MANCHESTER, England — There is positivity to be found for some segments of the travel and tourism market despite the economic outlook and falling consumer confidence, according to a panel speaking at the Annual Hotel Conference (AHC) in Manchester on 3 October.
Despite the inflationary economic environment, Sam Ward, UK hotels leader at professional services brand PwC, said that the current situation was different from prior ‘black swan events’. The 2008 recession followed a ‘big boom’, she pointed out, whereas the UK has only experienced a short post-Covid recovery period for the release of pent-up travel demand and savings.
“UK consumers came out [of the pandemic] on average with money to spend on travel,” she said. “I don’t think we’re quite yet in the mentality to cut back”.
She suggested the continued pent-up demand for travel could push any drop in demand due to falling consumer confidence further down the line.
Moderator Patrick Whyte, editor-in-chief of Hospitality Insights, asked Eleanor Scott, director, strategy, PwC, about the impact of future spend on travel. She said the typical relationship between consumer sentiment and consumer spend was “about a six-month lag”, with a perceived drop in consumer sentiment earlier this summer now starting to become evident in spending.
Ward highlighted the latest PwC consumer sentiment survey, which found that, although consumers were looking to tighten spending habits, including eating out, holidays appeared to be more protected than perhaps expected – one sacrifice consumers may be unwilling to make following the last two years.
Richard Clarke, managing director, AB Bernstein, an asset management firm with $735 billion in assets under management, agreed. He added that if unemployment remained “then I think we can probably be reasonably confident that this time is different”. He pointed out that despite a drop in web traffic to Booking.com in July/August, this picked up again in August/September, suggesting this may have had more to do with travel disruption than a decrease in demand.
He said that AB Bernstein’s own research found that holiday spend was more resilient than expected, with “travel beginning to hold up better than other spend buckets” and consumers “much more willing to cut back on dining out and clothes than travel”.
Ward also quoted Barclaycard consumer spend data, which saw hotels, resorts & accommodation spend up 4.1% and sustained popularity for staycations. She said there had been a “significant shift” towards more domestic travel driving the sector’s recovery with “more of a reliance on the UK consumer feeding UK hotels”.
“We have seen that consumers have prioritised their travel post-Covid and if one of the cutbacks they make is to travel domestically, then that is beneficial to UK hotels,” she said.
However, with the more cost-conscious consumers downgrading, she suggested mid-market hotels were the ones that may feel “squeezed”, while there was “likely to be a cutdown on the size and number of leisure events, parties, weddings and events… with the cost-of-living inflation squeezing wages”.
This is further evidenced by other market surveys: According to research among frequent flyer members of Collinson’s Priority Pass, travellers are planning to make nearly as many trips by air in the next year as they did prior to the pandemic. And 42 percent of respondents to an Amadeus survey confirmed that international travel was a high priority spend area for the coming year.