Travel Weekly Insight - Annual Report 2019-20

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Produced in association withAnnual Report 2019-20Forty-seven million reasonsto be confident in 2020Produced by Travel Weekly, with exclusive consumer research

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ContentsTRAVEL WEEKLY INSIGHT REPORT 2019-2045791516Executive summaryKey findingsConsumer researchMarket outlookConsumer usiness travelInvestment in travelAviation323540424549HospitalityTravel technologyCybersecurityFuture of workSustainable travelResilienceTRAVEL WEEKLYINSIGHT ANNUALREPORT 2019-20EditorIan TaylorDesigner and illustratorKate CollingsChief subeditorMike WalshProduction managerNick CrippsTravel Weekly Groupeditor-in-chiefLucy HuxleyHead of salesMary RegaManaging directorStuart ParishJacobs Media Group chairmanClive JacobsFront cover: Outbound holidays hit a record 47 million in 2018; numbers in 2019 wereon a par and exclusive consumer research by Kantar/Service Science for this reportsuggests demand for overseas holidays in 2020 will at least match 2019 (page 15)Travel Weekly Insight Annual Report 2019-20 is published by Travel Weekly Group Limited. Registration number 6927031.Registered address: Third Floor, 52 Grosvenor Gardens, London SW1W 0AU. Materials in this publication may not be reproduced in any form without permission.Registered at the Post Office as a newspaper. Printed in England for the proprietors by 26/12. Origination by Rhapsody. Travel Weekly Group Limited 2019Cover and page 3 images: ShutterstockTravel Weekly Insight Report 2019-203

Executive summaryopportunities for growth2019 has been an eventful and somemight say transformational year forthe UK travel sector. While consumerconfidence wavered in a climate ofcontinued political and economicuncertainty, spending remainedresilient.Most important, consumers stillfavour experiences and our research onleisure spending has shown net spendingon holidays remains robust and aboveother leisure categories. However, shouldthe consumer fundamentals change thereis concern consumers’ ability to pursuetheir holiday dreams as often or aselaborately may be constrained.There have been fewer travel companyacquisitions over the last year. Whilethis could be linked to the generaluncertainties, it is also potentially anindication that longer-term prospects forgrowth in the sector are being questioned.The sector is becoming increasinglycompetitive and a range of operationalchallenges have put pressure onindividual operators as well as the sectoras a whole. Cyberattacks, drones and fleetissues have caused service disruptions,and workforce-related challenges – risinglabour costs and limited labour supply –have combined with overcapacity to putmargins under pressure.SETTING A VISION FOR 2025As 2020 dawns and focus shifts to refiningbusiness plans for the next five years, whatshould travel businesses do to continueto grow? The answer is simple: focus onpeople – both consumers and employees.While the outlook for economicgrowth might be muted, there are stillopportunities for growth. Holidaysremain special to consumers and a travelbusiness can set itself up for success byunderstanding what, when and howconsumers want their holidays. This isonly possible if staff are motivated andfeel their contribution is valued.Technology is a key enabler forimproving understanding of the consumer4Travel Weekly Insight Report 2019-20Travel companiesneed to focuson consumersand employees,and work outhow to lead withpurpose, saysAlistair Pritchardof Deloitteand there is more the sector could do inusing analytics to predict what consumerswant next. The sector can also make betteruse of technologies to operate efficientlyand empower staff – for example, byautomating more menial tasks andenabling staff to be more insight-led.This can be achieved by extracting morevalue from the data collectively held onconsumers, by collaborating and sharingacross companies.There are indeed signs that consumerpreferences are evolving. Holidaysare increasingly an opportunity forconsumers to enrich their lives and theywant authentic experiences. They alsowant to understand the impact theirholidays have on the environment, thelocal communities and places they visit.Having a strong brand, interestingofferings and competitive prices mightnot be enough to succeed in the nextphase of growth. In future, a successfulcompany needs to be responsible andpurpose-led to inspire and resonate withconsumers and employees. This is notabout quick wins. Companies need toinvest time and effort in working out howthey truly lead with purpose. The pressureto do so is only likely to increase.Alistair Pritchard, lead partner,Travel and Aviation, Deloitte LLP

Key FindingsMore than 1 in 2plan overseasholiday in 20207 in10 took adomesticholiday in20196ptrise inconcern at6pt riseenvironmentalimpact of flyingNo changein planned durationof overseas holidays:plan7 nights or lessin adults ‘verylikely’ to take6pt increasedomesticholidayBrexit impactin 2020in holidaymakers who anticipate53%on holiday decision2 in 3 under-35s4pt risein bookingby smartphoneanticipate‘Brexit impacton holiday’5pt fallbooking with agent 4pts on 2019over-55ssay Brexitto have‘no impact’9 out of 10in expectation of1 in 2 holidaymakersto book all-inclusive:2 in 3to spend5pt rise inadults planninghotel stay overseassame or moreon holidayin 20201 in 25Onlyholidaymakersplan homestay booking– no change since 2015Travel Weekly Insight Report 2019-205

Forewordfocus on sustainability is the one certaintyDesire for certainty on Britain’sfuture relationship with the EU maybe satisfied one way or another bythe general election as this reportwent to press. But we will awaitclarity on how the process plays outwhatever the outcome.This is the fourth Insight AnnualReport since the 2016 Brexit referendumand the main concerns of the travelindustry have not changed. Thesector requires maintenance of flyingarrangements, friction-free borders,thriving economies, stable exchangerates, skilled personnel and so on.What comes next may not entirelymeasure up. Yet despite a cloudedeconomic outlook and the preoccupationsof the past 12 months, demand for travelremains undiminished.Trends previously identified havestrengthened over the past year.All-inclusive bookings have become sucha mainstay of the outbound market thatone-in-two holidaymakers intend to bookall-inclusive in 2020.Smartphone bookings are rising,posing a challenge to high street agents.Yet the liquidation of Thomas Cookproved less of a death knell for thehigh street than an opportunity forrenewal as the UK’s largest independentagency chain swallowed Cook’s retailoutlets whole.Consumer research findingsrun through this report, along withsupporting data, and senior figures atDeloitte provide commentary on theeconomic outlook, investment, latesttrends in technology (especially aviation),cyber security, the workplace and,crucially, sustainability.Like it or not, this issue will mostdefine the future.Rapid progress is now required toreduce fossil fuel emissions. The UNEnvironment Programme (UNEP) annualEmissions Gap Report, published inNovember, provided sobering reading.It noted: “Greenhouse gas emissions6Travel Weekly Insight Report 2019-20Despite a cloudedeconomicoutlook and thepreoccupationsof the past 12months, demandfor travel remainsundiminishedTHE CHARTS (page 7) representUK holiday taking in 2019. Figures1, 2 and 4 are self-explanatory.Note the increase in overseasholidays among 16 to 34-year-oldsand decline among older adults.Figure 3 shows a breakdown ofthose taking overseas holidays byage and the proportion by region;24% of overseas holidaymakerstaking two or more breaks in 2019travelled with children, 39% wereover 55 and 71% in social classABC1. These are not the same asthe proportions within these groupstaking two or more holidays – 20%of those with children, 23% ofover-55s and 29% of ABC1scontinued to rise . . . at 1.5% per yearin the last decade. There is no sign ofemissions peaking.”A 55% reduction in emissions by2030 is required “to put the world onthe pathway to limiting warming to1.5C”. By contrast, business newspaperthe Financial Times reported: “Existingglobal pledges to reduce emissions willcorrespond to more than 3C of warmingby the end of the century.”Growing anxiety about the climatewas reflected in a rise in awarenessof the impact of flying and the ‘flightshame’ (flygskam) movement in Sweden.Whether this will spread remains tobe seen, but unchecked growth can’tbe assumed – perhaps leading to newpressure for carbon taxes or fresh doubtover a third runway at Heathrow.I am grateful to all at Deloitte for theirhelp in producing this report, indebtedto Tom Costley of Service Science forarranging the Kantar research andgrateful to David Hope of GfK for hisinsight on outbound booking trends. Anyfaults are my own.Ian Taylorexecutive editor,Travel Weeklyian.taylor@travelweekly.co.uk

UKHolidayMarketKantar/service science consumer researchFIGURE 1: UK HOLIDAY MARKET 8 968%pointsYoYpointsYoY89%76%105m0pointsYoY 1 %overseasholidays, 2018on2017who took an overseasholiday in 2019 alsohad a domestic breakwho had adomesticholiday in2019 also tooka holidayoverseas47m-1%58mholidays,domestic &overseas, 2018increasein overseas-2 holidayspointsdomestic YoYin 2018took at leastone holidayin 2019holidays, 2018Source: 2018 data – ONS/VisitBritain54%FIGURE 2: UK OUTBOUND HOLIDAY MARKET, 2019UK adultstook at least%one overseas pointsYoYholiday.% adults taking overseas holidays%08023%.took twoor more60 1%pointsYoY 2 6 3 261%-9060%-3-227%24%016-2425-3435-440 3 2 351%44%23%17%45-5420%55 -2061%61%18%20-7056%47%40-7 1ChildAt least oneTwo or more46%29%23%15%No childABC1C2DEFIGURE 3: WHO TAKES HOLIDAYS?AGE OF UK OVERSEASHOLIDAYMAKERS, 2019% of those taking at leastone holiday abroad16-2416%withchildrenTwo or moredomestic holidays24%22%-9pointsYoY39%55 34%25-3419%Over-55s35-4416%Figuresrounded 5pointsYoYNorthMidlands-1-4SouthpointsYoY56%71% 252%-255%pointsYoYpointsYoY 355%-9pointsYoY40% 2Social classABC145-5415%% UK adults taking at least oneoverseas holiday, by region% of UK holidaymakers taking.Two or moreoverseas holidays0London62%% changeyear on yearFIGURE 4: UK DOMESTIC HOLIDAY MARKET, 2019% adults taking UK domestic holidays 571%pointsYoYtook at leastone domesticholiday 8pointsYoY45%took twoor more%80 6 6 2 4 -1 -273%69%604036%40% 2 7 8 13 2 2 5 9 8 11 1 476%76%72%67%63%63%54%51%44%44%39%37%37%70%At least oneTwo or more20016-2425-3435-4445-5455 ChildNo childABC1C2DESource: Kantar/Service Science, October 2019Base: 1,276 UK adultsTravel Weekly Insight Report 2019-207

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Market outlookconsumer confidence faces twin pressuresPolitical uncertainty hung overeverything in 2019, heightened bymore than one Brexit withdrawaldate and multiple seemingly criticalmoments.The sector was trebly hit by the impacton business and consumer confidenceand by the uncertainty about travelarrangements. It could be consideredremarkable, therefore, that the marketheld up so well. The collapse of ThomasCook in September barely countered thatview since Cook was not brought downsolely by events in 2019.The UK will have a new governmentin 2020. The December general electionappeared likely to produce either agovernment led by Boris Johnson thatwould lead Britain out of the EU onJanuary 31 or a hung parliament andmaybe a second referendum. A no‑dealdeparture remained a theoretical possibilityafter Johnson insisted a government ledby him would stick to December 2020 asthe Brexit transition deadline.Former Abta chairman Noel Josephideswarned a January leave date would be“problematic” for the sector. But anPoliticaluncertainty andan economicslowdowncould test UKholidaymakers’resilience in 2020OUTBOUND holiday numbers hita record in 2018 and appeared oncourse to match those numbersin 2019 despite a relatively slowfirst few months of the year forbookings (Figure 5). Note the link toGDP growth and the lengthy periodof stagnation in numbers between2009 and 2014, coinciding withthe years of post-financial crisisausterity, before a recovery andthen a relative plateau since 2016agreed withdrawal should at least avoidthe risks outlined in leaked cabinetoffice papers in August of fuel, food andmedicine shortages and “a three‑monthmeltdown at ports”.Industry leaders attending Abta’sTravel Convention in October werewarned by Peter Foster, Europe editor ofthe Daily Telegraph, to expect “grindinguncertainty” to continue as the “long‑termimpacts of Brexit have yet to emerge”.The uncertainty had an undoubtedimpact on the outbound booking cycle asexplored elsewhere in this report (page 16).Deloitte UK lead partner for traveland aviation Alistair Pritchard agreedwith Foster’s assessment, saying: “If theWithdrawal Agreement is ratified, it onlydeals with the exit terms. We’ll move intoa new period of extended uncertaintyabout what a future relationship with theEU will look like.” He also warned: “I’mnot sure [a ratified deal] would have animmediate positive impact [on] bookings.It might take longer for confidence tocome back. In March 2019, people thoughtbookings would come in once we gota Brexit delay. We’ve seen assurancesFIGURE 5: UK HOLIDAYS ABROAD, 2000-1950Holiday trips (million)Annual holidays and GDP 2.1%2.6%2.4%31.9%1.9%21.4%-0.3%-1-2*12 months to June 2019** Six months to June 2019Source: ONSGDP growth100.4%**-3-4-4.2%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*-5Travel Weekly Insight Report 2019-209

marketoutlookconsumer confidence pressuresthat flights will operate irrespective ofno-deal, but that is not the only factor. It’smore about certainty.”Pritchard does not foresee agreementon Britain’s withdrawal leading to asurge in the value of the pound. He said:“[Currency] dealers have already priced inexpectations on the exchange rate. I don’tsee sterling returning to heady heights.”THE UK is among the world’stop-four source markets forinternational travel and thenumber two for travel spendingper head, only narrowly behindGermany (Figure 6). Total UKoutbound holiday numbers areat an all-time high, althoughprovisional figures suggest a smalldip in spring 2019 (Figure 7). Theoverall recovery since 2008-10 isnot reflected in first-quarter figureswhich remain down on 2008ECONOMIC SLOWDOWNBrexit was not the only source ofuncertainty. Alexander Boersch,chief economist at Deloitte Germany,highlighted a “synchronised slowdown”in the world economy when he addressedthe European Hotel InvestmentConference in London in November.Boersch said: “Trade growth is at an alltime low if we exclude the [2008] financialcrisis. There has been an industrialrecession in eurozone manufacturingthrough the whole of 2019. We see a20-point fall in investment intentions.There is a two-tier economy. Servicesand domestic-oriented sectors thrive butmanufacturing suffers. Can this decouplinggo on? Yes, for now, but not for ever. Itcould last into next year.” He describedforecasts of slower but continued globalgrowth as “somewhat optimistic”.Yet UK demand for overseas holidaysbroadly held up and exclusive researchby Kantar for this report suggests goodreason for confidence going into 2020.It found a small increase to 53% in theproportion of UK adults intending to takean overseas holiday in 2020 and almost90% expecting to spend as much as ormore than in 2019 – when outboundholidays in 2019 appeared set to equal therecord of 47 million set in 2018.Pritchard explained: “The UKFIGURE 6: GLOBAL TOP-FIVE TRAVELSOURCE MARKETS, 2018DeparturesSpending per head of population million1008093m1,20089m1,00072m71m* 1,160 1,15280060 71660040 44040029m2020000ChinaUSGermanyUKFrance 199*Excl. HongKong, Macao,TaiwanSource: UNWTOFIGURE 7: OVERSEAS HOLIDAYS FROM UK, 2008-19Holiday trips by quarter and % change on 20085 6%Q3 (Jul-Sep) 4% 8%Q4 (Oct-Dec)Holiday trips by quarter% change on 5.9m5.8m5.7m5.8m5.8m6.5m7.2m7.7m7.5m7.6mHoliday trips (million)15Q2 m12.1m13.1m13.4m13mQ1 22010200820120 80Source: ONS10Travel Weekly Insight Report 2019-20

consumer continues to be in a reasonablygood place. Over the first nine monthsof this year we had UK wage growthexceeding inflation, high levels ofemployment and low interest rates. Theone caveat is there are signs things maybecome more challenging.”He noted: “There tends to be alag between business confidence andconsumer confidence and businesseshave been more cautious for a time. Themost‑recent figures showed employmentfalling and that could potentially have abearing on wages. Consumer spendingmight become a bit weaker.“Looking at the global economy,Germany, China and the US all weakened.We have slowing global growth, withtariffs biting. Trade‑related matters havecreated uncertainty and where there isuncertainty you have less confidence toinvest and a tendency to retrench andcontrol costs. The risk is that multipleeconomies tip into recession.”He acknowledged an added problem:“The ability [of central banks] to invest infiscal stimulus [cut taxes] is more limitedbecause of the measures already taken. Toan extent, we’re overdue a recession.“Most major economies will see slowergrowth. That does not mean peoplewon’t go on holiday, but it raises thequestion whether they will go as manytimes, go away for as long and spend asmuch. People will still want to travel,but perhaps on a slightly tighter budget.All‑inclusive resorts give some certaintyabout costs so are likely to be popular.”The Kantar research suggests a four‑point rise year on year to 50% in theproportion of UK holidaymakers intendingto book all‑inclusive accommodation.THE FALL in the value of sterlingagainst the euro since 2016 appearedto have little overall impact on UKholiday numbers to the eurozoneat first, possibly as it coincidedwith a shift away from the easternMediterranean. The subsequentimpact appears muted (Figure 8).Brexit may have more of an impact(Figure 9). Research for this reportsuggests 45% of holidaymakersforesee a potential impact, with asharp difference in view by ageFIGURE 8: UK-EUROZONE HOLIDAYS*& EXCHANGE RATE: 2007-193531.7m 31.2m 1.4629.6m27.1m26m 1.3824.2m 25.1m 25.1m 1.26 1.24 1.12 1.17 1.15 1.23 1.18233m 33.1m 32.6m31.8m26.6m2520 1.22 1.14 1.13 1.12115106.3m507.3m 7.1m 7.5m 8.1m 8.2m6.6m 7.2m 7.4mUK outboundUK inbound / rate1.58m8.6m / rateHolidays (million)308.7m 8.4m 0.502007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019***EU15 states, includes main eurozone destinations but excludes Cyprus, Malta & Slovenia**12 months to June Exchange rate at June 30 Figures rounded Source: ONS/UK TreasuryFIGURE 9: BREXIT’S IMPACT ON OVERSEAS HOLIDAYS‘How much impact, if any, might Brexit have on the likelihood of you taking an overseas holiday?’% change in ‘impact’ year on year 6IMPACT45%SomeSomeimpactimpact31%31%Noimpact42% 4 566%0-1 7 3 9 14 147% 49%41%40%46%40%34%28%25%25-34 635-4445-5455 4 10ImpactNo impact55%49%22% 764%62%16-24Source: Kantar/Service Science, October 2019 931%ChildNoChild50%50% 48%37%39%47% 47%43%35%33%London-11 2Significantimpact14% 20SouthDon’t know13%80706050403020100Midlands% change YoYNorth%ABC1C2DETravel Weekly Insight Report 2019-2011

marketoutlookconsumer confidence pressuresTHOMAS COOK FALLOUTThomas Cook’s failure marked the endof a 170-year history, although the grouponly emerged in its final form in 2007.The collapse was described by Abtachief executive Mark Tanzer as “afailure of corporate finance”. Pritchard,however, attributed the

TRAVEL WEEKLY INSIGHT REPORT 2019-20 Front cover: Outbound holidays hit a record 47 million in 2018; numbers in 2019 were on a par and exclusive consumer research by Kantar/Service Science for this report suggests demand for overseas holidays in 2020 will at least match 2019 (page 15) BLACK YELLOW MAGENTA CYAN 91TRS1951127.pgs 02.12.2019 14:37

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