Outbound travel demand is forecast to remain strong through the autumn despite “some caution” at the lower end of the market, according to analysts at professional services group PwC.
The latest consumer research by PwC found confidence rose this summer despite continuing high inflation and successive interest rate rises pushing up housing costs.
PwC’s UK consumer sentiment survey found confidence improved from a low of minus 44 points last September to minus 13 in June, above the long-term average of minus 15 since 2008.
The survey found a higher proportion of consumers planned to reduce spending than increase it in almost all categories other than grocery shopping over the next 12 months. But holidays remained one of the strongest categories, although there was a 17-percentage point difference between those planning to cut holiday spending and those planning to spend more.
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PwC head of hospitality, sport and leisure and consumer corporate finance Rick Jones and colleague Eleanor Scott, partner at PwC consulting business Strategy&, will address Abta’s Travel Convention in October and present updated research on consumer sentiment and travel spending.
Scott said: “We’ll run a survey in September to see consumer intentions for next year.”
She explained: “We’re cautiously optimistic about consumer sentiment. Travel is a priority and demand stronger than people could have hoped early in the year.
“The premium end of the market is going strongly [and] travel demand is particularly strong among those aged 55 and over – the group most positive about their household finances.”
However, she said: “There is more caution around the value end of the market. Households lower down the income levels are struggling. People want to go on holiday but are waiting to see what it will cost.”
Scott noted a low point in consumer confidence came last September. saying: “Confidence has got back to its long-term level.
“Interest rates are top of mind because they’re in the press. But a surprising number of people own their homes outright and many others have already been affected by rising rates. People are much more concerned about everyday costs rising.”
She insisted: “We’re not seeing a softening in luxury travel [demand]. But some [businesses] in mid-market are becoming nervous and will be reliant on late bookings.”
Jones agreed, noting consumer sentiment had improved “significantly” this summer.
He remains upbeat about the prospects for mergers and acquisitions (M&A) in the sector despite a global slowdown in M&A activity, highlighting three underlying factors.
Jones argued: “One, there is growth in the travel sector and a belief it will continue. Two, [travel] corporates are re-aligning their portfolios. Three, people are looking at businesses that have not been capable of being sold [till now].”
He noted his corporate finance team completed seven deals in the first six months of this year, including advising Flight Centre on its acquisition of luxury tour operator Scott Dunn in January, and suggested “travel looks very healthy” compared with the wider leisure sector.
The PwC research will also examine consumer attitudes to sustainability, although Jones noted a difference between “what people say and what they do”.
Scott agreed, saying: “People say what they think they should say [in surveys]. People are increasingly aware they should be taking environmental factors into account when booking holidays. But they are not necessarily willing to trade off the holiday experience or what they are willing to pay.”
She added: “There is greater awareness on the consumer side, but there is a lack of information and knowledge. What is different now is that companies realise they have to do something.”
The Travel Convention, Bodrum, Turkey
October 30 to November 1
Details and registration: thetravelconvention.com
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