Overseas Cash Masks Downturn In Home Grown Leisure Spending, Says KPMG

An influx of cash from foreign tourists could be masking a slowdown in spending by UK nationals on leisure activities, says KPMG.

Since the EU referendum the fall in value of the pound has boosted inbound tourism, reviving the sector at a time of uncertainty for UK business. Latest figures from the Office of National Statistics show that overseas visits to the UK in 2017 are at an all-time high since records began in 1986, and recent data from Expedia shows there has been a significant increase in interest from international and domestic holidaymakers looking to travel to the UK this year.

UK hotel and other accommodation providers have been celebrating increased revenues throughout their sector, however this is not seen to be filtering through to the rest of the UK leisure sector, with pubs and restaurants in particular struggling to boost their takings. Last month saw sales growth of only 0.6% across pubs and restaurants despite good weather, according to the latest Coffer Peach Tracker.

KPMG‘s Head of Leisure, Will Hawkley, believes that the reason rising hotel revenues are not being mirrored across the rest of the leisure sector is due to growing caution amongst UK customers, who are reining in spending in the wake of creeping inflation and a slowing down of real wages and disposable income.

Will Hawkley said
“The increase in accommodation revenues is great news for the UK economy with increasing inbound tourism and staycation numbers demonstrating that the UK remains a top holiday destination.

“However when looking at pub and restaurant takings in the UK over the last twelve months you will see that not much has changed. Revenues remain flat, with numbers occasionally tipping over in to minus figures and I believe that sadly the problem is potentially more serious than is evident at first glance. The injection of cash from inbound tourists could be seen as creating a false sense of security amongst leisure proprietors. If you were to suddenly remove this layer of sales you would see that the real decline in UK leisure spend by UK nationals has been masked.

“Figures from Cardlytics that highlighted card and contactless payments within the leisure sector have increased could also potentially be misleading, as it has never been easier to use contactless payment, and since the payment limit per transaction was raised from £20 to £30 the need to carry cash has lessened significantly. Thus these cashless payments are artificially increasing card payment figures.

“To continue to grow in this tough marketplace, operators in the pub and restaurant sector must continue to focus on reducing costs and encouraging more custom.

“The use of technology will be crucial in achieving cost efficiencies by enhancing the customer experience and reducing back of house costs. Encouraging patrons to order from a tablet device provided or a downloadable app can not only speed up the sales process, but it can also enable more orders to be taken at any one time. The aim of which is not to replace interaction with those working at any given establishment, but to improve the customer experience by adding something that differentiates you from the competition. As we have seen in the US the use of such technology can also result in significant up-sells.

“With the summer months shortly coming to a close, and the inevitable seasonal drop, off now is a key time for the sector to really focus on cost efficiency and new ways to attract customers whilst increasing spend per head. The use of data and technology will be key to driving innovation and the future success of the sector.”