Recessionary concerns are not the same for all, PwC’s Rick Jones tells Ian Taylor
A difficult autumn and winter are in prospect with an 80% rise in the energy price cap announced last week stoking a general rise in the cost of living.
But there remain reasons to be positive in travel, according to Rick Jones, PwC partner in corporate finance, M&A and refinancing, who is due to speak at Abta’s Travel Convention in Marrakech in October.
Jones told Travel Weekly: “Things are not easy, with large cost increases, but there are enough doomsayers about the industry. People have been locked in unable to travel for two years and are looking for experiences. It’s not that consumers aren’t price-sensitive but they’re currently less price-sensitive than maybe one expects.”
Consumer sentiment surveys suggest “consumers are very sensitive and turning off all spending taps”, he said. “But you see from the spending data that is not what they’re doing. Employment is high and that drives spending, and savings are also quite high.”
The Bank of England has forecast the UK will slide into recession in the fourth quarter of this year and will remain so through all of 2023.
Jones said: “It’s a dynamic situation and particularly difficult now. We don’t have the new prime minister yet and the perceived gap in decision- making is also leading to a drop in confidence. It’s a contested election and you’d think we could take two different paths. That exacerbates the confusion.
“The new PM will need to take decisions quickly on how the government can help both consumers and businesses in a way that is fiscally responsible.”
He noted housing costs will also increase and a recession could impact on job security, stressing: “Housing and job security are both very important.”
But he argued: “It’s important to break down the impact of any recession by category of consumer, category of spending and probably by region, and you’ll see different pictures emerging. There are areas of greater resilience. The overseas travel sector has been performing strongly. That is very positive.”
He is not overly concerned about the current level of debt in the sector, arguing: “One good thing about the industry is that it’s regulated and this limits the amount of debt. I don’t foresee any major crunches.”
That does not mean investment will flow straight away. Jones said: “There is a lot to make investors uncomfortable. What’s a new booking and what’s a credit note? Are we entering a world where you can no longer travel 365 days a year? Will we see further lockdowns or additional restrictions? Does it translate into shorter booking windows?
“Consumer confidence could really be hit when utility bills hit in October. Investors would want to see the impact of that.”
He noted On the Beach and Jet2 have reported “pretty good numbers” yet their share prices “seemingly have no bottom” and said: “That tells you something about the public market’s perception of travel.”
Private investors view the sector differently, he suggested, but said: “They will want to look at what’s happening in the fourth quarter and the January-February peak booking period.”
The Travel Convention 2022, Marrekech, October 10-12
thetravelconvention.com