Market overview Confidence returns but incomes lag


Asia. Its aim could be to curtail US shale-oil investment, with $75 a barrel suggested as a price below which shale deposits become uneconomic. Energy analysts hailed the Saudi move as “a fundamental change for the oil market”, concluding of shale investment: “No basin is safe.” This is not without long-term implications


for pricing if warnings that oil companies could cut $100 billion in investment in production prove right.


Global uncertainties The sense of global uncertainty was heightened by a series of international crises, with the UK joining the US in a new war in Iraq and, by extension, in Syria in response to Isis. The ability of the West to contain the insurgency appeared questionable, amid


The Deloitte View


Consumer confidence Consumer confidence has risen throughout 2014. The rate of growth in confidence slowed in the third quarter but was still up three points on the third quarter of 2013, according to the Deloitte Consumer Tracker. Confidence continued to rise even


in the absence of income growth as a number of factors combined to support consumer spending. Lower oil prices, falling consumer price inflation and a strong pound throughout 2014 all helped ease the pressure on disposable income. This was reflected in Deloitte data, with consumer sentiment on disposable incomes up by seven points year on year. An improving labour market also


helped prop up the UK consumer economy with unemployment at its lowest level since November 2008 and


private sector hiring continuing to more than offset declines in public sector employment. Underlying demand remained robust,


with consumer spending up 2.1% in the first quarter of 2014. While the average annual rate of growth remains below that for the 10 years preceding 2007, absolute levels are back to where they were in the pre-financial crisis period. Our data continues to show a switch


from a focus on spending on essential items to more spending on discretionary categories and big-ticket items. Spending on big-ticket items such as furniture and major household appliances continues to rise, benefiting from the strength of the housing market in the first half of 2014, although there were signs of it starting to cool following the mortgage market review. Most notably for the travel sector,


the Deloitte tracker for Q3 2014 showed net holiday spending in positive territory for the first time since the survey began in Q3 2011. It meant the proportion of consumers reporting they spent more on holidays in the previous three months outweighed those who spent less – a sign of continuing improvement in consumer confidence and of a desire to prioritise holidays. At first glance it is difficult to reconcile


this improving picture with disappointing outbound figures. However, we believe this is because people have been booking holidays for later in the year, with figures set to improve for the latter half of 2014 and into 2015. We also believe that the staycation/domestic holiday market, which continues to enjoy a renewed lease of life with two good UK summers in recent times, has had an impact on the outbound holiday market.


2 LINKED PIES – TAKEN FROM MAY INSIGHT – ‘UK overseas holidays 2013: by duration’


UK OVERSEAS HOLIDAYS 2013: BY DURATION As % of all holidays overseas


As percentage of all holidays overseas


28 nights or more 3%


Up to


14-27 nights 20%


3 nights 16%


14-27 nights 30%


4-13 nights 61%


4-13 nights 55%


As proportion of overseas holiday spending


Up to


3 nights 7%


UK OVERSEAS HOLIDAYS 2013: BY DURATION


UK OVERSEAS HOLIDAYS 2013: BY DURATION As proportion of overseas holiday spending


28 nights or more 8%


Source: Office for National Statistics


12 | Travel Weekly Insight Annual Report 2014


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