Travel industry in for ‘white knuckle ride’ in 2009

UK consumers will continue to earmark cash for their annual holiday in 2009 – at the expense of short breaks and pub and restaurant outings, a new study shows

The PricewaterhouseCoopers findings come against a backdrop of recession and a reduction in spending.

PwC head of travel Malcolm Preston said: “It will be a white knuckle ride for the travel industry as they adapt to the changing shape of the UK consumer’s holiday.

“Those who are flexible and switch the emphasis from the discretionary short break to the semi-discretionary main holiday, and provide value for money for those who still have cash, will maintain a strong market position.

“However, it seems for many travellers the recession is still hovering in the background. The key question is whether current intent towards spend is aligned with next year’s reality.”

Consumers ranked holidays and short breaks as the top two spending priorities for 2008, six places higher than debt repayment, when asked in April.

PwC asked the same question in November but looking ahead to 2009.

The latest results saw debt repayment (credit cards, loans and overdrafts) rise to first place (20%) but with large holidays sticking close by in second (16%).

Only one per cent of people say they will prioritise eating and drinking out, which fell eight places from fourth in April to 12th in November.

Preston said: “During the boom era we would expect to see a far higher proportion of people prioritising travel and holidays, so undoubtedly the industry is not immune to the downturn.

“However, these results show the UK consumer is still set on escaping the recession depression and [aside from paying off unsecured debt] refuse to sacrifice the summer or family holiday.”

But short breaks plummeted between the two polls from second to eighth place in the league table and only two per cent surveyed will put cash aside first and foremost for these trips.

Preston added: “As consumer confidence has fallen over the last six months, the popularity of short, city breaks is dropping.

“This is a result of the UK jet set culture reverting to reliance on one, long holiday.

“We expect to see people being more cost conscious during this period and also reducing their main holiday by a matter of days.

“The collapse of XL impacted tour operator planning and shortening of holiday duration could force a further flight timetable re-jig.”

As the country slips into recession those with less disposable income are now prioritising the repayment of unsecured debt over taking a holiday, according to PwC.

Yet those with high net worth and higher income families still believe buying a holiday is the top priority, above repaying their household debt.

Those social groups with the highest level of debt will have the least cash to splash out on a holiday. Of the most indebted generation (25–34) who operate a ‘spend now, save later’ policy, only eight per cent would prioritise holidays as their top spend.

Unsecured debt repayment and upping their savings and investment is of the highest importance.

Over 65s are the most concerned about the recession, having experienced economic turbulence before and being cash dependent.

But they are the most determined to prioritise holidays in 2009 with 27% putting holiday spend first, with only 15% focused on unsecured debt repayment.

“Pensioners have the least debt and most time on their hands with which to travel, which should offer hope to travel companies that target this demographic,” said Preston.

*Consumers were asked – Thinking about the up coming new year, what do you think will be your top spending priority during 2009? Please select your first choice. 

by Phil Davies