Barclays Forum: Deloitte warns of increased pressure on consumer spend on travel

Barclays Forum: Deloitte warns of increased pressure on consumer spend on travel

Deloitte has seen a first significant fall in consumer spending sentiment on holidays in the five years it has been tracking the market, the Barclays Travel Forum was told yesterday.

Graham Pickett, senior partner at Deloitte, said despite the “surprising” downturn he remained optimistic about the prospects for the sector although he added there was “a degree of caution around”.

He told 300 travel delegates at the 13th annual forum that a change in the type of holidays people are looking to take looks set to impact spend on travel and predicted the lates market would be “quite challenging”.

“There will be a bit of extra capacity around and there will be deals,” he added. “That could be good, it could be bad. This industry is good at responding [to challenges] in fairly quick time. It’s not an industry that struggles with change.”

Addressing the UK economy, he said: “The UK is seeing an issue with a widening trade gap. We have a very nervous consumer now. When you start looking at the travel trade and the economy there are a number of factors that are beginning to cause some concern for the consumer.

“Personal debt is definitely up. On house prices, the feel good factor at home has been around for some time, but that’s now easing and we have considerably higher costs from inflation in terms of utilities.

“We are seeing a lot of challenges in the retail sector, in licenced premises and restaurants. There is a lot of pressure there because the consumer is not spending as they did.”

Pickett said while global GDPR forecasts are generally positive, the UK’s has been one of the countries to have been downgraded and he said there were a few worrying signs in the global economy.

He said with 80% of GDPR growth forecast in emerging economies that had large US dollar debts those are economies are “having to run a little bit faster to repay those debts” due to the strengthening of the dollar.

“There is a nervousness in the market about whether these economies are going to be able to generate enough wealth to repay those debts,” Pickett said.

He added that inflation was also creeping back up as well as the prospect of interest rate rises, although he ruled out rate rise in the UK until the latter part of the year.

“There is a generation of consumers who have never experienced that,” he said. What does it mean for them? The European economy has been having quite a god time. GDP growth has been pretty good.

“However, there has been definitely a blip in the first quarter of 2018.I think it’s quite difficult to call.”

Political uncertainty in Germany and Italy is also causing uncertainty, added Pickett, who said Italians were now worse off than the Spanish raising the prospect of a backlash against the impact of the Euro.

He said the Euro is a currency with no consistent fiscal policy behind it and dictated by political disparities within the Eurozone which tends to see Germany getting stronger. The UK leaving Europe is, therefore, not seen as being a good thing among other members.

Oil prices are also set to rise due to the Iran crisis a renewed US sanctions look set to take a million barrels a day out of the market, and this after Opec “got its act together” and cut production meaning global stocks are low.

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