Viewpoint: Who can afford a weekend away during a cost of living crisis?

The impact of this is seen in the difference between the intention to take trips and trips actually taken. Last summer, while 50% of people had planned to take an overnight UK domestic trip, only 29% reported that they actually took it. Previously we have seen a much closer correlation between trip intentions and actual reported behaviour.

Something we have seen, which should be a concern for the UK domestic market, is that consumers are prioritising going overseas. The cost of living crisis is forcing people to make decisions and typically longer booking times for overseas travel means that these foreign trips are more likely to remain in place. Last summer, which was wetter and less sunny than 2022, also cut the chance that UK residents would book a last-minute domestic break.

For the UK, domestic travel has been at best stable year-on-year. But overseas travel has increased, particularly in the summer. This is only by a few percentage points, but that's a huge amount of demand, with hundreds of thousands of additional people going abroad. The UK market, though, has been supported by inbound travel, notably from the US, where many travellers still have vouchers from trips that were cancelled because of the pandemic, and the hope is this will continue.

What we are seeing is a pronounced shift in the nature of domestic demand that can be attributed, we believe, to the impact of rising interest rates. As a consequence of rate rises, demand is not so much choked off but transfers to a different demographic, according to whether consumers are net borrowers or net savers.

Borrowers are typically younger, they have mortgages and are just about keeping their heads above water. Compare them with net savers, who are mainly older, empty nesters who have paid off their mortgages, who have some savings and decent pensions, and are now benefitting from much improved interest rates on their savings. The change in activity is striking.

There are big changes in demand by life stage. Since 2021 the number of pre-nesters – that is 18- to 34-year-olds with no children in the household – taking a recent domestic break have declined, with retirees, conversely, increasing notably, especially outside the peak months. In 2021, just 24% of retirees took a UK overnight trip between April and September, but in the same period in 2023 this more than doubled to 55% of this segment. This is a dramatic change in the nature of demand in such a short period of time.

No other life stage saw so pronounced a shift. Part of that is because of the distance away from the pandemic; in 2021, many retirees were not travelling because they still had Covid fears, but now they are willing to travel and, financially, life is looking pretty good for them. For the hotel sector, this also means some change in the most sought-after destinations; while city or large town locations remain the most popular, we have seen quite an uptick for countryside locations.

The latest comments from the Bank of England suggest that net savers will be feeling more buoyant for a while to come, with Andrew Bailey, the Bank's governor, commenting in December 2023 that it was "too early to start speculating about cutting interest rates". The Bank's priority remains controlling inflation, with high interest rates the backdrop to the weak performance of the economy. The Office for National Statistics reported that GDP shrank by 0.3% on the month in October 2023, with the fourth quarter looking no rosier.

For the UK, success is to be found in attracting those retirees who are not affected by the pronouncements of the Bank of England. For an added boost, see what can be done about controlling the weather.

Cris Tarrant is chairman and founder of BVA BDRC