Staycations give much needed boost to hospitality

As the interest rate increased for a 14^th consecutive month in August, Which? Consumer Insight Tracker revealed that 81 per cent of renters and 79 per cent of homeowners were worried about housing costs, despite falling prices in the energy sector offering some respite from soaring costs.

With the cost-of-living crisis continuing to spiral, the tourism sector was braced for the knock-on impact on consumer spending. Consumer research by Savanta suggested that up to a fifth of Brits would be opting out of a summer holiday this season.

There was a decline in August of consumer spending, with a 2.8 per cent decrease in credit and debit card spending – however, the British Retail Consortium revealed that there was a 4.1 per cent increase in sales in the year to August, indicating that consumers are opting to tighten their belts for essentials to afford luxuries, like holidays.

In fact, research by Travelodge found that 63 per cent of Brits have opted to book a holiday this summer despite the cost-of-living crisis, and 72 per cent of those have chosen a staycation as their holiday of choice. Staycation spending is predicted to hit £25.9 billion in 2023, with an average of £875 per person.

Our own late and failed payment claims data also suggests that hotels are benefitting from the popularity of staycations, with an 83 per cent decrease in late or failed payment claims in Q2 2023 from Q1 and a 35 per cent decrease year-on-year. Late and failed payment claims are early warning signs that a firm's supply chain is stalling, and often a precursor to insolvency.

Ruby Hartery, hospitality and insolvency expert at Atradius UK, says:

“Ahead of the summer season, the tourism sector was braced for a rocky road as consumers navigated a ‘quadruple threat’ of a cost-of-living crisis, rising energy costs, labour shortages, and changing consumer spending habits. The balance between affording our daily lives and enjoying the freedoms we missed out during the pandemic means it can be hard to predict how hospitality will fare in typically busy periods, like summer.

“Although the road to recovery has been challenging, the adaptability shown by the hospitality sector, with the ongoing popularity of staycations, offers hope for its resilience, as there are still opportunities for those who are more agile and can adapt to market conditions.

“Trade credit insurance provides a vital safety net, ensuring that suppliers in hotels, restaurants, and other hospitality businesses are financially protected against potential losses arising from insolvency. Ultimately, in an industry where trust and reliability are paramount, trade credit insurance enhances the tourism and hospitality sector's resilience and ability to flourish in a competitive market.”