UK Tourism and Tourist Expenditure: Tourism in London

The London Eye
The London Eye

Tourism in London is a major contributor to the UK’s foreign income. Tourism in London is driven by both domestic and overseas visitors. The latter is the more dominant, accounting for 58% of visits. In 2013, approximately 17 million visitors from overseas were received in London, spending a total of £11 billion (London Tourism Report, 2013). The city has, in recent years, seen an increase in the number of overseas visits, a trend attributed to the fact that London is host to Britain’s most visited tourist attraction sites. The British Museum alone, for instance, attracts more than five million visits annually (London Tourism Report, 2013).

the british museum
The British Museum

While the British economy as a whole has taken a major blow since the start of the global financial crisis in 2008, the tourism sector has continued to thrive. Income from international tourism has seen an upward incremental trend of up to 30% since 2008, positioning the tourism industry as Britain’s fifth largest export earner (Tourism Alliance, 2014). This study will analyze the UK tourism sector with respect to London with the aim of determining the role of tourist expenditure in economic success, existing challenges, opportunities for growth, and the effect of the recent global crisis on the same. The study is guided by the hypothesis that the average tourist expenditure in London, which contributes significantly to the UK GDP, was adversely affected by the recent global economic crisis and is likely to be affected by similar global phenomena in future.

1.2 Research Justification

The Tourism Alliance (2014) reported that the tourism sector had been one of the best performing economic sub-sectors for the past five years. According to the report, revenues from UK tourism had increased by 30%, and had generated about £24 billion annually between 2008 and 2013. Domestic tourism had contributed to this growth significantly, registering an increase of 11% between the year 2010 and 2013. Comparatively, growth in other economic sub-sectors, e.g., manufacturing (0.3%) and the service sector (6%) could not match the growth in the tourism sub-sector (Tourism Alliance, 2014; European Commission, 2013). This exceptional performance of the tourism industry has also contributed to almost one-third of all additional jobs created in the UK economy between 2010 and 2013.

Tourism statistics indicated a 3.5% increase in tourist volumes between 2012 and 2013 (Bremner, 2015). In addition to attraction sites, tourists also spend money on hotels, restaurants, bars, shopping, and other such entertainments. Such tertiary revenues also form an important source of revenue for London, and the UK at large. Researching these additional sources of revenue would help improve future UK tourism reporting and forecasting. It would also aid strategists in developing tailor-made products targeted at particular tourist groups.

Additionally, in the past decade, the world’s largest economies have suffered a major blow from the global financial crisis. The United Kingdom is no exception. While the better part of its economy took a plummeting, London’s tourism industry continued to thrive. International tourism to the UK has seen an increase in revenue of up to 30% between 2008 and 2013. This has elevated the tourism industry to Britain’s fifth largest export earner (European Commission, 2013). Considering the new-found significance of tourism in the UK, there is a need to shift focus to this market segment in order to determine its dynamics as well devise ways of developing it. In this case, the paper will focus on determining the average London tourist expenditure, its contribution to the UK economy, and how this was influenced by the recent global economic crisis.

1.3 Objectives

The general objective of the study is to analyze tourist expenditure in London’s attraction sites, in terms of entrance fees, shopping, foodstuffs, housing, entertainment, travel and transport, et cetera, and the impact of this in increasing revenues from tourism, and on the United Kingdom’s economy. Additionally, the impact of the global financial crisis on tourism expenditure in London will be studied.

Specific objectives will be to:

  • To determine and highlight major tourist attraction sites in London, their access fees
  • To assess average tourist expenditures on food, shopping, transportation, and accommodation.
  • To determine the impact of the global financial crisis on London’s tourism and tourist expenditure

1.4 Significance of the Study

This paper will analyze tourism in London over the last couple of years, specifically the period between 2005 and 2008. The paper will highlight the dynamics of London’s tourism while paying specific attention to tourists’ expenditures. The study will also analyze the contribution of tourism towards the economic growth of the city of London, and the United Kingdom as a whole. The paper will also assess the significance of the recent global financial crisis on London’s tourism. Finally, it will offer suggestions as to what can be done to sustain and increase the growth of tourism in London. Among other things, the study is expected to have the following specific significance.

  • It will provide an in-depth understanding of tourism in London and the larger UK
  • It will provide an understanding of tourist expenditure trends and their impact on the general economy of the United Kingdom
  • It will look analyze the impact of the global financial crisis on London tourism and tourist expenditure
  • It will serve as a reference for future studies on the same topic.

1.5 Scope of the Study

Tourism is vital to both the economies of the rich and poor countries. It involves traveling and visiting, which contribute towards total consumption and spending. Tourism brings in foreign currency to a nation while also guaranteeing prudent management of resources. Tourism has stood out as a major player towards the economic prowess of London, as well as the United Kingdom in general. As earlier noted, even while the United Kingdoms’ economy was on a low due to the financial crisis that has hit most world economies, the tourism sector defied the odds and has continually posted returns to the economy of the United Kingdom (Tourism Alliance, 2014). More and more tourists are increasingly visiting tourist attraction sites in the capital of the United Kingdom, thereby boosting revenues. Notable too, is the fact that this increase in revenue is as a direct result of tourists’ expenditure on terms of access fees to tourist sites, transport and accommodation costs, shopping et cetera. The study will analyze this trend and offer insight as to the dynamics involved. The study will also offer insight as to the contribution of tourism to the overall growth of the economy of the United Kingdom, analyze whether there are factors that could be impeding even faster growth, as well as offer solutions to any arising challenges so as to create a better tourism structure and facilitate more tourist expenditure, which in turn contributes to the advancement of the economy.

1.6 Outline

This report is subdivided into five chapters. Chapter one gives a detailed statement of the problem, background information, and a detailed justification for the study. It also outlines the objectives of the study. Chapter 2 outlines similar works on the topic of study, that is, the average expenditure by London tourists, and the impact of the global recession on that. Research gaps and contradictions in study findings are also highlighted. Furthermore, the chapter lists the study’s research questions. Chapter three, on the other hand, describes the research methodology employed in the research, giving its limitations, strengths, and suitability. The results of the study are discussed in chapter four. The final chapter is a conclusion of the findings. It also gives recommendations on ways of sustaining and improving London tourism.

2.0 Literature Review

2. 1 Tourism Consumer Behaviour

Consumer behaviour focuses on a variety of consumption activities and not just purchasing. These usually include identifying needs, finding information, analyzing alternatives, developing purchase intentions, the actual purchasing, use, and disposal (Bray, 2008). Tourism consumer behaviour, therefore, refers to the various actions, attitudes, and decisions related to the purchase and consumption of the tourism products and services as well as the reactions to such consumption. The identification and understanding of consumer behaviour is essential for the development of products and services that meet consumer needs. This applies to the tourism industry where consumer needs vary from physical, emotional, personal, personal development, and cultural needs to status needs. Tourism products and services must, therefore, be tailored to meet these needs (Stanciu & Mihai, 2010; Todd, 2007). Meeting consumer needs leads to customer satisfaction. According to Bloemer and Kasper (2005), consumer satisfaction refers to the ability of services and products to meet the customers’ needs and expectations. It is a client expectation function, perceived value, and perceived quality. The satisfaction of clients enables organizations to assess their potential in meeting the expectations and needs of consumers effectively. Again, it helps businesses evaluate their performance and identify the areas that require and also those that are relevant to the customers. Companies predict organizational profitability, consumer loyalty and satisfaction through satisfaction surveys (Bloemer & Kasper, 2005). The profitability of a business emanates from the satisfaction of customers.

Consumer behaviour is influenced by a number of motivators at the individual level and in the environment. Stanciu & Mihai (2010) noted that in the tourism industry, such motivators include personality, lifestyle, past experience, personal perceptions, and social status needs. Adventurous personalities, for example, have fuelled the growth of adventure tourism which involves high risk attractions like canoeing and mountain climbing (Scott & Mowen, 2007; Alvarez & Asugman, 2006). Tovikkai (2010) also noted that personal values materialism, conformity, the need for uniqueness and vanity (p. 5 & 6). In a bid to fit to a particular social class, consumers may purchase products, basing on their ability to enhance their social life, rather than on the basis of having immediate needs (Pandit, Karpen, & Josiassen, 2008). The same applies to conformity, where consumers buy products in order to fit to particular social groups (Schutte and Ciarlante, 1998). The need for uniqueness is also a major determiner of consumer choice since the acquisition of unique products satisfies the desire to enhance one’s identity (Tepper, Bearden, & Hunter, 2001). These are important motivators in the tourism industry which is associated with luxury, extravagance, exclusive destinations and travel packages that easily portray social status.

2.2 Impact of Tourist Expenditure on the Economy

Archer (1973) identifies four major factors in determining the impact of tourism in an area:

  • The nature of the main facility
  • The number of visitors
  • Spending by visitors and;
  • The degree to which spending impacts on the economy.

In practice, however, dependable estimates of tourism expenditures and valid information on the structure of the local economy are sufficient to estimate tourism economic impacts. Tourists spend a lot of money on goods and services at places where they visit (Courney, 1982). These expenses contribute to a direct injection of money to the market. With the host locality also needing to provide such goods and services to more than its locals, their demand rises, causing price increase that is good for business. The more attractive the tourist location is, the more compound the effect is.

The general economic importance of tourism can be observed in its contribution to the GDP (Witt &Luiz, 1994). This is regardless of its percentage of contribution to the GDP or the tourist expenditure. According to UNEP (n.d.), wealthy nations enjoy more tourism, attributable to their good infrastructure that allows tourists to have better experiences. While the money they make is huge, it is a small contribution to the entire GDP. That, however, does not mean that it is an insignificant contribution in any way. Developing countries on the other hand make much less money from tourism. However, the contribution that it makes to the countries’ GDP is a huge percentage of the gross GDP.

More specifically, tourism expenditure has economic significance in a number of ways. Tourism is seen as an export business in its outcome (Encore, 1989). This is mainly because tourists bring in foreign currency to the visiting state, just as an export would. The higher influx of tourism means that the host country has more hard foreign currency to use for its import expenses. However, some analysts argue that expenditure itself does not lead to improvement in the economy. According to Thornton (2009), increased savings stimulate the economy, even if tourism and consumer spending is anemic. Accordingly a substantial amount of the income from tourist expenditure also leaks away to other areas that provide essential goods for the market.

Tourism expenditures also attract foreign direct investments (Oxford Economics, 2011). The foreign investor will be attracted to a place where they are sure of tourist numbers and sufficient expenditures to sustain business. The foreign direct investments also benefit local economies by introducing capital, demand for local products and healthy competition. Furthermore, more tourists visiting attractive cities and places necessitate the needs for direct flights to other key countries and cities. These direct flights also boost the influx of investors.

There has been a class of tourism that has often been overlooked-the business tourist. The tourist in today’s world is not only the individual or family who travels purely for pleasure; business tourism has been on the rise (Ballantyne, Packer & Axelsen, 2009). A recent global survey of more than 2300 business people found that 89% of respondents considered in-person meetings as vital for “sealing the deal,” while 95% agreed that it is a key aspect to both building and maintaining long-term relationships (Harvard Business Review, 2009). A further 97percent agreed that such meetings are important for developing ties with new markets. The key point is that such meetings, even without the business aspect, bring about almost similar impact as the pleasure tourist would-foreign currency, expenditure on food, accommodation, travel, etc.

Infrastructure is a key pillar of economic growth, even if independent from tourism (Mark, 1989). Nonetheless, tourism has been known to have a major boost on infrastructure. Higher tourism expenditure gives the local government more money to spend on public infrastructure such as roads, telecommunication, airports, etc. Such utilities are however not exclusively for use by tourists. They are and can be used by locals for their own business needs. The improvement of infrastructure thus attracts more tourists, thus more demand and more profitable prizing.

Also of importance of how tourism and tourist expenditures affect the economy is based on the seasonal nature of the tourism business (Adrian, 1991). On certain times, tourist numbers are low and thus businesses may lower their prices to attract the relatively few available tourists. This means that, in such times, tourists get to spend less which cuts back on profits. Tourist businesses such as hotels and theme parks strive to operate at maximum capacity so as to increase profitability. However, these businesses must sustain maintenance costs and other expenses even during low seasons. Furthermore, the effect is also compounded by the fact that the tourists visiting during low season pay less fees due to low demand. This means that government income and revenue is also affected by tourist seasons thus directly affecting the economy.

High levels of tourism can also have some negative economic impacts. It may lead to increase in import necessities to sustain the foreign appeal (Mathieson & Wall, 1982). Tourists often demand homely comfort especially on food, drinks and luxury. While they desire the host nation’s uniqueness, they require standards of comfort and necessities that is akin to their home countries. This requires the host country and/or service provider to import the items rather than sourcing them locally. This imposes the need for extra costs in meeting the luxury demand.

2.4 Estimating the Impact of Tourism

Estimating tourism expenditure on economic gain is quite complicated. The effect is more than deducting total expenditures from total expenses. Tourism has trickle down effects to other sectors too as well as leakages. These are known as secondary effects. Multiplier effects have to be considered in order to capture secondary effects of tourism expenditure (Archer, 1994). They depict both the direct and indirect effects of tourism expenditure. However, these effects differ across different sectors and regions. The secondary effects of tourism are categorized into direct, indirect and induced effects.

Fletcher (1994) discusses the secondary effects caused by tourist expenditure to the economy. Direct effects are production changes directly connected to the immediate changes in tourism expenditure. For instance, tourists need hotels to eat while visiting the country. An increase in tourist numbers directly leads to increased sales. The additional sales, salaries, taxes and product suppliers are direct effects of tourism expenditure. Indirect effects are changes resulting from changes in re-spending of the business’s receipts to goods and service providers to the primary business. These goods and service providers present another angle of indirect economic effects ultimately linking the primary tourist business to other economic sectors. For instance, the income generated by tourists’ travel companies is spent on other goods and services such as fuel within the local market.

Archer (1990) shows how input-output modeling can be used to estimate the economic impacts of tourism. He argues that all foreign expenditure into an economy causes the multiplier effect and tourism expenditure is just one of them. He argues that the input-output analysis has three major uses. First, it can be used to analyze public and private investments. Second, it helps simulate the impact of new tourism developments. Third, it can be used to compare the relative magnitudes of impacts made by different types of tourism, and those made by tourism versus other sectors of the economy.

Fletcher (1989) introduced and advocated for the input-output analysis as a reliable method to estimate the impact of tourism spending on the economy. According to him, this model is preferable since it provides an all-embracing view of the economy, makes consideration on interdependencies between various sectors, is flexible and is policy neutral. The multiplier effects of tourism expenditure may continue until the money leaks from the economy through imports (Bull, 2004). A study conducted in Thailand estimated that 70% of all the proceeds made from tourism ends up leaving the country. Most developing countries bear the brunt of overseas leakage as opposed to the developed countries. In some countries, the leakage goes up to 80 percent lost through foreign owned tourist hotels and businesses expatriating their profits or by simple imports.

Analyzing the multiplier effects is important for policy preparation and analysis. It is considered to be suitable to predict any eventual changes that may be effected by changes in tourist expenditures.  According to Wang (2006), tourism expenditure is “typically scrutinized by policy makers, planning officials, marketers and researchers for monitoring and assessing the impact of tourism on the local economy”. The studies have been successful in various countries. Jamaica, for instance, had a study conducted in 1985 that examined the economic impact of tourism expenditure according to the aim of the visit, the time of the visit and whether or not it was a first-time visit (Fletcher, 1985). The study allowed the government to determine which type of tourist was most beneficial and in what sector, then was able to tailor its policies to attract the kind of tourist that would specifically improve the sector they want. For instance, if a tourist who visits in summer for the second or consecutive time has more impact on the creation of new jobs, the government will tailor its advertisements to target the tourist who has already visited the country.

 

2.5 Conclusion

Existing studies confirm that tourist expenditure and tourism should be regarded as a key component of economic stimulus programs, especially during an economic crisis. Its role on the economy means it should be crucial during formulation of policies created to revitalize economic growth because the trade flows spawned by a strong tourism industry have a major effect on business and consumer confidence. Most studies focus on financial data from businesses and tourist attraction points then relate to their economic contribution. This study will give information on average expenditures for tourists across different financial classes as well as whether individual or family tourists. Hopefully, the information will enable the policy makers and especially advertisements to target certain markets and provide more specific financial information.

2.6 Research Questions

  • What are the major tourist attraction sites in London, and what are their access fees?
  • What is the average tourist expenditure on food, shopping, transportation, and accommodation in London?
  • What is the contribution of tourism to the UK economy?
  • What was the impact of the global financial crisis on London’s tourism and tourist expenditure?

3.0 Research Methodology

3.1 Study Motivation

The City of London Corporation runs a City Information Center that provides information to and about London visitors. In 2013, the company published a report on the tourist numbers and data for tourists visits in the previous year (CIC, 2013). According to the report, London received 67 percent of all tourists who visited the United Kingdom. The report also identifies profits made by major tourist products during the year, with travel pass cards making over 50 percent of the total profits.  The city receives most tourists during the month of December and the least during March, with profit gains reflecting respectively. The report is quite focused on financial data and tourism statistics. However, it does not comment on how much of these figures end up in government coffers either through taxes or otherwise. Thus, while it would be reliable in giving information on tourist expenditure, it may not be reliable for the determination of their contribution to the economy. This, as noted by Kyte (2012), could be partly because of poor reporting, e.g. where some privately owned attraction sites often do not publish commercially sensitive data.

Webber and White (2010) conducted a research on how tourism expenditure was affected by the global recession and the overall impact of this phenomenon. Their research used an input–output method to examine the effect of the global recession on tourists’ expenditures in the UK. The research found that the recession had a negative impact on the tourism sector amounting to almost £45 million, representing a £21 million net fall across the production chain and a £24 million net fall in the compensation of employees. This research simply emphasized on how tourist expenditure can affect an economy.

3.2 Research Background and Context

Tourism has over the years become a major economic phenomenon and personal undertaking for most people, whether domestic or international tourists. It affects various other market forces and is affected itself by various factors. It has over the years developed into one of the strongest pillars of the UK economy (GLA Economics, 2011). Increased expenditure is also a variable directly related to tourism. A cup of coffee in local cafes, for instance, goes for between £1 and £2 (Rose, 2013). While the local Londoner may not be comfortable with such prices, the abundance of tourists makes sure that the coffee is bought, and the money they leave trickles down to the city’s dwellers. Even with the dipping of most European economies, the United Kingdom included, tourism in London has continued to thrive over the years. The sector was mildly affected by the economic crisis and has recovered significantly (London Tourism Review, 2014). The number of tourists visiting London has steadily improved, and so has the tourist expenditure. It is this exponential growth that motivates this study, where an analysis of the dynamics behind the growth of the tourism industry and impact of such growth towards the economy is done to establish the role played by the tourism sector towards the growth of the economy of London, and the UK.

3.3 Brief Overview of Research Methodology

The research used secondary data collected through both quantitative and qualitative research. Qualitative research mainly deals with investigative studies.  Through this kind of research, the researcher acquires the ability to get an understanding with regards to certain happenings, opinions, and incentives. It helps in revealing more detail into the problem in as much as it helps to come up with ideas for prospective quantitative research. Qualitative research is also used to expand the problem more to get a deeper understanding (Bogdan and Taylor, 1990). Quantitative research is a statistical research method. It is used to enumerate the problem through using numerical data. Quantitative research is mostly used to compute approaches taken by different groups of people, views, conducts, and other variables (Lisa, 2008). It is mainly distinguished from qualitative data through the use of measurable data to come up with facts and discover patterns in research. The methods entailed in qualitative data collection are mostly structured. They include methods such as online surveys, paper surveys, telephone interviews, longitudinal studies, website interceptors, online polls, and systematic observations among others (Wyse, 2011).

3.4 Data Collection, Method & Procedure

The research study aimed at covering a sample of different tourists in London. Statistics on numbers of tourists visiting London, vis-à-vis their expenditure were obtained from reports, peer- reviewed journals, and other relevant publications. These were obtained from online databases through Google Search. The keywords/ phrases ‘UK tourism’, ‘global financial crisis and UK tourism’, ‘UK tourist attractions’, ‘tourists’ expenditures UK’, were used to identify appropriate sources. Sources that contained data on the effect of the 2008 financial crisis on UK tourism, UK tourism, UK tourists’ expenditures, and UK tourist attractions, were chosen for analysis.  The collected data provided insight into the correlation between tourism in London and the economy, the average London tourist who visits traditional landmarks and iconic places of London, spending trends of these tourists cumulatively, and the impact of the 2008 financial crisis on UK tourism.

3.5 Data Analysis

This study adopted a combined explanatory, exploratory and descriptive data analysis. Exploratory research involves the exploration of new phenomena that may be helpful to the researcher’s desire for better understanding and summarizing it, mostly using visual aids, to gain insight (David 2004, p. 20). Exploratory research is broadly focused. The main setback of this form of research is that definite answers are rarely provided especially in the clinical field of study. The principal purpose of exploratory research is to identify major issues and variables (Millman 2010, p. 64). Descriptive research, on the other hand, seeks to provide an accurate description of observations of phenomena. Thus, descriptive analysis research maps the terrain of a particular phenomenon by giving summative descriptions of samples and measures. Finally, explanatory research method entails the method of research that seeks for explanations for the nature of unique relationships. Among the processes involved, hypothesis testing provides for an understanding of the relationships that are there between variables. Explanatory data analysis explains trends and causes of occurrences, especially those that are not well known. Among the three research methods, relations between variables are which determines the most appropriate method to apply (Dairl2004, p. 56).

4.0 Results and Discussion

4.1 Attraction Sites in London

In 2011 London recorded more than 37 million tourists in the city’s key attraction sites (CIC, 2013). The numbers of tourists visiting these sites are staggering and reports suggest an increase in these numbers as years pass by. It can then be almost guaranteed that every tourist who visits London will at some point be visiting an attraction site within London and that will mean spending money. The major attraction sites by visitation data will be highlighted in this report as well as the expenditure on visiting them. However, the data on expenditure and visitor numbers may not be very accurate since some privately owned attraction sites often do not publish commercially sensitive data while a couple of government owned attraction sites have free entrance yet could have the potential to make revenue e.g. through sale of souvenirs (Kyte S., 2012).

Figure 1: Visitor trends to London’s attractions. Adapted from the London Tourism Review (2014). Free attractions record the highest number of visitors

4.1.1 The London Eye

The London eye is a giant Ferris wheel on the bank of River Thames. The entire structure has a total height of 443 feet, with the wheels diameter being approximately 394 feet. It is currently Europe’s tallest Ferris wheel (Mann, 2001). It has been considered as the United Kingdom’s most popular paid tourist attraction with over 3.75 million visitors annually (O’Ceallaigh, 2014). A ticket to ride a single revolution in the capsule together with other visitors costs £19.95 if bought at the venue. A discount of 10 percent is however available if the ticket is bought online. Children between 5 and 15 years old are charged £14 while those below 4 years can ride it for free. Senior citizens are however charged £16.50 for the ride (Rose, 2013).

According to O’Ceallaigh (2014), a visitor-or a group of visitors- may be allowed to charter one capsule for an exclusive ride. However, such an arrangement can only accommodate a minimum of three and a maximum of 25 persons, the cost for which will be £500 per ride, regardless of the number of people inside. There are many other arrangements available however, from chocolate and wine tasting rides, to hour-long executive dinners, all of which range from a low of £35.04 to a high of £5,000. The average tourists, however, may not be so into the unique packages. The average adult tourist could spend £19.95 (O’Ceallaigh, 2014). The boarding process and the ride itself take a total of averagely one hour.

4.1.2 Museums

London has plenty of amazing museums that collectively attract more visitors than any other venues in England. The good news is that most of these museums have free entry policies with their funding coming from the government. However, some costs may be incurred nonetheless. The British Museum is the grandest of them all and a must visit. It contains a collection of more than 8 million works from every continent in the planet highlighting the story and development of human culture from the beginning to the present (Marjorie, 2002). Other free museums in London include the Victoria and Albert Museum, the National Gallery, the Imperial War Museum and the Natural History Museum. Even though it doesn’t cost anything to visit these museums, common practice has been that tourists will engage a local guide to take them through these free venues. The guides are often tipped £10. The price is not set but only practiced as a custom.

4.1.3 The Buckingham Palace and the Tower of London

These two buildings are the most popular palaces in the United Kingdom. Buckingham Palace is the residence and principle workplace of the reigning monarch of the United Kingdom (Edma, 1997). It is one of the only few working royal palaces in the world. A ticket for an adult tour in the palace costs £20.50. Children under 17 years will be charged £11.80 while children under 5 years will not be charged (Rose, 2013).

The Tower of London, also known as Her Majesty’s Royal Palace and Fortress is a historic castle on the banks on the River Thames. The Crown Jewels have been on display in the palace since the 17th century and have served to attract much tourism attention (Parnell, 2009). Ticket prices for an adult would cost £22.00 while children under 17 years will be charged £10.00. Children under 5 years of age will not be charged but will have to be accompanied by an adult. Persons with disabilities and senior citizens are charged £18.70. If the tickets are purchased online, the price could cost less by up to £1. A family of five, two adults and three children will be charged £60.70 (Rose, 2013).

4.1.4 Westminster Abbey and St Paul’s Cathedral

These two buildings are among the most noticeable religious buildings in the United Kingdom and are among the cities major tourist attractions. St Paul’s Cathedral charges £18.00 for adults and £15.50 if bought online (Susan & James, 2015). Senior citizens and persons with disabilities are charged £16.00 or £13.50 if the ticket if bought online. Children between 6 and 17 years are charged either £8.00 or £7.00 depending on the mode of purchase. Children under 6 are not charged (Bradely & Pevsner, 2013).

Westminster Abbey charges £20.00 for adults, £17.00 for children between 6 and 17 year of age, while those under 5 will not be charged. A family of four will be charged £45.00 while that of three will be charged £40.00 (Trowles, 2013).

4.2 Accommodation

Not all of London’s tourists incur accommodation costs. Some arrive in the mornings, visit places and leave before nightfall (Tourism Alliance, 2014). Others spend at friends’ or relatives’, while others have unique arrangements. Nonetheless, many do have to spend in a hotel and this forms a very significant part of their overall expenditure.

London has many hotels throughout the city which keep the prices low. But the prices are not very cheap as compared to other cities. There are nonetheless various categories which tourists can pick from depending on their budgets. Due to this fact, it is difficult to estimate the average accommodation expense that a tourist will incur. While attraction sites offer more regular pricing with little variation to social status, the accommodation industry have a very wide range. The prices also tend to vary depending on the season, and even day of the week, with weekends being more costly than weekdays. However, reports show that economy class tourists take up most of the accommodation options in London (see Table1 below).

4.2.1 Hostels

Hostels typically have between one to ten beds per hostel and there is a wide variety to choose from. Modern designs incorporate privacy and pricing with some dorms separated by curtains, and some by stone wall. Prices typically range between £10 and £20 per bed. The high end hostels with private rooms may cost upwards to £80.

4.2.2 Hotels

Budget hotels offer typical hotel accommodation with varying standards of services subject to costs. However, most of these hotels relocated outside the city with the furthest being relatively cheaper than the closer ones. The prices range from £50 to £150 (Simon, 2011).

4.2.3 Apartments and high end hotels

High end hotels and rental apartments that target the wealthy tourists are located closer and even often within the city. They offer luxurious accommodation, food and services. Rental apartments have kitchens which allow the occupier to prepare their own food, giving them more options. These hotels and apartments will typically range from £130 upwards (Ibrahim, 2014).

Table 1: Breakdown of Tourist Accommodation Statistics

BREAKDOWN OF TOURIST ACCOMMODATION
ROOMS HOTELS
TOTAL Rooms TOTAL Hotels
Economy 26,282 23% 449 37%
Midscale 11,236 10% 117 10%
Upper midscale 13,321 11% 132 11%
Upscale 33,576 29% 289 24%
Upper upscale 20,488 18% 149 12%
Luxury class 11,869 10% 82 7%
Total 116,772 1,218
Source: STR Global London Survey, July 2013

4.3 Transportation

The London Underground is the most popular transportation network in London. It is a meshwork of rails that run under the city that will connect passengers to most parts of the city. However, cash or credit card payments for tourists at every public transportation means may incur more costs and sometimes complications. Tourists are often advised to purchase a TravelCard or an Oyster Card (Rose, 2013). Single travel tickets bought for cash can be priced up to £4.80. Using the cards, the price could average £2.30. The cards can be purchased for a single day, or a number of days up to 365 days. The cards would cost between £10 and £17 per day for full travel within London (Budget your Trip, 2016)

4.4 Food

Most hotels and hostels offer bed and breakfast options thus the visitor will not be expected to spend extra cash on breakfast.  However, for the visitor who seeks breakfast in a café, the cost of standard traditional English breakfast will cost between £4 and £8 (Budget your Trip, 2016). For the affordable but less exciting options, the visitor can buy a takeaway snack from bakeries or grocery stores for between £5 and £7. A fast food restaurant would charge between £7 and £9 for an average meal, say French fries and sausage. For a proper meal in a local restaurant or café, a visitor could pay between £10 and £15 for lunch (Budget your Trip, 2016). A full course meal at a local non-tourist restaurant could cost between £12 and £18. These restaurants are common and should be easily accessible to any tourist.

The cost of food is highly significant. As shown in figure 2 below, visitors to London spend most of their time eating in restaurants. This shows the significance of this service industry in generating revenue.

Figure 2: Activities undertaken by tourists during their visits to London. Adapted from Visit Britain (Overseas visitors to Britain: Understanding trends, attitudes and characteristics – Sep, 2010)

4.5 Breakdown for the Average Tourist Expenditure

Table 2 below shows estimates of the total average expenditure for a tourist. However, the considerations exclude costs of travel to London. This is due to the different dynamics involved in calculating that cost. For instance, a domestic tourist may travel for less than an overseas tourist, but slightly higher or lower from another domestic tourist depending on where they travelled from within the United Kingdom. The table is based on the assumption that a tourist spends three nights and visits almost each of the venues above on the 2 days they spend in the city.  The table is also based on the estimates for a family of four touring London, with two adults and two children aged between 6 and 17 years.

 

Table 2: Breakdown for the Average Tourist Expenditure

FINAL BREAKDOWN
ECONOMY MIDSCALE UPPER SCALE
Family Individual Family Individual Family Individual
TOURIST ATTRACTIONS London Eye 67.9 19.95 67.9 19.95 67.9 35.04
Free attraction sites (Tour Guide Tips) 10 10 10 10 10 10
Buckingham Palace 64.6 20.5 64.6 20.5 64.6 20.5
Tower of London 60.7 22 60.7 22 60.7 22
St. Paul’s Cathedral 52 18 52 18 52 18
Westminster Abbey 45 20 45 20 45 20
SUB TOTAL 300.2 110.45 300.2 110.45 300.2 125.54
Accommodation (3nights) 120 60 300 150 450 300
SUB TOTAL 120 60 300 150 450 300
Transportation (2days) 136 34 136 34 136 34
SUB TOTAL 136 34 136 34 136 34
MEALS Lunch (2 Days) 40 10 80 24 80 30
Dinner (2 Days) 80 24 80 30 164 36
SUB TOTAL 120 34 160 54 244 66
TOTAL 678.2 238.45 896.2 348.45 1130.2 542.54

Source: GPA Economics, 2011

4.6 Tourism Dynamics in London

Overseas expenditure has been on an upward trend in recent years, resulting in an increase of £3.2 billion since 2010 (Tourism Alliance, 2014). In 2013, overseas visitors spent over three times as many nights as their domestic counterparts. This is a trend that has been consistent in London over the last five years. The average amount spent per person in a visit to London increased by £19 to £843 in 2013 (London Tourism Review, 2014). This reflects an increase of £82 over the last five years. On a day-to-day basis, overseas visitors spend approximately £15 per day more than their domestic counterparts. This leads to the conclusion that despite domestic visits accounting for 42% of all visits to London, overseas visits still remain to be more valuable, with a higher average length of stay, and a higher average spend per visit, as explained by the table below.

Table 3: London Overseas Visits, Nights and Expenditure, 2010-2013

2010 2011 2012 2013
Visits (millions)  14.71 15.29 15.46 16.08
Nights (millions)  90.3 91.5 94.3 97.4
Expenditure (£ billion)  8.74 9.41 10.08 11.26

Source: Office for National Statistics, International Passenger Survey 2003-2013.

London also has an extensive appeal to certain age groups. In 2013, approximately 50% of all overseas tourists to London were aged between 25 and 24 (London Tourism Review, 2014). Ages between 35 and 54 accounted for approximately 40% of domestic visitors. This indicates that domestic tourists are more likely to be older than their overseas counterparts. Tourists above the age of 65 accounted for only 11% of all domestic visitors and 5% of overseas visitors. The chart below shall attempt to describe this trend.

4.6.1 Domestic and Overseas Tourists Age Profile, 2013

Figure 3: Visitors to London by Age Groups

Source: Office for National Statistics, International Passenger Survey 2013; Visit England, Great British Tourism Survey 2013

Majority of London’s visitors are aged between 25 and 54 years (Fig. 3). Tourists visit London for a conglomerate of reasons. Two major reasons stand out; holiday visits and business visits. Since 2008, the volume of visits has been on an upper trend, this is largely attributed to the increasing volume of leisure visits which include those classified as visiting friends and relatives. The international holiday segment of London’s tourists has significantly grown since 2008 with tourists’ numbers increasing by up to 30% and expenditure increasing by up to 72% (Kevin, 2013). London’s overseas visits consistently climax in the third quarter of the year, which is in the months of July, August and September (CIC, 2013). Conversely they are at their lowest in the first quarter of the year, which are the months of January, February and March.

Domestic tourists make up a significant percentage of tourists spending nights in London. They, however, tend to stay shorter periods of time compared to their international counterparts (London Tourism Review, 2014). Accommodation is the biggest item of expenditure for domestic tourists, accounting for approximately £2.5 billion (Buccellato, 2010). As shown in figure 4 below, majority of visitors to London are foreign, with business visitors forming a valuable segment of that. Inbound tourists are the most valuable since they spend much more than domestic tourists (Tourism Alliance, 2014).Domestic visitors also spend significantly on entertainment, and a far smaller amount on shopping, a phenomenon partly attributed to the fact that there is no price advantage to domestic tourists shopping in London. They shop from their points of departure and come fully prepared.

tourism in london statistics
Figure 4: Categories of London’s visitors. Adapted from the London Tourism Review 2014

4.7 The Economic Contribution of Tourism

Tourism has been contributing significantly to the UK GDP (Fig. 5). According to Deloitte (2013), the tourism industry created 3.1 jobs in the UK in 2013 in addition to pumping £113 billion to the economy in terms of tourist spending. In 2014, tourism contributed 3.5% (£1.9 billion) directly to the UK’s GDP and a total of £187.7 billion (10.5%) when indirect contributions were considered (WTTC, 2015). A direct contribution of 1.893 million jobs, an equivalent of 5.7% of the total employment for that year was also reported. The total contribution of the tourism industry to employment was estimated to be 4.228 million jobs (12.7%).

tourism in london
Figure 5: The economic contribution of tourism to the UK GDP

4.8 Effects of the 2007 Economic Crisis on UK Tourism

The tourism sector is a critical component of the UK economy since it accounts for up to 4 % of Gross Value Added -GVA (Hodson & Mabbett, 2009). The 2008 economic crisis affected the tourism sector adversely. During the crisis, household consumptions both locally and overseas reduced. The increase in unemployment rates and tight credit conditions reduced the disposable incomes of individuals (Diamond, 2004). Business expenditure reduced greatly reducing tourism expenditure since business tourism is a major component of modern tourism. Many firms sought to reduce their cash flow and operational costs leading to reduced travel budgets. Additionally, the threat of retrenchment and laying off of workers made in necessary for people to preserve their income (Wilks, 2013). It should be understood that the net effect of spending in the tourism sector is reliant on the disposable income of individuals. Therefore, the weakened economic conditions, especially between 2007and 2011, reduced disposable incomes hence ensuring that the spending on tourism was minimal (Fig. 5). Observation based on staycation effect shows that tourism in the UK was cheaper for foreigners owing to the weakening of the currency rate (Radzi, 2012). Depreciation on the value of the sterling pound in the UK meant that local tourism was cheaper while outbound tourism more expensive.

tourism in london statistics
Figure 6: Effects of the 2007 Economic Crisis on major UK economic sectors

From the figure 6 above, it is evident that business tourism was the most adversely affected. As explained earlier, business expenditure reduced greatly reducing tourism expenditure since business tourism is a major component of modern tourism. Many firms sought to reduce their cash flow and operational costs leading to reduced travel budgets. Additionally, the threat of retrenchment and laying off of workers made it necessary for people to preserve their earned income (Wilks, 2013).

During the recession, domestic visits to London stagnated. The same happened with domestic tourism expenditure which remained at about £2.8 billion between 2008 and 2013 (London Tourism Review, 2014). Additionally, the number of domestic visitors who spent nights in London reduced during the recession and improved after that (Fig. 7).

tourism in london
Figure 7: Trends in domestic visits to London and expenditure between 2008- 2013. Adapted from the London Tourism Review 2014

These statistics, however, differ from those reported by the Tourism Alliance (2014) as shown in figure 8. Despite that, there is evidence of reduced tourist visists and expenditure during the global recession period.

tourism in london statistics
Figure 8: Trends in domestic visits to London and expenditure between 2007- 2013. Adapted from the Tourism Alliance’s Report on UK tourism statistics 2014

5.0 Conclusion and Recommendations

5.1 Conclusion

As noted above, tourism in London contributes either through direct industry or through tourist economy, the difference being that the former is made of income made from visitor spending and tourism economy-related government spending. The latter comprises direct industry as well as private and government investments in the tourism sector. The tourism industry contributes greatly towards the economic growth of London, and the UK in general. The tourism sector has given rise to products that support various linear sectors of the economy. The table below explains this:

Table 5: Products and their Corresponding Industries

Products Industries
  1. Sports and recreational activities
Entertainment Industry
  1. Road passenger transport services
Transport Industry
  1. Accommodation services for visitors
Housing Industry
  1. Travel agencies and other reservation services
Tour and Travel Industry
  1. Food and beverage serving activities
Hotel Industry

Source: European Economic Forecast, 2011

The London tourism industry led to the creation of approximately 226,000 jobs in 2004 (Tourism Alliance, 2014). The most striking statistic however is the difference between spends from different visitor types. For instance, while in 2010 international spending in London stood at £8.7 billion, domestic spend lagged behind at £2.5 billion. Some of the distinct advantages of tourism in relation to the economy as noted by the study are:

  • Creation of job opportunities
  • High tax revenue
  • Increased supply of money

5.2 Recommendations

To be able to sustain and grow the tourism industry in London, several recommendations as listed below may be adopted;

  1. The Government and the Tourism and Hospitality Sector need to create a partnership with a view to ensuring adequate consideration is give to tourists
  2. Both the Government and the Tourism and Hospitality Sector need to engage in active promotion of tourism to ensure that London continues to thrive as a popular tourist destination.
  3. Both the Government and the Tourism and Hospitality sector should participate more towards the improvement of infrastructure so as to ensure ease in terms of transport, security and other amenities that promote tourist confidence.
  4. The Government and all other relevant stakeholders need to participate more in the preservation of culture and heritage, which are two of the most attractive aspects in the tourism sector.

5.3 Reflection

In the current global world, several nations around the world are striving to position themselves as suitable destinations for tourism and investment. The reason for this is that an influx of visitors boosts a country’s economy; jobs are created, foreign investment is realized, and foreign currency is brought into a nation. In this study, I researched on tourism in the UK, with special emphasis on the most popular destination in the UK- London. My aim was to identify the average expenditure of London tourists and the impact of the 2007 global financial crisis on London tourism. To start with, I noted that the United Kingdom has been a major beneficiary of tourism. Of all the destinations in the UK, London city has reaped the largest benefits. London has numerous tourist attractions ranging from museums, theatres, historic sites, etc.

Visitors to London can largely be categorized into two broad groups, namely; business and leisure tourists, based on their reason for visiting the city. They can also be grouped as domestic and international tourists based on their origin. Domestic tourists are those visitors that travel from other parts of the UK to London. On the other hand, international tourists are inbound visitors from foreign nations. Compared to domestic tourism, inbound tourism has a greater contribution to the London micro-economy. This is because international tourists tend to spend more, incurring expenses on accommodation, food, transport, entertainment, etc. While domestic tourism is also significant, a good number of domestic tourists are daytime visitors who forego accommodation expenses leading to reduced contribution.

Globalization has made it easy to conduct international business. This is because of the existence of cheap, fast, and, overall, convenient means of transport and communication. For this reason, new business trends are emerging within the global business sphere. People are finding travelling to meet clients and business partners more convenient than conducting business on phone or via the internet. This shift in preference to face to face business meeting has led to the emergence of business tourism. Traditionally, leisure tourism has been the focus of many strategists in the tourism sector. However, with the emergence of such new trends, there is a need for tourism sectors around the world to restructure. This is especially important for London which receives numerous business tourists annually. Perhaps, local travel agencies and the UK government should focus on marketing London both as a leisure and business destination. This would not only increase revenues from tourism but also increase foreign direct investment.

Finally, it is important to note that, being in a global world, the UK economy is not immune to disturbances in other world economies. The recent global financial crisis adversely affected the UK tourism industry. Notable effects were a reduction in both business and leisure tourism. Hotels were caught off-guard and recorded reduced occupancy as well as reduced profits. It is important that the tourism industry keeps track of economic performance in future in order to identify cues of financial strain in the market. Additionally, the sector needs to come up with strategies for surviving such periods, for example, by offering subsidized travel packages to sustain tourist numbers. In concluding, I noticed that despite the good performance of the tourism industry over the recent years, the UK government has not taken note of its importance in contributing to the GDP. Other sectors like manufacturing continue to be given a priority. Perhaps it is time for the government to take advantage of the opportunities presented by tourism in order to diversify its economy.

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