The industry has been warned to expect another flat year in 2013 with a growing disparity between consumer spending in the north and south of the country linked to employment.
Deloitte travel, tourism and leisure partner Graham Pickett told delegates at Travel Weekly’s Business Breakfast that economic growth would be flat next year and up to 2% up “at best” over the next three years.
“We have got 2% growth in the world economy, and the UK is in recession. The outlook is frankly difficult. The biggest issue I see is uncertainty,” he admitted.
One of the biggest factors to impact the UK economy will be the handling of the euro zone’s financial crisis, with scenarios ranging from a “euro meltdown” to no change or “everyone getting on a level pegging”, he said.
Pickett highlighted the north-south divide, coupled with whether consumers had a job or not, as the most significant factor in terms of how much UK consumers will spend next year.
He said: “From what we are seeing from our surveys, there is a two-track economy; those with a job and those without a job. There is a disparity between the north and the south and whether you are in a job or not.
“If you have got property and a job, the spending pattern has not really changed. If you are living in Manchester and do not have a job, the whole idea of a holiday is a dream.”
Pickett was optimistic consumers with jobs would take a holiday next year, but the trend of paying for it later will continue, he said. “People will be discerning about how they spend their money. I think they will take a holiday if they have a job but they will pay later.”
Consumers had already traded down from two to three weeks’ annual holiday in five-star resorts to “more modest” holidays this year, which has hurt the longhaul sector. Shorthaul holidays to Europe have also benefited from the exchange rate which meant the euro was “relatively cheap” in comparison with an “expensive” US dollar.
Pickett added: “If you look at the customers, they are very pessimistic about how they are going to spend money. Household debt is high, although it’s come down a bit. They are having a holiday but they are delaying paying for it. Inflation has come down and that may be something that will push the consumer to spend. Unemployment is also coming down.”
Travel companies which have flexibility to switch product to meet demand and have little commitment were best-placed to do well in the current climate. “Others who do not got their market share right in the holiday sector will find it difficult,” he added.