Businesses are increasingly positive about the future and most expect to expand in 2014, reveals Chris Lee, head of travel at Barclays
As we enter the second half of 2014, it’s an opportune time to examine the state of the industry and consider some of the key areas of interest ahead.
Confidence continues to return – more than two-thirds of senior industry representatives expect people to travel more in 2014 than last year.
A survey of more than 200 senior industry representatives from tour operators, high street and online agencies, cruise lines and other travel businesses at the recent Barclays Travel Forum revealed that half were more positive about the future, compared with a third 12 months ago.
Growing confidence
Almost 75% of respondents expected their businesses to expand in 2014, with nearly three in 10 expecting to see growth of 10%-20%. More than 80% expected their business to grow
in 2015, with more than one in 10 expecting an uplift of at least 20%.
This optimism is supported by the rise in consumer confidence. There appears to be a feelgood factor in London and the southeast, which some attribute to rising house prices, and sales remain strong. Tour operators report good growth in high-end trips with an average booking value of £4,000-£5,000 per person.
The positive outlook is welcome, given the low levels of discretionary spend the sector has witnessed in recent years.
Confidence is rising and, with broadly supportive economic conditions, it appears that growth is becoming more sustainable.
The continuing appreciation of sterling will obviously be a factor in helping Europe account for the biggest growth this year.
Warning signs
However, the strong position is
not without warning signs.
Operators to lower-end destinations are concerned by overcapacity. Low-cost carriers are expanding holiday sales through their own tour operating divisions or links with partners. And some operators are concerned that TV shows highlighting a cheap-drinks culture in some destinations may deter families.
Changing subject, it will be interesting to see whether there is an exodus of travel companies to Majorca or Dubai to escape UK regulators. To date, this does not appear to be a major trend.
Some of our customers continue to predict that the likes of Google, TripAdvisor and Booking.com will move into holiday sales, and it will be interesting to see whether this becomes a reality.
Good investments
Private equity, and merger and acquisition interest remain strong. Many travel businesses, including Gold Medal, JAC, On The Beach and Key Travel, have been sold over the past year or so. There has also been private equity interest in Lowcost Travel Group, Iglu and Audley Travel. There is every indication this interest will continue.
Several companies have also taken advantage of bank lending at low base rates to fund growth or acquisitions, and entrepreneurs are continuing to fund start-ups. Hopefully, they will be able to navigate the proposed changes to the Small Business Atol on which the CAA is now consulting.