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www.thecaterer.com Who can afford a weekend away
during a cost of living crisis? As interest rates rise, it’s the savers with a pension in the bank who are cashing in to take that longed-for trip after Covid, says Cris Tarrant
T
he cost of living crisis is maintaining its hold over the front pages and con- sumers’ thoughts, with our research
indicating that 50% are thinking that “the worst is still to come”. Due to the cri- sis, 20% of UK adults say they have been “hit hard and are cutting back”, while a fur- ther 52% think “things are OK, but we are being cautious and very careful”. The impact of this is seen in the differ-
ence between the intention to take trips and trips actually taken. Last summer, while 50% of people had planned to take an over- night UK domestic trip, only 29% reported that they actually took it. Previously we have seen a much closer correlation between trip intentions and actual reported behaviour. Something we have seen, which should
be a concern for the UK domestic market, is that consumers are prioritising going over- seas. The cost of living crisis is forcing peo- ple to make decisions and typically longer booking times for overseas travel means that these foreign trips are more likely to remain in place. Last summer, which was wetter and less sunny than 2022, also cut the chance that UK residents would book a last-minute domestic break. For the UK, domestic travel has been at
best stable year-on-year. But overseas travel has increased, particularly in the summer. This is only by a few percentage points, but that’s a huge amount of demand, with hundreds of thousands of additional people going abroad. The UK market, though, has been supported by inbound travel, notably
“As a consequence of rate rises, demand is not so much choked off but transfers to a different demographic”
from the US, where many travellers still have vouchers from trips that were can- celled because of the pandemic, and the hope is this will continue. What we are seeing is a pronounced
shift in the nature of domestic demand that can be attributed, we believe, to the impact of rising interest rates. As a con- sequence of rate rises, demand is not so much choked off but transfers to a different demographic, according to whether con- sumers are net borrowers or net savers.
Borrowers are typically younger, they have mortgages and are just about keeping their heads above water. Compare them with net savers, who are mainly older, empty nest- ers who have paid off their mortgages, who have some savings and decent pen- sions, and are now benefitting from much improved interest rates on their savings. The change in activity is striking. There are big changes in demand by
life stage. Since 2021 the number of pre- nesters – that is 18- to 34-year-olds with no children in the household – taking a recent domestic break have declined, with retir- ees, conversely, increasing notably, espe- cially outside the peak months. In 2021, just 24% of retirees took a UK overnight trip between April and September, but in the same period in 2023 this more than doubled to 55% of this segment. This is a dramatic change in the nature of demand in such a short period of time. No other life stage saw so pronounced a
shift. Part of that is because of the distance away from the pandemic; in 2021, many retirees were not travelling because they still had Covid fears, but now they are will- ing to travel and, financially, life is looking pretty good for them. For the hotel sector, this also means
some change in the most sought-after des- tinations; while city or large town locations remain the most popular, we have seen quite an uptick for countryside locations. The latest comments from the Bank of England suggest that net savers will be feeling more buoyant for a while to come, with Andrew Bailey, the Bank’s governor, commenting in December 2023 that it was “too early to start speculating about cutting interest rates”. The Bank’s priority remains controlling inflation, with high interest rates the backdrop to the weak performance of the economy. The Office for National Statistics reported that GDP shrank by 0.3% on the month in October 2023, with the fourth quarter looking no rosier. For the UK, success is to be found in attracting those retirees who are not affected by the pronouncements of the Bank of Eng- land. For an added boost, see what can be done about controlling the weather.
Cris Tarrant is chairman and founder of BVA BDRC
14 | The Caterer | 26 January 2024
www.thecaterer.com
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