristics impact a tourist’s choice of travel destination. Figure 3 depicts various factors that lead tourists to select the UK as their preferred travel destination, including contemporary culture, climate, and sports (Statista, 2023). Moreover, value for money is a significant determinant of travel choice (Visit Britain, 2022). Digital and interpersonal intermediaries remain a significant source of information and motivation for tourists in the UK.
Theoretical Models
The Attention Restoration Theory
The attention restoration theory helps explain the fascinating factors that lead tourists to choose the United Kingdom and other holiday destinations. It is held that visitors would reconsider returning to fascinating destinations (Pessoa, Oliveira, and Souza, 2022). The theory postulates that fatigue is addressed by spending time observing the natural environment. It outlines fascination as the inadvertent attention or a person’s ability to capture environmental stimuli with little effort, reluctantly.
Fascination can result from an ecological tourist destination shaped by friendliness, mystique, richness, fitness, uniqueness, and attractiveness (Widanta et al, 2023). Fascination makes people travel as the visitor’s selections change based on varying diversity and characteristics of existing destinations(Kim, Kim, and Yang, 2021). The concept of fascination is highly applicable to the tourism sector and affects a person’s intention to revisit a place.
Porter’s Diamond Model
The tourism and hospitality industry naturally spans vast areas, with connections in every direction, to offer remarkable experiences for visitors. Usually, numerous stakeholders are involved, both directly and indirectly, in the sector, hence the need for industry competitiveness (Mariani, Bresciani, and Dagnino, 2021). The diamond model offers a conceptual framework for assessing country-specific bases of advantage that bolster global competitiveness, while providing ways for stakeholders to benefit from the nature of competition (González-Rodríguez, Díaz-Fernández, and Pulido-Pavón, 2023). The theory is applicable in analyzing the competitive nature of the UK’s tourism and hospitality industry.
The diamond model identifies four major dimensions that represent factors for regional advantage. These include demand conditions, factor conditions, supporting and related industry, and company structure, strategy, and rivalry as depicted in Figure 4. Regarding factor conditions, the UK has state-of-the-art infrastructure and other production mechanisms that make the tourism sector competitive and preferred by visitors (Bouchra and Hassan, 2023). The country is not only rich in natural and knowledge resources but also boasts skilled labor that supports the sector. The geographic location and high-tech infrastructure provide the necessary competitive advantage (Happ, 2021).
Demand conditions, such as product prices, quantities, quality, and the level of innovation in the sector, make the country attractive to tourists (Fernández et al., 2020). Regarding related and supporting industries, the UK has a robust network of suppliers and distributors that adequately support the sector and provide sufficient competition with other players (Fernando, 2021). Regarding firm structure and rivalry, it is evident that the country has robust managerial practices and healthy rivalry from domestic tourists, which positions the sector at international standards that attract visitors.
Global Pandemic and Its Impacts on the UK’s Tourism and Hospitality Sector
The hospitality and tourism sector was among the hardest hit industries by the pandemic. The pandemic influenced the tourism and hospitality sector in several ways, including a reduction in tourist arrivals (Fraser of Allander Institute, 2021). Restrictions on movements and trading activities disproportionately affected the sector (Hutton, 2022). The restrictions included limits on business hours, forced closure of business premises, and the shutdown of international travel, as shown in Figure 5. The net effect of these restrictions and disruptions was a reduction in business activity (Riaz, 2023). These restrictions influenced demand and capacity in restaurants, hotels, resorts, bars, and other social venues (Almeida-García et al., 2020). Whereas the restrictions and forced closures impacted customer demand and affected business revenues, the tourism and hospitality sectors continued to incur fixed operational costs.
Apart from business interruptions, the pandemic has led to massive job losses in the sector. Labor market data show a significant reduction in workers in the tourism and hospitality sector following the onset of the COVID-19 pandemic (Office for National Statistics, 2021). Moreover, Hutton (2022) highlights that from the first quarter of 2020 to the last quarter of 2021, the number of laborers in the tourism and hospitality industry declined by 3.6 percent. This compares to a 1.3 percent decline in jobs in other industries (Ntounis et al., 2022). Businesses in the hospitality and tourism sector announced job redundancies following the height of the pandemic, as shown in Figure 6.
On the supply and distribution side, businesses in the tourism sector were compelled to remain closed following the onset of the pandemic and government containment measures. For example, businesses selling drinks or food were among the establishments initially closed to avert the spread of the virus, leading to reduced profitability and job losses (Sugiura, 2024). Moreover, the UK’s hospitality and tourism businesses were unable to meet operational needs, forcing most premises to shut down.
The government initiated innovative policies to avert the harsh effects of the pandemic. Key among them was the Coronavirus Job Retention Scheme (CJRS), or furlough scheme, which aimed to cushion businesses from the impacts of the pandemic (The United Kingdom, Department for Digital, Culture, Media & Sport, 2021). The scheme supported employers in the tourism and hospitality sector in retaining their workforce and continuing to pay staff while businesses were shut. The UK government paid £2,500 every month to the furloughed staff. The policies sought to caution families, workers, and employers about the harsh effects of the pandemic.
A temporary value-added tax (VAT) cut was another policy the government implemented in response to the pandemic’s effects. The VAT on accommodation, hospitality, and visitor attractions was provisionally reduced from 20% to 5% between July 2020 and September 2021 (International Monetary Fund, 2021). Thereafter, a 12.5 percent VAT rate was applied until March 2021, after which it reverted to 20 percent (The London Assembly, 2022). A policy on business relief was implemented for hospitality, retail, and leisure businesses at a 100 percent rate until March 2021, before reverting to 66 percent (Dube, Nhamo, and Chikodzi, 2021). The government also implemented policies relating to business bounce-back schemes and business grants.
The policies contributed to rethinking the tourism and hospitality industry more sustainably. The policies vouched for sector stakeholders in the U.K. to gain access to innovative systems (Kumar and Nafi, 2020). This leads to the creation of inventive institutions to support sector-wide interventions that enable the recovery of establishments impacted by the pandemic (Organisation for Economic Co-operation and Development, 2020). The policies also encourage businesses to deploy sustainable, innovative strategies that incorporate technologies to protect them from the severe effects of a business recession.
The UK’s Balance of Payments (BoP) for Tourism and Hospitality
The tourism and hospitality sectors contribute significantly to the UK’s economy. Before the pandemic, British residents spent about £19.5 billion on domestic tourism and another £ 62.325 million on foreign destinations (Khan et al., 2021). In return, inbound visitors spent 28.448 million pounds, resulting in a balance-of-payments deficit of 33.877 million pounds in the tourism and hospitality sector (Davahli et al., 2020). The balance of payments trend from 2012 to 2019 shows a negative figure (Office for National Statistics, 2021). The imbalance in inbound and outbound expenditures for tourists entering and leaving the U.K. is shown in Table 1.
Table 1: UK Tourism Balance of Payments Before Pandemic (Source: Visit Britain, 2021)
The post-pandemic levels show a significant recovery period in the tourism and hospitality sector. The recovery is backed by strong demand for travel following the COVID-19 downturn (United Nations World Tourism Organization, 2024). While domestic visits within the U.K. fell to about 6 million in 2021 post-pandemic, inbound visitor numbers to the country recorded significant growth (Visit Britain, 2021). The current account shows a narrower balance of payments following the pandemic’s interruption of international travel, as depicted in Figure 7 (Global Data, 2022). The financial account over the past years depicts a considerable balance of payments (The World Bank, n.d.). However, it has since narrowed during and shortly after the pandemic due to interrupted tourism activities.
Conclusion
In conclusion, the tourism and hospitality sector is one of the largest employers in the country, both directly and indirectly. The industry was hit hardest following the onset of the COVID-19 pandemic. The UK receives millions of visitors, driven by factors such as fascination, experience, weather, facilities, and food.
The sector has shown signs of recovery, as evidenced by increased inbound tourism and spending after the pandemic was contained. The balance of payments in the sector has been huge, but the advent of the pandemic narrowed the gap due to increased travel restrictions, leading to reduced spending. Prospects include sustainable interventions that support the sector, such as tax incentives, political stability, and security, to attract both domestic and international visitors.
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