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UK consumer spending on travel, Q4 2014

This sector report appears in Where’s Britain spending? – a quarterly report from Barclaycard on consumer spending in the UK. To read the full report, please use the download link below.

04 Feb 2015 09:00

In the fourth quarter of 2014, some of the key drivers that we see in this report – including falling fuel costs, greater consumer confidence and growing demand for value – had a clear effect on spending in the travel category.

Overall, the results were good. Spending was strong at 7.7% growth year-on-year in the fourth quarter, a rise from 5.8% in the third quarter.

Howard Archer, Chief European and UK Economist at IHS Economics, says falling oil prices should help the travel industry. “A few years ago there was a surcharge for fuel prices but there’s no need to have that at the moment,” he says.

In December, the ONS said falling fuel prices, caused by declining oil prices, had brought the costs of road and air travel down, with petrol prices dropping by 5.9% during November. This helps explain why average transaction values went down to -11.4% during the quarter, after being at -6.4% in the third quarter.

Another contributing factor to the falling transaction values could be people’s growing demand for value. Mark Tanzer, Chief Executive of the Association of British Travel Agents, says he is seeing strong demand for value-for-money experiences. “People want their holidays to work harder for them and they want to get more out of it. Not necessarily the holidays with lowest prices, but those where they can see lots of different destinations – sea cruises, river cruises, we’re still seeing a lot of growth in that area.”

Mr Tanzer also says that most people who are spending on travel today are those on higher incomes, who also have the highest rate of personal confidence. “We’re definitely seeing affluent holidaymakers driving growth in the market,” he says, “particularly those in social categories A and B. We’ll expect to see that continue.”

Generally when people go away at Christmas it tends to be a second or third holiday rather than the main holiday of the year. It tends to be the more affluent end of the market that take winter holidays.

Mark Tanzer, Chief Executive, ABTA

Salman Syed, UK Managing Director of Thomas Cook, agrees that the higher income segment is driving spending on holidays. “We have seen very strong growth in the higher end of the market, the luxury holidays,” he says. “We’ve just launched our exclusive brand in response to that demand so we clearly see that as a very high growth segment. The wage increase segment will hopefully accelerate that further.”

The positive news for travel spending looks set to continue. In the fourth quarter, 28% of respondents to our survey said they plan to increase their spending on travel over the next three months – up from 24% in Q3. We see similar increases in expected spending on airlines and hotels, up from 17% to 22% and 15% to 19% respectively.

Oct 14

Nov 14

Dec 14

Airlines

3.2%

7.6%

8.0%

Hotels

5.6%

8.2%

7.2%

Travel overall

6.0%

9.0%

8.3%

To find a selection of our latest and most recent consumer spending reports please visit our report hub.