the uk travel sector competing in a changing world · 2020-05-11 · q3 2011 q4 2011 q1 2012 q2...

© 2014 Deloitte LLP. Private and confidential.

The UK travel sectorCompeting in a changing world

Graham Pickett

Lead Partner – Travel, Hospitality & Leisure


Agenda

2

The business outlook

The successful travel company of tomorrow

Over-capacity concerns

Key takeaways


Business outlook

3


Emerging markets driving economic growthWhile Eurozone creates concern in the developed countries, some emerging markets are

experiencing slower growth

4 Source: The Conference Board - Global Economic Outlook 2014, April 2014 update

2.4%

1.9%

-0.4%

1.8%1.5%

4.7%

7.7%

7.2%

2.4% 2.3%

1.1%

1.9%

4.7%

3.6%

2.8%

2.1%

1.1%

2.9%

1.4%

5.5%

7.6%

7.1%

1.9%

1.5%

2.3%

2.9%

4.7%

2.4%

GLOBAL US EuroArea

UK Japan India China East Asia &Pacific

LatinAmerica

Brazil Mexico Middle East& NorthAfrica

Sub-Saharan

Africa

DevelopingEurope &

Central Asia

Global outlook for growth of Gross Domestic Product (Year on Year,%)

2013e 2014 (Projected)

© 2014 Deloitte LLP. All rights reserved.

Euro

Chinese Yuan

UAE Dirham and US dollar

Indian rupee

80

90

100

110

120

130

140

British Pound vs. Major market currencies (Indexed to 1st week of February 2010)

Indonesian

The currency effectImproving currency rates make UK outbound travel more attractive

5

Onset of talk regarding

tapering of Quantitative

Easing by US Federal Reserve Outbound

travel for UK

becomes

cheaper

Outbound

travel for UK

comparatively

more

expensive

Source: Bloomberg


UK vs. other European countriesUK is leading the growth scenario in Europe

6 Source: Eurostat

1.7%

0.5%0.3%

-1.2%

-1.8%

3.1%

2.0%

0.9% 0.9%

0.1%

0%

5%

10%

15%

20%

25%

30%

-3%

-2%

-1%

0%

1%

2%

3%

4%

United Kingdom Germany France Spain Italy

Un

em

plo

ym

en

t r

ate

(%

)

GD

P a

t m

ark

et

pri

ce (

% Y

oY

)

Gross domestic product at market prices (% change over previous year) &

Unemployment rate (%)

2013 2014F Unemployment % (Apr 2014)


Improving business confidence in UK UK CFOs are becoming more confident and show increasing appetite for risk

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Risk appetite (% of CFO who think it is a good time to take greater risk onto their balance sheets)

Source: The Deloitte CFO Survey Q1 2014


Political and business uncertaintiesThe uncertainty around the outcome of the referendum and UK position with the EU has

increased business and consumer uncertainty

8 Source: HMRC, Scotland analysis report , May 2014

Business

RisksPolitical

Risks

UK Elections 2015

Scottish

Referendum

Pending EU vote

Overheated

housing market

Potential interest

rate hike

SE Airport decision

£


Consumer confidence on the riseGrowing consumer confidence could be reflected in higher consumer spending during the

year

9

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

Deloitte Consumer ConfidenceNet % of UK consumers who said that their level of confidence has improved over the last three months

Source: The Deloitte Consumer Tracker Q1 2014


Interest rate riskUK consumers also expect conditions to continue to improve in 2014 but rising interest rates

remain a key concern

10

24%

26%

54%

71%

27%

34%

-11%

23%

-11%

5%

-1%

22%

30%

13%

43%

63%

23%

29%

-12%

22%

-7%

9%

2%

29%

-20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80%

The value of your property

The taxes you pay

Your spending on utilities

Price of goods in supermarkets

Your spending on transport

Your spending on grocery shopping

Your level of debt

Your housing expenditure

Your spending on non-essential categories

Your income before tax

Your saving or investments

The UK interest rate

Expectations for 2014 compared to 2013 (% Net balance, increase minus decrease)

Q1 2014

Q3 2013



UK household debtThe rising levels of household debts in the UK raises serious concerns over liquidity

11 Source: Money Charity, Note: * Office for Budget Responsibility (OBR) forecasts

£Total household debt

£2.251 trillion*(Q1 2019)

£1.443 trillion(Q1 2014)

Average

household debt

£54,629

Daily interest paid

£161 million

Loans written

off daily

£7.3 millionPer 5 min 12 sec

A person declared

bankruptDaily purchases

using plastic cards

£1.496 billion


Consumer category spending in UKUK consumers are more positive about the economy and are expected to take more holidays

this year

12

-20%

-20%

-12% -15% -18%

-19%

-16%

1%

-6%

20%

10%

12%

21%

-18%

-18%

-15%

-17%

-18%

-16%

-17%

-2%

-7%

8%

9%

11%

27%

-13%

-12%

-11%

-11%

-11%

-10%

-10%

1%

1%

6%

9%

10%

16%

Electricalequipment

Going out Alcoholand

tobacco

Furnitureand

homeware

Restaurantsand

hotels

Clothingand

footwear

Majorhouseholdappliances

Phone,Inernet etc.

subscriptions'

Holidays(long break)

Transport Housingexpenses

Groceryshopping

Utility bills

Category spending in the next three monthsNet % of UK consumers spending more by category over the next three months

Q1 2012 Q1 2013 Q1 2014

+1% (Q1 2014)

-6% (Q1 2012)



UK domestic vs. international travel Greater consumer confidence and expectations for rises in real income in 2014 is likely to see

an increase in overseas travel at the cost of holidays in UK

13

70%72%

74%

66%

73%

78%

29%

39%

48%

58%56%

45%

2009 2010 2011 2012 2013 2014

Domestic and Overseas travel intentions of UK residents (7+ nights)

(In percentages)

Overseas Holidays UK Holidays

Source: BDRC Continental, 2014

25%

13%

13%

13%

12%

5%

5%

5%

4%

25%

19%

14%

12%

10%

9%

8%

7%

8%

Spain

USA

France

Italy

Greece

Caribbean

Portugal

Turkey

Far East

Top outbound destinations considered for 2013 & 2014

2014E 2013


Over-capacity concerns in the airline industry

14


Heathrow

Gatwick

Manchester

Stansted

Aberdeen

Birmingham

London City

Luton

Bristol

NewcastleBelfast City

Belfast International

SouthamptonLiverpool

JerseyGuernsey

Leeds Bradford

Norwich

Isle of man

Cardiff Wales

Scatsta

Humberside

Kirkwall

Sumburgh

Exeter

Southend

Average

-15%

-10%

-5%

0%

5%

10%

15%

20%

-20% -10% 0% 10% 20% 30% 40% 50%

2013 v

s 2

014 (

Jan

uary

-Ap

ril)

Air

Tra

nsp

ort

M

ov

em

en

t (%

)

2012 vs 2013 Air Transport Movement (%)

Air traffic movementAirline movement at major UK airports grew at a slower pace in early 2014, except in South

East, thus raising concerns about reducing demand and over-capacity in supply

15

60% of top 30 airports in UK

saw below-average YoY growth

in ATMs in Jan-Apr 2014


Over-capacity risk in the airline industryOutbound holiday trips see a modest growth in the first quarter of 2014, adding to the fear of

over-capacity

16

7%4%

19%

6%4%

6%

-24%

-31%

-11%

5% 5% 5%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

All trips Holidays Business Trips

UK Outbound trips: Q1 2014(% change YoY)

v Q1 2013 v Q1 2012 v Q1 2008 v Year to March 2014

Source: Travel Weekly Insight, May 2014


Industry concerns on over-capacityConcerns on over-capacity increases as more airlines plan to add new planes and new routes

17


The successful travel company of tomorrow

18


Investing in digital technologiesDigital has become a major driver in the sector as travel companies recognise the efficiency

and customer acquisition and retention benefits it can bring

19

Improved conversion rates

Increased consumer value

Dynamic service assistance

Enhanced customer loyalty

Better decision making

By 2015, 89% of airlines will sell tickets via mobile apps

70% of airlines will implement flight status updates via social media

80% of airports/airlines will invest in

business intelligence solutions in the next 3 years

Data analytics

Social media influence

Mobile travel


Consumer centricityTravel agents are looking at innovative ways to increase consumer engagement and enhance

customer experience

20 Source: Travel Weekly consumer trend survey 2013

Targeted and tailored approach

Loyalty programmes

In-destination Services


Key takeawaysHow to build on success in 2014/2015?

21

• Improving consumer confidence and economic situation in the UK creates a positive

environment for more overseas trips

• But interest rate hikes and rising household debt remain key concerns for UK consumers

• Political uncertainty over Scottish referendum and potential EU votes add to business fears

• Fear of over-capacity due to disproportionate increase in fleet additions and slower growth

in passenger traffic could create pricing pressures for the industry later this summer season

• Using social media and mobile technologies to benefit from efficiency and increase

customer satisfaction

• Leveraging analytics for targeted marketing and delivering tailored travel offerings

• Striving to provide end-to-end travel solution leveraging digital technology to enhance

customer experience

• Strengthening loyalty programmes to compete with online and offline travel agency

competitors

UK economy

Successful travel company of tomorrow


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the uk travel sector competing in a changing world · 2020-05-11 · q3 2011 q4 2011 q1 2012 q2...

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