Chris Lee, head of travel and professional sports at Barclays Corporate Banking, takes a look at the first months of 2015 and what we might expect in the future
Overall, the year got off to a solid start for the industry amid positive signs that consumers are looking for the next opportunity to recharge their batteries.
Yet the opening days of 2015 were somewhat subdued. Many operators offering summer holidaysabroad reported a sluggish start to January. There was little snow at the start of the ski season, and when it did finally arrive, it fell heavily, leading to flight delays and resulting in emergency accommodation costs for providers.
However, things picked up after this initial wobble and, despite the uncertain economic outlook for the eurozone, our operator partners tell us they are feeling positive for the remainder of the period.
As the winter season draws to a close, we don’t anticipate a major slowdown in activity among operators.
We hear travellers are increasingly booking holidays on credit, rather than debit, cards. This could be an indication that, despite consumers having less cash for discretionary spending, they don’t want to miss out on the chance to get away.
Anecdotally, holiday durations appear to have fallen, suggesting that people are booking shorter trips as a way to ensure they get a break without blowing the budget.
However, it’s not all about escaping the UK. There are opportunities for businesses offering UK-based holidays, hospitality and leisure activities. Research commissioned by Barclays last year led to a forecast that by 2017 total expenditure by overseas and domestic tourists in the UK could exceed £135 billion.
Office for National Statistics (ONS) figures attest to this, suggesting the UK’s appeal as a destination has not suffered from the strength of sterling. Figures released in February showed that 2.5 million overseas visitors spent almost £2 billion in total here in December 2014 alone. Last year, there was a 7% increase in the number of visitors from Europe and a 6% rise in tourists overall, which chimes well with Barclays’ forecast that total annual spending by overseas tourists in the UK will grow by 34% to £27 billion by 2017.
But companies should not neglect the domestic market. Our research suggests domestic tourism expenditure will rise 25% to more than £108 billion by 2017. The staycation is still popular, and the markets for hotels, caravan parks and holiday lets remain buoyant.
All eyes on APD
As the election approaches, we expect Air Passenger Duty (APD) to remain a focus for the industry.
The government’s decision to devolve APD and other powers to Scotland and the Scottish National Party’s commitment to cut the tax by 50% have triggered debate on the impact of the changes on other parts of the UK.
With a review of proposals to devolve APD to Wales to come, it will be interesting to see how this develops.
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