The rising cost of living is expected to hit consumer confidence but there is little sign so far of it hampering the rebound in holiday demand.
The Consumer Price Index (CPI) rate of inflation is at a 30-year high, forecast to hit 6% this month and exceed 7% in April. Yet consumer markets analyst Mintel insisted travel “will remain a consumer priority”.
In an analysis provided exclusively to Travel Weekly, Mintel noted: “Many consumers have been able to top up their savings during the pandemic and travel will be one of the main areas to benefit from pent-up demand for experiences that have been off limits.
“The increased cost of living will lead those on lower incomes to watch how they spend. [But] consumers on higher incomes, less affected by inflation, are far more likely to take holidays.”
Mintel research in December found 85% of households with income of £50,000-plus plan a holiday this year. It also noted the travel sector “holds one big advantage – holidays represent escapism, something never more applicable.”
Paul Davies, Mintel category director for leisure, travel and food service, said: “Luxury experiences will remain a priority consumers will be prepared to pay for.”
Tui chief executive Fritz Joussen acknowledged “inflation is an issue” as he reported the group’s latest quarterly results on Tuesday. But he insisted: “Savings are strong. We don’t see a pattern of buying cheaper.”
Joussen pointed out: “Fuel prices are high. Fortunately, we hedged everything we sell for the season. The pound is strong at €0.83 or €0.84, so we have a counter effect. Holidays to Turkey should be very attractive because of the devaluation of the Turkish lira. It should not be a problem.”
Agents offered a more mixed view. Perfect Getaways director David Palmer said: “We’re not massively worried about the cost of living. We’re relying on pent-up demand for holidays. People are booking better holidays than two years ago. They haven’t been away and have cash they want to use.”
However, a spokesperson for The Travel Network Group said: “The rise in cost of living will be worrying for many [and] have an impact on available income. It might be the difference between going on holiday or not, or make customers reconsider the destination and spend.”
More: Comment: Travel remains a priority despite rise in living costs
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