UK consumers scale back leisure spending as pound suffers

25 May 2017 Consultancy.uk

UK consumers are currently continuing their trend of interest in spending on experiences over goods, finds a new study. While the research demonstrates that consumers have relatively similar spending plans intentions to last year however, long-term trends such as inflation, weak wage growth and Brexit may create uncertainties.

Deloitte’s most recent ‘Passion for leisure’ paper has explored current trends around consumer spending in leisure by respondents to its UK survey, broadly demonstrates a trend of tighter budgeting amongst consumers. The research attributes this decline to, among other things, rising inflation, a slowdown in nominal wage growth, a weak pound, and the uncertainty caused by Brexit, which are starting to put pressure on consumers’ planned leisure spending.

‘Passion for leisure’ explores a variety of data points, from the quarterly analysis of recent years, to year-on-year comparisons and demographic breakdowns.

Beginning with specific spending in the past three months, the paper states a traditional post-Christmas tightening of the belt could be seen, after the indulgence of late December. When comparing the rates from the final quarter of 2016, numbers in the first quarter of 2017 were predictably lower – with the greatest reductions in spending found in in-home leisure activity spending which decreased by a further 4%, eating out which shrank 3%, and visiting coffee shops/sandwich shops which fell by 3% as well.

Category spending in the last three months

There were a number of bright areas however, with the number of people paying for short-break hotel stays and long-break leisure travel seeing slight increases in net spending relative to the previous quarter, with figures standing at -4% compared with -9%, and -4% against -8% respectively.

This was more than a seasonal pattern however, as in terms of year-on-year spending patterns however, the first quarters of 2016 and 2017 also showed an intent to scale back leisure spending among the public. Consumers were markedly less happy to spend on the gym or playing sport this year, with -5% spending compared to -1% in the same quarter of 2016, while other leisure activities also fell from -8% to -10%

Again, some areas saw minor gains, as holidays, hotel stays and leisure travel, both long and short, saw slight increases of spending interest from -4% in 2016’s first quarter to -5% in 2017, and -4% vs. -7% respectively.

Mixed Results

Encouragingly for the leisure industry however, looking forward to the next three months, the study notes that consumers are slightly more reluctant to commit to further tightening their belt, relative to the last quarter of 2016. In the eating out category the net reported spend is projected to increase, up from -17% to -11%, with similar numbers forecast for drinking in pubs/bars. Coffee and sandwich shops meanwhile are set to see a slight increase +1% between the quarters, with a similar result for in-home leisure activity.

The biggest increases were again noted in the holidays, hotel stays and leisure travel segments, for both short and long breaks, which in future are expected to elevate to 0% and +1%.

Category spending over the next three months

Year-on-year meanwhile the research again highlights both improvement and deterioration in certain areas. Over the last year, eating out and drinking in pubs or bars, for instance, saw slight increases, both of 1% to -10% respectively, while coffee and sandwich shops and in-home leisure activity saw slight deterioration on last year of -3% and -2% respectively. Cultural entertainment too, saw a decrease, by -3%, reaching -10% in Deloitte’s survey of spending.

The research also took in demographics based approach to changes in consumer net spending sentiment by category. Compared to the average for the next three months, the 18-34 year old millennials are considerably less keen on spending on drinking in coffee shops / sandwich shops and in-home leisure, which fell from -16% to -18% and from -10% to -18% respectively. Culture and entertainment spending too is set to see a decrease from the category, from -8% to -11%.

The category is keen to spend more on eating and drink outside of home however, seeing increases from -14% to -10% in dining and -14% to -7% in pubs. With rising ticket prices and stagnating wages nobbling the generation’s spending clout however, one of the biggest drops was attending live sports events, which plummeted from 4% last year to -3% in 2017, while engaging in sport or gym-routines both saw slight decreases in spending intent, at -5% last year to -7% this year.

Simon Oaten, a Partner in Hospitality and Leisure at Deloitte, commented on the trends, “The focus on health and wellbeing is as expected for the start of the year, with spending falling for eating out and rising for gym and sport-related leisure activities. Overall, consumers are continuing to prioritise holidays, which is why spending has increased for both long and short-haul trips.

Oaten added, “The habitual and prioritised nature of leisure spending continues to prevail, and for younger consumers, that means going out and socialising over some food and drinks. Millennials are favouring experience-led leisure activities and in doing so are challenging the perception that young people stay at home glued to their screens.”

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