Bags packed: Reuniting with lost holidays
Prolonged inflation has taken its toll on consumers’ finances. Even as inflation rates show signs of easing , roughly 50% of Irish consumers surveyed in Deloitte’s Global State of the Consumer Tracker feel financially worse off compared to a year ago. Many continue to cite concerns around savings and nearly half still say they’re delaying large purchases. The Irish sense of financial well-being seems to have taken a hit, and over the past year, so has spending confidence. Recession warnings certainly aren’t making matters any better.
Through all the gloom, however, the Irish travel industry recovery doesn’t seem to have skipped a beat. Hotel occupancy is beginning to rival pre-pandemic levels. Rooms command significantly higher rates compared to 2019. And in February 2023, more passengers moved through Irish airports than February 2019. Lagging group demand and inbound tourism must improve before the industry fully recovers. But at the very least, travel’s current momentum doesn’t seem to tell the story of a country slipping closer to potential recession.
Irish consumers may lie at the heart of the recovery. After years without coveted getaways, built-up pandemic demand is likely still shaping industry dynamics. Travel booking intentions (the percentage of survey respondents likely to book leisure trips within the next 3 months) have been on a clear uptrend since 2021 (figure 1). More recently, booking intentions have
been particularly strong for international travel. This segment is up year on
year, signaling a travel recovery still in full swing.
Figure 1
Leisure travel booking intentions in the Ireland remain on a long-term uptrend
Travel’s recovery story probably isn’t just about growth. But also a bit of recalibration. Booking intentions aren’t rising across all travel segments. Private accommodation rentals, for example, have weakened considerably since early 2022 (figure 1). Throughout the pandemic, travelers gravitated to segments better suited for social distancing. As health and safety concerns fade away, pandemic travel preferences are fading along with them.
Making up for lost time
Travel intentions continue trending higher, even as the Irish contend with prolonged financial challenges. And part of the reason might be how consumers are prioritizing their overall spending.
Discretionary spending intentions have weakened considerably since the Fall of 2021-when inflation first began putting a strain on household budgets (figure 2). But planned spending cutbacks, however, have been deepest in categories such as restaurants, recreation and entertainment, and electronics. Spending intentions for leisure travel, however, have remained much more resilient. The prioritization of travel over other discretionary categories is further evidence that built-up demand still exists in the market.
Figure 2
Spending intentions for leisure travel have remained more resilient compared to other discretionary categories
Additionally, when it comes to Irish consumers planning to take holidays within the next three months, the number of savers outnumber the spenders on those willing to upgraded travel experiences.(figure 3). This is also seen across other countries, including Spain, Belgium, Denmark, and Brazil, savers also outnumber spenders.
Figure 3
Irish Consumers planning leisure travel within the next three months are significantly more likely to cite a willingness to save rather than spend on upgraded travel experiences.
What’s in a trip? Many ways to adjust based on budget
Despite the many positive signals around travel spending, roughly one-quarter of soon-to-be travelers surveyed say they’re in savings mode. And this group is important to pay attention to. If economic conditions worsen, travel savers could quickly grow in number.
Figure 4 presents 10 distinct points in the travel journey (from planning to in-destination)—and illustrates where “spenders” intend to splurge and where “savers” intend to make sacrifices on upcoming leisure trips.
Below are some key takeaways:
Figure 4
Irish consumers planning to travel for leisure within the next three months are more likely to make sacrifices around hotel and air fare class, rather than when, where and how long they travel
- Lodging location is king: Consumers are less likely to compromise by staying further from the beach/city center; instead, more cite a willingness to downgrade on amenities or class of lodging.
- Location in terms of destination is another high priority: More would prefer to find a less-popular time of year to travel than miss out on visiting the destination they want to visit. This sentiment lines up with stronger booking intentions for international travel in recent months.
- Itinerary is the “location” of aviation: When it comes to flights, soon-to-be travelers will book a lower-fare class or forego an upgrade before they will accept an inconvenient itinerary. Even savers appear to be trying to avoid those painful itineraries.
- Let me do my thing! In-destination travel activities remain a high priority for savers and spenders alike. More travelers would rein in their restaurant spend than miss out on the experiences they want to have.
After being dealt a heavy hand throughout the pandemic, airlines, hotels, and other travel suppliers face new economic uncertainties that bring the potential to weaken consumer spending confidence. But sentiment data suggests the Irish are prepared to put up a fight to protect their holidays, which could help mitigate some headwinds from a potential downturn. Barring any further economic volatility, the 2023 summer season could be shaping up to be a strong one.
In the coming months, Deloitte’s 2023 Summer Travel Survey and Corporate Travel Study will offer further insight into consumer holiday intentions and trajectory for corporate travel’s recovery.
