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Deloitte says it expects consumer confidence to rebound in the previous quarter following an unexpected dip in the last quarter of 2013.

Addressing travel industry delegates at an Abta Travel Tax Briefing in London yesterday, Alistair Pritchard, industry lead travel and tourism, described last year’s setback as a “short-term blip”.

He said consumer confidence, which is vital for the travel sector due to its reliance on disposable income, had been showing gradual improvement.

“While consumers are finding that their economic circumstances are improving there are still some headwinds that people face.

“However, with an accelerating economy, that should bolster consumer incomes. We expect some positive lift in confidence this year and next quarter results should show some improvement.”

The Deloitte consumer confidence tracker remains in the negative, meaning overall more people are less confident about the next three months than are more.

However the picture is improving and Deloitte expects reduced inflation and improved earnings to start to make people feel more wealthy in coming months.

Pritchard said: “Consumers are still fairly selective about their spending. There has been some conscious trading down in some categories.

“Things like groceries and transport have been reduced and consumers have spent that disposable income and traded up in other areas. Holidays have seen some of that benefit.”

Deloitte’s consumer sentiment work has found they value their holidays  and are willing to sacrifice in other areas to preserve the annual trip.

“Overall consumers have been quite savvy about managing their budgets and we expect that is here to stay.

“Next quarter figures we expect to demonstrate more spending on holidays and we feel consumers will be more positive about the economy given the expected rise in real incomes.”

Although most forecasts suggest most consumers intend to take a holiday, Pritchard said some areas are likely to lose out, in particular the staycation and people opt to go abroad.

He predicted the UK domestic would decline by as much as 20% with people in the higher socio-economic bracket switching to a foreign holiday.

There were signs that some consumers were booking earlier taking advantage of early bird deals, but travellers are still ‘playing it safe’ in terms of destinations with Spain Greece and Italy popular.

In the upper end of the market tailor-made trips are increasingly popular and Pritchard said the firms that will do best will use data to really understand their customers’ requirements.

Key challenges remain in terms of the global economic situation with unforeseen shocks likely to cause uncertainty as the recovery takes hold.

“Sentiment in the market is positive, but up until now most people would acknowledge that good news about consumer being more confident probably takes a little bit more time to trickle down from the economy overall to people’s pockets,” Pritchard said.

“Consumers are always looking for something new and it’s a constant challenge for the industry to keep up and reinvent itself.

“Overall while there are elements of the sector that continue to find the environment tough there are some sub-sectors that are doing well. An improvement in consumer confidence and real incomes will be positive news for the industry as a whole.

“Those companies that will benefit most are the ones that understand and engage with their customers in the most meaningful way.”