UK retail spending figures have sent conflicting signals over the past few months – down year on year in December and January, but up in February.
Growth in the service sector, which accounts for 80% of the UK economy, hit a three-year high in March according to the latest Purchasing Managers’ Index (PMI) survey.
And a Bank of England survey found “restaurants, bars, hotels and tour operators reported fairly robust growth” despite an overall slowdown in retail sales in the first three months of the year.
There is no ambiguity about the latest outbound travel booking figures despite a weaker exchange rate and rising inflation.
Industry analyst GfK reported season-to-date bookings for summer 2017 up 6% to the end of February and revenue up 12% – that is with about 50% of bookings for the season now in.
Passenger bookings for the winter 2016-17 season now ending were up 12% and revenue up 15%, while bookings for next winter (2017-18) were 10% up year on year at the end of February.
GfK’s analysis of March bookings for these seasons should be available next week.
Outbound departure figures from the UK’s Office for National Statistics obviously lag the booking data, but give a wider view of the market and confirm the picture.
Provisional figures show holiday departures from the UK in 2016 up 6% on 2015, and 7% in the final quarter – with fourth quarter holiday spending up 15%.
The January numbers look just as strong, with holiday departures up 7% year on year in the month and 8% over the last three months.
Inbound numbers were more spectacular, presumably stimulated by the exchange rate, with visits to the UK on holiday up 19% year on year in January and 22% in the three months to January.
So inbound leisure travel has surged, certainly since last autumn, while outbound has maintained momentum despite a year-on-year fall in the pound’s value of about 18%.
Figures from Europe’s big two integrated travel groups confirm this picture of a sector continuing to defy fears of a downturn.
In its most recent trading update, TUI reported UK bookings for this winter up 12% on a year ago and summer 2017 bookings up 3%.
The increased bookings were matched by higher average selling prices for both seasons.
Tui’s average UK sales prices for this winter were up 7% year on year, raising TUI’s UK revenue by 20% on a year ago with 95% of the programme sold.
A slightly higher rise of 8% in average sales prices for this summer gave the group’s UK business an 11% increase in revenue for the season to March 19.
Tui noted its UK revenue and price performance for summer 2017 “reflects continued growth in long haul and cruise as well as the impact of currency inflation for euro-based destinations”.
The strong winter 2016-17 figures “reflect growth in long haul and UK cruise as well as higher demand for the Canaries, mainland Spain and Cape Verde . . . offset partly by lower demand for Turkey and Egypt.”
No other regions matched the revenue growth in the UK, with more than half (53%) of Tui’s UK summer 2017 programme sold.
Group-wide sales for this summer were up 4% and revenue up 9%, with group sales for the current winter up 5% and revenue 9%.
Chief executive Fritz Joussen made no mention of Brexit in his trading update, describing TUI’s position as “robust despite the impact of macroeconomic and geopolitical challenges in certain source markets and destinations”.
Thomas Cook’s latest update reflected its somewhat weaker position by comparison with Tui, but did not contradict the overall picture of surprisingly strong trading.
Chief executive Peter Fankhauser reported strong demand for Greece and “smaller European destinations”, including Portugal, Cyprus, Croatia and Bulgaria, had helped boost group summer bookings by 10%.
UK bookings for this summer were flat year on year to mid-March, but with average prices up 3% and ‘charter risk’ (package) prices up 9%.
Bookings for winter 2016-17 were up 6% year on year, but with average prices down 1% – compared with group-wide bookings up 1% and prices down 1%.
The UK price fall was chiefly due to seat-only sales which Cook reported as 5% down in average price against a 5% increase in average prices for ‘charter risk’ or packages.
Fankhauser explained: “Our focus in the UK remains on selling higher margin, quality holidays rather than pursuing volume growth amid a more competitive market to the Spanish Islands.”
Both Fankhauser and Joussen expressed confidence in fulfilling expectations for the remainder of the financial year, based on the continuing resilience of the UK market.
The question is can it continue indefinitely or will economic factors ultimately intrude?
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