Special Report: Consumers are booking early and spending more

Special Report: Consumers are booking early and spending more

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Uncertainty about the economy, terrorism and the EU has not dented consumers’ confidence. Ian Taylor reports on the latest First Rate Holiday Confidence Index

Consumers show no sign of shying away from overseas travel despite concerns about the economy, uncertainty about Britain remaining in the EU and the pound being worth less against the euro and dollar than a year ago.

The latest First Rate Holiday Confidence Index, published on Wednesday, showed demand for travel stable year on year and holidaymakers ready to increase their spending.

The index, a composite of six measures based on a survey in March of 5,000-plus UK consumers, shows no change on 12 months ago or on winter 2015. The results led First Rate to note: “Encouraging stability in consumers’ appetite for overseas travel despite the weaker pound, the threat posed by terrorist attacks and a sharp fall in confidence about the UK economy.”

The industry should be encouraged as last year saw the strongest demand for summer holidays since 2008, with the Office for National Statistics reporting a 9% increase in overseas holidays year on year.

Economy concerns

The First Rate survey found a 17-point swing from positive to negative in confidence in the economy on a year ago, with a 10-point increase to 29% in those believing the economy would not improve in the next 12 months. Yet more than half of respondents (56%) said they still intend to take a holiday abroad in the coming year – on a par with a year ago and up one point on winter 2015. Half  of these respondents (52%) had already booked a trip.

At the same time, First Rate’s three holiday-spending measures were up on or level with the past two surveys. Its Cost of Booking index was up one point on the last two surveys, and its Travel Money (the amount taken on holiday) and Destination Spending indices were each up one point on winter 2015 and level with a year ago.

The overall confidence index is compiled from six indices reflecting holiday intention, frequency and duration as well as spending.

More than four out of five respondents (82%) who took an overseas holiday last year said they would do so again this year. At the same time, 27% of those who did not travel abroad in the past year intend to do so in the coming year, up from 24% last October.

Consumers confident

First Rate noted: “Consumers who intend to take holidays abroad remain much more upbeat about the economy and their personal finances than those not planning trips.”

It found one-quarter (25%) of respondents felt their own finances would improve in the next 12 months despite the overall economic uncertainty, 42% felt their job to be secure and 61% felt confident of meeting their financial obligations.

Alistair Rennie, First Rate Exchange Services head of innovation and insight, described the results as “very positive”.

He said consumers’ economic confidence was “the lowest we’ve seen” since the index launched in 2013, but added: “It has not seeped into people’s confidence in their personal finances, and people’s belief that they can meet their financial obligations has improved.”

More than half the respondents said they would be travelling abroad. The survey found 62% expressed concern about terrorism, but First Rate noted: “They have not let this dissuade them from travelling.”

Rennie said: “You would think the weaker pound may have dented demand for Europe. But events in Tunisia, Turkey and Egypt have balanced the sterling impact. People either plan to spend more or about the same as last year.”

He said the rise in the number of holidaymakers who have already booked was also “encouraging”, saying: “Perhaps it’s an indicator that the ‘book early’ message is getting through.”

The First Rate Spring 2016 Holiday Confidence Index surveyed 5,155 UK adults in March, and is produced in conjunction with the Institute of Travel & Tourism, University of Wolverhampton and YouGov. The report is available from holidayconfidenceindex@firstrate.co.uk

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