Graham Pickett of Deloitte slides from Visit England #VEC13 event

© 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]


Agenda

• The role of travel in the global economy

• The UK context

• Consumer economy

• Travel economy

• Infrastructural challenges

• Actions for the travel sector

3


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



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



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


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


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


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


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


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%


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


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


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 (%)


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


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


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