Deloitte UK lead partner for travel Alastair Pritchard foresees solid demand for 2018
The UK travel and tourism sector has performed very well over the last 12 months despite numerous setbacks – Brexit, hurricanes, airlines collapsing, terrorism and so on.
Consumers have continued to have the confidence to travel. Airline association Iata reported global growth in air passengers of 7.9% in the first half of 2017, the highest since 2005.
Research by Kantar TNS for the Travel Weekly Insight Report 2017-18 found half of UK adults took at least one overseas holiday during 2017, four points up on 2016.
Clearly, the devaluation of sterling against the euro and the dollar had a big impact. It has been particularly positive for inbound travel.
We saw a record number of visitors to the UK. This August inbound visitors to the UK were up 5% on the previous August and visitors spent more while they were here. The domestic market also fared well, up 6%.
Looking ahead, we see the immediate future as fairly positive. Our Deloitte Leisure Consumer quarterly update forecast holiday demand would be flat year on year.
However, Kantar TNS data for the Insight Report suggests about half of UK consumers plan to travel abroad in 2018, three percentage points up year on year.
There are some trends within this. In London, we see consumers less likely to travel abroad on holiday next year, possibly linked to inflationary pressures and increased living costs.
Beach demand is forecast to be six points up next year on this. Families appear more likely to travel in the peak period next year than this, and fewer people plan to travel in late summer.
There are some clouds on the horizon. UK inflation is at its highest since 2012. We have seen the first interest rate rise for 10 years. We have relatively slow wage growth in the UK. Consumers are feeling the pressure.
We see the impact on consumer confidence in our Deloitte Consumer Tracker. The biggest loss of confidence is in disposable income, which is down 12 percentage points on a year ago.
But it’s not all bad news. People are postponing big discretionary purchases, but our research shows this is not around holidays, it’s around cars and eating out and entertainment.
The outlook is positive. The sector has become good at reassuring consumers and, despite the [multiple] terrorism events, there appears very little impact on people’s view as to whether they will travel next year.
Everything in the research suggests people will go on holiday, but they are starting to change habits.
The proportion [of UK consumers] planning a seven-night holiday overseas next year has risen four points, while demand for 14 nights is down three percentage points.
We see a growth in appetite for two and three-star hotels and continued strength of demand for all-inclusive holidays in the lower-income bracket.
The research found a seven-point increase year on year in holiday bookings made via mobile. But there is a still a disconnect between people researching on mobile and booking. That is probably driven by the complication of [booking] multiple elements and multiple apps.
The fall in sterling is clearly driving up costs and there is a perception that people want to go to a safe destination. That will push up prices. But demand overall should hold up as consumers prioritise spending on holidays over other categories of discretionary spending.
The mergers and acquisitions pipeline remains very strong in travel, and we expect some deals to complete in the first half of 2018.
But keep an eye on consumer trends as people’s ability to spend can change quite rapidly, and it’s important the industry gets confirmation that aircraft and people can continue to move freely into and out of the EU from Britain.
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