by Mike Saul, Head of Hospitality and Leisure at Barclays Corporate
The past year has taken its toll on consumer confidence.
Against a background of economic turbulence across Europe as well as the UK, with the euro falling to a nine month low and unemployment rising to its highest level in almost two decades, the 3% drop in outbound travel figures, released last week, offers little festive cheer.
This decline highlights the extent to which wider economic issues have filtered through to the travel industry and the challenging environment in which the sector has had to operate.
Looking back over the past 12 months no one could have foreseen the issues the industry would have to face.
From the political fallout in the Middle East and North Africa to fears of a collapse of the single market currency, the industry has had to pull out all the stops to keep consumers travelling.
This has been far from easy with discretionary spend being measured against rising utility prices, low wage growth, and until recently, rising inflation.
Clearly, last week’s Office for National Statistics figures are far from the early Christmas present the industry was hoping to look forward to, but there are still some positives.
Consumers have consistently demonstrated their desire to travel. Few are willing to forego their annual break; instead, we have seen a shift in the types of holidays sought as consumers and providers strive to find suitable and viable alternatives.
Staycations are rising in popularity, and holiday villages are benefiting from this revival. All-inclusive packages, once the preserve of a few, are gaining traction given the cost certainty that they can offer.
The popularity of these offerings will continue to gather momentum as we head into 2012.
The failures and profit warnings seen over the past 12 months have served as a strong reminder to many travellers of the benefit of booking packages via Atol and Abta-protected agencies.
While the Atol scheme’s future model has yet to be clarified, we may find increasing numbers of travellers, particularly families, choosing to protect themselves and their holidays by booking through such protected firms, where any additional cost will outweigh the inherent risk of going it alone.
As consumers seek such certainty, operators will similarly be looking for ways in which to protect themselves.
There’s no predicting what 2012 will throw our way. If Iran’s threats to close the Strait of Hormuz materialise, we are likely to see oil prices rise rapidly, and if the euro continues to fall then managing forex rates effectively will be more important than ever.
Clearly there is no crystal ball, but fixing variable costs now will ensure that businesses have some certainty at an uncertain time.
2011 has been tough across the industry for consumers and corporates alike.
Just as consumers will be looking to rein in spend where they can, those operators that are able to manage their financials confidently and adapt their offerings to meet changing trends will stand in good stead to navigate whatever the New Year throws our way.
Such active engagement has seen the industry through many peaks and troughs and will continue to serve us well, and that at least should offer some festive cheer.
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