Update on the leisure sector

The Deloitte Consumer Tracker Q2 2020

The Deloitte consumer confidence index remained at a record low in the second quarter of 2020, though it showed weak signs of a rebound as the lockdown started to ease from May after the COVID-19 pandemic reached its peak in the UK. The index recovered one percentage point from its historic low last quarter, to -17%, but consumers remained very pessimistic.

Latent demand to drive leisure spending as restrictions ease

There was a substantial slump in leisure spending patterns in what would normally have been a high spend second quarter with bank holidays and warmer weather. The continued lockdown left consumers with little choice but to pursue in-home leisure, which was the only activity that did not see a drop quarter on quarter. Business continuity and survival remained the key focus for most leisure and hospitality businesses. Operators had to manage the cost of labour and rent at a time of little or no income, investment plans had to be halted, potential acquisitions deferred and hiring suspended.

UK consumers seem to be more optimistic about the next three months and intend to spend more on leisure activities than they did in the last quarter, though overall spending intentions remain subdued. With the easing of the lockdown, latent consumer demand offers a glimmer of hope for a leisure sector recovery. Eating and drinking out saw the highest uptick in terms of net spending intentions. However, this may just be an initial surge driven by latent demand. Worried about the possibility of a severe economic downturn and a second wave of the virus, consumers are generally tightening their belts.

As a result, the leisure sector may need to prepare for a longer recovery time compared to other industries. The temporary schemes recently announced by the government regarding tax cuts, employment schemes and subsidies could trigger a quicker recovery in the sector. VAT for the tourism and hospitality sectors including food, accommodation and attractions will be cut from 20% to just 5%. The ‘Eat Out to Help Out’ scheme that offers diners a 50% discount on food at restaurants and bars for the month of August, will deliver immediate positive impact for businesses and consumers.

Some leisure activities to see a spike in interest as restrictions ease

Some leisure sectors could recover faster than others, as consumers hope to resume certain activities as soon as they are available. Shopping and drinking out are the first activities consumers plan to do, driven by their desire to socialise. In the next few months, UK consumers also hope to restart going to the gym and theatres, though indoor live events remain restricted. However, interest in dining out is less straightforward, only 22% of consumers feel it is safe to go to a restaurant within a month and a quarter plan to wait for at least six months.

Driven by domestic travel demand, holiday rentals and hotels in the UK may see an uptick sooner than air travel, where spending is not expected to pick up for six months. However, the partial lifting of both the two-week quarantine in the UK and the travel restrictions to some destinations, may improve the likelihood of consumers booking their summer break. The survey results suggest that there could be a spike in travel spending towards the end of the year and early next year, though that could change as the impact of the pandemic continues to cause fluctuations in demand.

The Deloitte Consumer Tracker Q2 2020

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