The total value of tourism to the UK could rise by more than 60% to £188b over the next decade - as long as the Government provides more support to the sector, according to a new report.
Research from professional services firm Deloitte and Oxford Economics forecasts that the favourable exchange rate, the lure of the 2012 Olympics and the appeal of UK tourist attractions should ensure the sector grows at an above-average 3.5% per annum between now and 2020.
It says spending by overseas visitors will almost double, from £16b now to £31b in 2020, making tourism the UK's fifth-largest industry and third-largest foreign exchange earner.
The report, commissioned by tourist agency VisitBritain, also predicts that the number of jobs supported by tourism over that period will rise by 264,000 - from 2.63 million now to 2.89 million.
However, the report warns that Government intervention will be the "key" to any success because a range of market failures need to be tackled.
These include co-ordinating marketing to help small and medium-sized tourist businesses that cannot afford to do it themselves, enabling rural firms who face higher costs of operating to adopt innovative technology, and supporting the many districts across the UK that rely disproportionately on tourism as an important source of jobs for low-skilled and part-time workers.
Christopher Rodrigues, chairman of VisitBritain, said the report was "enormously encouraging".
"It demonstrates that the industry has the power to deliver a huge amount of extra wealth and jobs to Britain in the coming decade," he said.
"This makes it clear that tourism is going to be central to the health of the British economy for years to come. The continuing low level of the pound and the approaching Olympics in 2012 give us a tremendous opportunity to promote Britain's attractiveness as a destination to the rest of the world."
Marcus Simmons, managing director at iknow-uk, the tourism and accommodation directory, said the figures were "great news" for the UK tourism industry but warned that operators could not expect the business to "just drop into our lap".
"Companies in the sector need to be pulling together to ensure maximum impact, and to enable us to show the rest of the world just how great Britain is as a holiday destination," he said.
"I also believe that the Government should look at the ways in which the tourism industry is funded, perhaps by looking at ways that private businesses can support tourist boards in their activity. UK tourist boards are currently heavily subsidised, and by empowering private companies we could see the need for this financial support cut, without damaging the potential of the industry."
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By Daniel Thomas
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