Many tour operators have enjoyed an impressive recovery in 2022 after two long years when trading was constrained by the Covid-19 pandemic according to the latest quarterly survey of 90 travel firms by business consultancy PwC (PricewaterhouseCoopers) for TTG Media’s latest Agenda 2022 seminar.
The poll found most travel firms expect both higher revenue and profits in 2023 compared with this year. It also served to illustrate how the UK’s economic turmoil and cost of living crisis has slowed the industry’s recovery this autumn after a positive summer.
More than half of travel companies (55%) have seen bookings return to normal or above pre-Covid levels, but this percentage was very similar to surveys conducted earlier in 2022 – again suggesting travel’s post-Covid recovery has lost momentum.
Operators now recognise economic factors as the biggest hurdle, with concern over household finances (53%), the rising cost of holidays (45%) and the pound’s weakness (41%) at the top of the list. This was a big change from the summer when travel disruption, including flight cancellations and airport delays, was the major issue.
MIXED PICTURE
Booking patterns have also been mixed, with evidence of a late-booking trend for the current winter season. Conversely, many operators have already seen strong sales for summer 2023, giving further evidence of divergent trends in different parts of market.
David Trunkfield, partner, travel and leisure, at PwC’s Strategy& consultancy division, said: “Some people are seeing demand being impacted, with clients travelling less, trading down or even cancelling. But the effects are not universal – they could differ based on the target customer group, with more affluent or older groups not being as impacted at this stage.”
One thing most travel firms do agree on is that holiday prices will go up as inflation takes hold, with 57% saying they will be “significantly” higher and another 40% expecting prices to be “slightly” higher in 2023. Many operators (49%) are currently only able to pass on “some” of their inflationary costs to clients through increased prices.
With the post-Christmas peaks selling season just weeks away, most operators intend to return to more normal pre-Covid marketing budgets in 2023, although there may be some variation in the timing of campaigns.
Travel firms’ marketing messages in peaks will continue to focus primarily on inspiration (55%) and destinations (52%), but offering “value” is also likely to be important (36%) to stimulate sales. Trunkfield said operators may need to offer added value to clients, such as VIP airport security passes and discounts to tempt them to book.
More encouragingly, the survey also highlights signs of continued pent-up demand for the trade in 2023, alongside a desire by some consumers to splash out on “more premium holidays”.
CONTINUED DEMAND
Britons are increasingly feeling the financial pinch as the cost of living crisis bites harder, but the relatively positive news for travel is that they plan to prioritise spending on holidays.
The latest quarterly consumer survey of 2,000 UK residents by PwC in October found that the worsening economic situation has not diminished consumers’ intention to travel in 2023.
The poll revealed financial factors are now the largest barrier to consumers travelling in 2023, while other worries such as travel disruption and fear of catching Covid have eased. Despite the financial squeeze, most people (82%) are expecting to spend the same or more on holidays in 2023 as they did this year.
Eleanor Scott, director, travel and leisure, at Strategy& for PwC UK, said: “Spending on experiences and holidays seems to be a real priority for people – data in recent months shows travel spend up year-on-year while most retail categories are down.”
The overall economic picture may be gloomy, but at least consumers seem determined to protect their holidays in 2023 – even if that means trimming budgets and searching for better deals and extra flexibility when booking.
