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© 2013 Deloitte LLP. Private and confidential.
Travel and the economy
Graham PickettLead PartnerTravel, Hospitality & LeisureDecember 2013
1
VisitEngland Visitor Economy Conference 2013
© 2013 Deloitte LLP. Private and confidential.2
Important notice
The document is proprietary to Deloitte LLP and should not be discussed, presented, copied, reproducedor circulated without the express written authority of Deloitte LLP. Where Deloitte is accredited as theauthor/source, such authority will not be unreasonably withheld.
Any requests should be forwarded (via email) to:
Graham PickettSenior Lead Partner, Travel, Hospitality & LeisureDeloitte LLP2 New Street SquareLondonEC4A 3BZ
Tel: +44 (0)1293 761232Email: [email protected]
© 2013 Deloitte LLP. Private and confidential.
Agenda
• The role of travel in the global economy
• The UK context
• Consumer economy
• Travel economy
• Infrastructural challenges
• Actions for the travel sector
3
© 2013 Deloitte LLP. Private and confidential.
The role of travel in the global economy
A notable global economic power
4 Source: World Travel & Tourism Council, UNWTO
6% of World’s Exports– ($1.3 trillion)
1 out of every 11jobs
9% of Global GDP
© 2013 Deloitte LLP. Private and confidential.
The role of travel in the global economy
Contribution to global GDP and employment is set to increase
5
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
0
5,000
10,000
15,000
Travel & Tourism - Contribution to GlobalGDP
Total Revenues (USD billion)Total Contribution to GDP (% Share)Real Growth, YoY(%)
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
0
100
200
300
400
500
Travel & Tourism- Contribution to GlobalEmployment
Total Employment (million)
As % of Global Employment (% Share)
Source: World Travel & Tourism Council, UNWTO
© 2013 Deloitte LLP. Private and confidential.
The role of travel in the global economy
Emerging economies fuelling growth
32%
22%
29%
-18%
12%10%
7%
33%
-1%
8% 10%
4% 4%7%
29%
7%
-2%
-11%
5% 4%1%
-2%
8%
42%
31%
15% 14% 13% 13%10% 8%
8% 8% 7% 7% 7%6%
5% 5% 5% 3% 3% 2%
-2% -4%-7%
% Change in Outbound International Tourism Expenditure
2010/11 2011/12
6 Source: UNWTO Note: % change over same period the year before, local currencies at current prices
© 2013 Deloitte LLP. Private and confidential.
65.0%
67.5%
70.0%
72.5%
75.0%
95
100
105
110
115
2006 Q1 2006 Q4 2007 Q3 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4 2013 Q3
Em
plo
ym
en
tra
te
GD
PIn
dex
(Base
peri
od
=2010)
UK GDP and Employment levels
UK Gross domestic product index (Seasonally adjusted)
UK Employment rate (Aged 16-64%, Seasonally Adjusted)
The UK context
General economic situation improving, with GDP and employment levels picking up
7 Source: ONS
© 2013 Deloitte LLP. Private and confidential.8
The consumer economyLack of growth in real incomes remains a key concern
-4%
-2%
0%
2%
4%
6%
8%
Jan
-06
Mar-
06
May-
06
Jul-0
6
Se
p-0
6
Nov-0
6
Jan
-07
Mar-
07
May-
07
Jul-0
7
Se
p-0
7
Nov-0
7
Jan
-08
Mar-
08
May-
08
Jul-0
8
Se
p-0
8
Nov-0
8
Jan
-09
Mar-
09
May-
09
Jul-0
9
Se
p-0
9
Nov-0
9
Jan
-10
Mar-
10
May-
10
Jul-1
0
Se
p-1
0
Nov-1
0
Jan
-11
Mar-
11
May-
11
Jul-1
1
Se
p-1
1
Nov-1
1
Jan
-12
Mar-
12
May-
12
Jul-1
2
Se
p-1
2
Nov-1
2
Jan
-13
Mar-
13
May-
13
Jul-1
3
Average earnings growth and inflation in UK
Average earnings including bonuses (%) UK annual inflation, CPI (%)
Source: ONS
© 2013 Deloitte LLP. Private and confidential.
UK consumers’ personal debt
Relying on UK consumers to stimulate further growth is risky
9
GBP £158.7 billion
Outstanding unsecuredlending in UK
GBP 54,178
Average household debt
Every 5 mins 3 sec
One declared insolventor bankrupt
GBP 1.428 trillion
Outstanding personal debt
GBP 163 million
Daily interest paid
Q3 2013
Source: The Money Charity
Total household debt projected to reach GBP 1.931 trillion in Q1 2018
© 2013 Deloitte LLP. Private and confidential.
Business confidence in the UKCFO confidence at its highest for nearly three years
10
-80%
-60%
-40%
-20%
0%
20%
40%
60%
07 Q3 08 Q3 09 Q3 10 Q3 11 Q3 12 Q3 13 Q3
Net % of CFOs who are more optimistic about the financial prospects for theircompany
Source: Deloitte CFO Survey Q3 2013
© 2013 Deloitte LLP. Private and confidential.
Eurozone indebtednessGermany continues to pay for the rest of the Eurozone, as Eurosystem imbalances remains wide
11 Source: Institute of Empirical Economic Research - Osnabrück University
-600
-400
-200
0
200
400
600
800
1,000
Net Balance of interbank payments with the Eurosystem/Target (EUR billions)
Germany Ireland Greece Spain France Italy Portugal
© 2013 Deloitte LLP. Private and confidential.
The English ConsumerImproved confidence and labour market driving discretionary spending in England
12 Source: The Deloitte Consumer Tracker
Net spending up Net spending down
Restaurants and hotels
(eating out and short breaks)
Q3 2013: -12%
Q3 2011: -25%+13 points
Going out
(cinema, theatre etc.)
Q3 2013:-19%
Q3 2011: -28%+9 points
Transport
Q3 2013: 15%
Q3 2011: 22%-7 points
Grocery shopping
Q3 2013: 21%
Q3 2011: 22%-1 points
Q3 2013: 31%
Q3 2011: 39%
Utility bills
-8 points
Holidays
(long breaks)
+11 pointsQ3 2013: -3%
Q3 2011: -14%
© 2013 Deloitte LLP. Private and confidential.
International travel to the UK
Emerging markets are growing but US and Europe still lead on inbound visitors
13
3.8
3.0 2.82.5
1.7 1.71.5
1.2 1.1 1.0 0.8 0.8 0.8 0.7 0.60.3 0.3 0.3 0.3 0.3
Top 20 Markets by Volume (in million)
2.4
1.51.2
1.00.8 0.8 0.8
0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Top 20 Markets by Value (in $bn)
Source: VisitBritain.org
© 2013 Deloitte LLP. Private and confidential.
International growth in outbound travelUK will compete with other countries to get their share of the growth
14
3.25%
4.40%
9.18%
8.75%
7.50%
5.38%
1.92%
2.68%
6.82%
4.08%
4.60%
4.40%
0% 2% 4% 6% 8% 10%
Mid East
Africa
South
South East
Asia & the Pacific
non-EU
EU
Europe
Central & South America
North America
Americas
World
Average annual growth forecasts for outbound travel by region,2010-2015 (%)
Source: Tourism Economics
© 2013 Deloitte LLP. Private and confidential.
Infrastructure challenges
Heathrow’s capacity constraining ambitions to be an international travel hub
15 Source: Heathrow Airport Limited (“One hub or None”, November 2012)
99%
71%
66%
62%
54%
0%
20%
40%
60%
80%
100%
0
200
400
600
800
1,000
Heathrow Paris Frankfurt Amsterdam Madrid
Flig
hts
(‘000s)
Flight capacity & European Players
Flight capacity (in '000s) Flights handled in 2012 (in '000s) Percentage Full (%)
© 2013 Deloitte LLP. Private and confidential.
Rails
0
10
20
30
40
50
0
5,000
10,000
15,000
20,000
Pa
ss
en
ge
rJ
ou
rne
y(b
illi
on
mil
es
)
Le
ng
tho
fN
ati
on
alR
ail
rou
te(m
ile
s)
Rail Network Length and Passenger Usage since1960
Length of National Rail route (miles)
Passenger Journey (billion miles)
Roads
0
1
2
3
0
100
200
300
400
Inve
stm
en
tin
pro
jec
ts(G
BP
bil
lio
n)
Bil
lio
nve
hic
lem
ile
s
Traffic Growth Vs. Government Investmentin Major Road Projects since 1960
Billion vehicle miles (all vehicles)Investment in major projects (GBP billion)
Infrastructure challengesRail and road travel infrastructure also needs strengthening
16 Source: Department of transport and HM treasury - UK
© 2013 Deloitte LLP. Private and confidential.
Driving economic growth through focused investment
Actions to make UK and England a more attractive tourism destination
17
Wide focus oninfrastructuredevelopment
Targeted marketing toattract high-spender
visitors
Pushing the digitalagenda across the travel
sector
Promoting Englandbeyond London as a
destination
© 2013 Deloitte LLP. Private and confidential.
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Deloitte LLP is the United Kingdom member firm of DTTL.
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend uponthe particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of thispublication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLPaccepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.
© 2013 Deloitte LLP. All rights reserved.
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18