There’s been a great deal of discussion about VAT rising to 20% in recent weeks, with all business sectors analysing what it means for them and how far their customers will be affected. For the travel industry, however, VAT is not a chief cause for concern. Holidaymakers planning their summer beach holiday don’t have to worry about paying more for their package holiday, according to ABTA, who is reminding travellers that the VAT hike does not apply to the total cost of an overseas package holiday.
ABTA states that tour operators’ profit margins are subject to VAT but the rise will represent a tiny, if any, increase in cost to consumers.

 

What’s more, although many people assume that there is VAT on flights and foreign holidays and therefore that the price of tours will go up, the truth is that the rise will have virtually no impact on trips abroad. The price of package holidays outside the UK to far flung destinations will not rise, although there will be some impact on domestic holidays as many hotels will pass on the full increase.

However, many customers taking UK holidays choose accommodation provided by small companies or individuals who do not pay VAT, so they will not be affected by the increase. That said, there are other taxes at play in this industry which are set to have more of an impact on travellers.

In November 2010, Air Passenger Duty (APD) rose for the third time in three years, in some cases by as much as 50%, adding up to £100 to the cost of a family holiday. A number of travel operators, including Virgin Atlantic and Thomas Cook, have criticised the increase, saying it will make family holidays "unaffordable for many".

The costs of travelling can often be intimidating for families, who see it as purely the start of a long list of holiday expenses. The hike in APD will no doubt push travellers to consider looking for better value at home when considering travel plans. Travel sites can expect a big increase in consumers searching for hotels within the UK as passengers put off by the higher cost of flying opt for a ‘staycation’ in order to save money.

What arises from these issues is the need for travel companies to talk to their customers more and discuss how tax increases will or will not affect them, and what solutions are available. It’s understandable, given the hype and publicity surrounding VAT, that travellers are getting nervous, so it’s more important than ever that travel operators ensure they are communicating effectively with their customers in order to allay their fears.

Travel agents and operators alike should be giving clear, honest advice to their customers, for example highlighting that staycations may not always be the cheapest option, and making sure that people are not put off browsing for trips abroad because of rumours they’ve heard about VAT.

Consumers need education before they will buy; they need to know exactly what’s included in the price they’re paying and that they are making a good choice in booking with a company and not their competition. They need to be able to justify their purchase to themselves, so the more information they have the better.

Communicating the benefits of the holiday they’re buying is the first step, but to really seal the deal, operators need to explain the reasons why all these benefits are possible when using their products or service. This will add to the credibility of their offer and make it significantly more appealing to prospective customers.

The key for travel businesses is to be both visible and inspiring to audiences. Holidays are a hugely important part of consumers’ lives, and are likely to be one of the few ‘big’ purchases they’ll make this year. Holidaymakers are going to be shopping around even more than ever, spending more time on comparison sites and trawling through websites looking for the best value deal. Companies need to be visible online by employing sophisticated search marketing and if appropriate on the high street, as well as in press. And when they reach the consumer, make sure what they’re saying is enthusiastic, accurate and informative.

A 360 approach to marketing, driving consumers from awareness through to consideration and loyalty, is more key than ever, and travel firms must ensure they are giving customers all the tools and information they need to choose their business.

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