News comes during WTM Week: Just before the World Travel Market convened on this past Monday, the Deloitte Consumer Tracker for the third quarter of 2017 came out and it showed that, following three consecutive quarters of decline, consumer confidence in the UK had picked up. But as bright as this factor shone on the economic horizon, the report did not bode particularly well for the tour and travel industry.
Deloitte described the increase in confidence as “tentative,” adding, “this quarter-on-quarter growth has occurred against a well-publicized backdrop of high levels of unsecured debt and rising inflation.” Deloitte also noted that there was some post-Brexit anxiety. The June 23, 2016 referendum in which UK citizens voted to exit (or “Brexit”) the European Union caused British Prime Minister David Cameron his job. His successor, Theresa May, hoping to establish mandate of confidence in her government’s handling of Brexit process, then called for a snap general election just five months ago, on June 8th. The election proved inconclusive, with some in May’s own Conservative party calling for her to step down.
Some of the results from Deloitte’s third quarter report, based on the results of a survey of 3,000 adults, include the following:
—Concerns about these rising debt levels and the growing disparity between earnings growth and inflation have created a squeeze on disposable income, meaning that consumers are having to make a choice between essential and discretionary purchases, which includes spending on holidays.
—Holiday spending has seen a decline in the last year, with spending on short breaks of four nights or less having fallen by three percentage points.
—Spending on longer breaks was down by two percentage points vs. the same period in 2016.
—Spending intentions for the next three months have also seen a year-on-year decline across the majority of leisure categories.
—British Millennials are planning to spend less across the majority of leisure categories over the next three months compared to spending intentions at the same time last year, including eating out and culture and entertainment.
—UK seniors (those aged 55 and older) have been less affected by cost pressures, but they intend to cut back on future leisure spending across a number of categories including habitual spending and, significantly, holidays.
Said Deloitte’s hospitality and leisure partner Simon Oaten, partner for hospitality and leisure: “The combination of rising inflation and lower wage growth is stretching disposable incomes and causing consumers to rethink their expenditure. It is no surprise that we are seeing UK consumers tightening their belts.”
And Then There is the Still-Stronger Dollar: Despite some hints that the British pound would grow strong against the U.S. dollar in the coming year, the fact is that there has not been much upward movement since the pound began plummeting in value against the U.S. dollar two years ago. Two years ago, on Nov. 6, 2015, the pound traded at $1.55. In the week following the Brexit vote on June 23, 2016, it fell to around $1.30, reaching its low point—$1.20—on Jan. 16 of this year. Since then, it moved fitfully upward, just past the $1.30 mark by the beginning of July and has stayed in that vicinity since then. With this kind of loss in value, it is a challenge for British tour operators to make much of a margin selling U.S. product.