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Update on the leisure sector

The Deloitte Consumer Tracker Q2 2021

Following a strong rebound in Q1 2021, consumer confidence bounced back to its pre-COVID-19 level in Q2 2021 and the Deloitte Consumer Confidence Index rose by two percentage points quarter on quarter to -9%.

Increased spending in the leisure sector reflects the reopening of the economy

With the reopening of indoor hospitality in England from 17 May, there was a huge increase in net spending in most of the leisure categories in Q2 2021 compared to the previous quarter. As consumers returned to socialising in restaurants and bars, the’ eating out’ and ‘drinking in pubs and bars’ categories saw the biggest quarterly rise in net spending ever recorded in this series, and they are now significantly higher than their pre-COVID levels. These two categories were up by 50 percentage points and 38 percentage points respectively, compared to the previous quarter. The yearly growth rates were even more impressive, with net spending on eating out jumping by 83 percentage points, while net spending on drinking in pubs and bars increased by 64 percentage points. Following the long-awaited reopening of indoor coffee shops net spending in coffee shops and in sandwich shops grew by 31 percentage points compared to Q1. In addition to satisfying their hunger and thirst, consumers also turned their attention to holidays and culture. With international travel restrictions still in place at the time of the survey, consumers were more likely to opt for ‘staycations’; and spending on short holidays grew by 24 percentage points compared to Q1 and by 21 percentage points for long holidays. With all entertainment and cultural venues closed, consumers focused on in-home entertainment during the pandemic, but as soon as museums and cinemas reopened there was a switch from in-home leisure (-9 percentage points this quarter) and betting and gaming habits (+1 percentage point) in favour of culture and entertainment, which enjoyed a 24 percentage point increase in Q2 2021 compared to Q1.

At-home workouts became hugely popular during the coronavirus pandemic and the habit will not disappear overnight, but people also returned to the gym in Q2 with a 19 percentage points increase in net spending on gym or playing a sport compared to the previous quarter. COVID-19 has accelerated the adoption of a hybrid model of online exercising and workouts in gyms which will continue after the pandemic ends.


Spending intentions for the leisure sector in Q3 2021

In Q1 2021, the consumer mood was boosted by the road map announced by the government for the easing of lockdown restrictions. Improved consumer confidence combined with pent-up demand meant that in Q1 spending intentions for Q2 2021 in the leisure categories were high, and our latest net spending data for Q2 demonstrates that these intentions materialised into actual spending. As a result of the optimism in Q1, although spending intentions in Q2 for Q3 2021 are up year on year across all the leisure categories, they are down compared to the previous quarter, with the exception of the in-home leisure and betting and gaming categories.


According to the Office for National Statistics (ONS) turnover in the hospitality sector rose to £6.9 billion in May 2021, the highest figure since August 2020, but 25% down compared with 2019 levels. The ONS reported that at the end of June spending in bars and pubs remained less than 70 per cent of pre-pandemic levels.1

While the hospitality sector seems to be recovering quite quickly, thanks to the pent-up consumer demand for its services, many businesses in the sector will be weighed down by debt and rent liabilities for at least the next few years. A recent survey of executives from the hospitality industry showed that while two-thirds (62%) expect 2023 to be the year of recovery for the hotel industry, 36% do not expect the industry to recover to pre-pandemic levels until 2024 at the earliest.

In addition, in the three months to June job vacancies in the hospitality sector were well above pre-pandemic levels. That could point to the beginning of a temporarily tight labour market or bottleneck, where hospitality businesses are looking to increase employment but cannot recruit the numbers they need. Indeed, according to the same survey of executives from the hospitality industry, hiring and re-staffing is now a major priority for 42% of the respondents.

Meanwhile, because of nervousness among consumers about soaring COVID infection rates, there was a mixed reaction to the long-awaited removal of all restrictions which took place on 19th July, including an end to the limit of six on indoor parties, compulsory mask wearing and social distancing. The sector continues to be at the mercy of restrictions imposed because of the virus and its new variants. For the travel sector it means constantly updating travelling information to comply with the latest changes in government guidance to the traffic light system. For consumers, this has resulted in confusion and a game of lottery as to whether the destination they thought was safe to travel to in one week remains on the green list the next. It makes planning for a holiday abroad difficult for travellers and the prospect of recovery for the sector more uncertain. Careful planning will be required to handle the pent-up demand from eager travellers while remaining flexible as destinations move up or down the traffic light system. The travel industry needs to balance demand and capacity, as well as recall furloughed staff and retrain them quickly. In the airline sector, if a carrier is too ambitious, it risks increasing capacity too quickly and incurring higher costs. However, if it is too conservative, it could miss the opportunity to boost revenues. Many cruise lines have also adapted to the uncertainty around foreign travel rules by offering ‘seacation’ sailings, with destinations around the UK’s coastline.

Much of the recovery continues to rely on pent-up demand

As summer 2021 has progressed, consumers’ hopes of resuming leisure activities have been dented by the growing rate of infections due to the Delta COVID variant. The sector will be relying on consumers continuing to spend the savings they accumulated during the pandemic. However, according to our Tracker research, when asked about their savings and whether they intend to spend them, one in five consumers (21%) responded that they have not been able to save since March 2020. Among the 79% of consumers who have saved, 17% say that they do not intend to use their savings in the next year, 4% do not know whether they will or not, and 58% intend to spend some of their savings in the next 12 months. When consumers were asked in which categories they intended to spend some of their savings, a half said they will be spending on holidays and hotels (49%), and about a third intend to spend on eating out (31%) and going out (30%), boding well for the travel and hospitality sector. However, the question remains how many businesses in the sector will manage to survive until most consumers feel safe enough to spend on travel and hospitality and until the headwinds holding back the sector, such as the tight labour market, subside.

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1 https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/articles/coronavirusanditsimpactonukhospitality/january2020tojune2021

The Deloitte Consumer Tracker Q2 2021

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