Market overview Confidence returns but incomes lag


media reports that US air strikes in Syria were encouraging anti-regime forces to ally with Isis in a conflict which could yet suck in Turkey and seems certain to blow back on the West in a heightened risk of terror. The war appears likely to last several years with potential repercussions for security at airports, attractions, hotels and so on. UK airport security was stepped up in July and the perceived threat level raised from “substantial” to “severe” at the end of August, making any hopes of relaxation in


The Deloitte View


The UK market Sadly, uncertainty rules the waves and skies. We have seen outbound travel market numbers soften during 2014, a sign of a difficult and challenging market for many players. Profit warnings and certain players


under stress have made many of the travel industry headlines, with only a few of the big brands posting profitable growth. Over the summer we saw significant


overcapacity in the airline sector which resulted in a number of airlines, including flag carriers such as Air France-KLM and Lufthansa and low-cost operators such as Monarch and Jet2 post disappointing results. The major travel operators recorded


mixed results, while the CAA expressed concerns about some of the smaller operators having a challenging time this autumn. One of the keys to the future success


of the major travel operators will be their ability to harness the power of digital technology to drive revenues and profits. Consumers are increasingly hyper-connected and have access to a wealth of real time information that is


fundamentally changing the traditional path to purchase and impacting consumers’ loyalty and advocacy. Falling fuel prices and favourable


exchange rates have made outbound travel more attractive for UK consumers. Fuel prices have fallen dramatically during 2014, while the pound has strengthened significantly against both the euro and the dollar, although sterling lost some of its gains against the dollar as the year drew towards a close. Outbound travellers are also reaping


the rewards of improvements in aviation technology with a new generation of aircraft joining the fleets of many of the world’s leading airlines. The Boeing 787 Dreamliner has already had a very positive effect on the sector and its impact will only increase as new deliveries of the aircraft help airlines reduce operating costs by up to 20%. The issue of consumer rights was thrust


into the spotlight by the ruling on the Jet2 case in June and the denial of an appeal to the Supreme Court in October, which is likely to produce an increase in the number of cases brought by consumers against travel operators for flight delays. At the


same time, the market awaits a resolution to attempts to revise the EU directive on package holidays. On top of the regulatory uncertainty


there are emerging geo-political and health risks such as the situation in the Ukraine and the outbreak of Ebola in West Africa that present challenges for the global travel industry. Looking forward, any changes in


personal tax or interest rate levels could act as a brake on travel spending, with concerns about both of these contributing to a general sense of uncertainty that could hold back market growth. Overall, we would describe the outlook


as approaching an amber light. The big question is whether that amber will be turning green in FY15 or heading for red? The economic growth predictions for


Europe and the UK as well as views on interest rates linked with movements on house prices will be key influences on consumer behaviour and the market in FY15. Above all else, market behaviour over the last five years has shown that holidays are a necessity – all that remains to be seen is will spending per head be higher or lower.


Over the summer we saw significant overcapacity in the airline sector


restrictions on liquids in passengers’ carry-on bags or other measures appear misplaced. Wider instability across the Middle East


– the Gulf states are increasingly involved in military intervention and the fall-out of the Arab Spring continues – could yet impact on parts of the sector. The war in eastern Ukraine led to


sanctions on Russia which contributed to the slowdown in the German economy and seemed set to smoulder on despite a ceasefire of sorts, at the very least souring


14 | Travel Weekly Insight Annual Report 2014


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