According to the latest figures, overall consumer spending has continued to drop in the first months of this year, but the hospitality sector has continued to buck the trend.
Visa’s February 2018 UK Consumer Spending Index is based on Visa card spending and put together by economists from financial information and analysis firm IHS Markit.
A strong performance by hospitality sector
The falls in overall spending seen throughout 2017 continued into this year, with nine out of the last ten months recording negative figures. But after the usual quiet January for restaurants, hotels and bars, with growth falling to 3.7% from December 2017's 4.9%, the sector was the strongest in February. Hospitality saw a strong increase of 4.4%, comparing February 2018 with the same month last year.
Face-to-face vs online shopping
The spend in face-to-face transactions (basically high street spending) on a year on year basis continued to fall. But although many might assume that fall to be in favour of internet shopping, the fall in face-to-face transactions was a hefty -2.5% and wasn't matched by the online shopping increase, which was only 0.3%. People are therefore cutting down across the board, which makes the good figures for hospitality even more noticeable.
While online shopping isn't going to affect the hospitality sector in the sense of direct competition, as the products simply can't be consumed online, the sector must continue to embrace the internet as a sales, marketing and customer service tool to stay ahead.
The biggest loser was recreation and culture, which saw its biggest year-on-year decline since 2010. That is unusual as hospitality and leisure usually go hand-in-hand, at least to some extent. People visiting somewhere for leisure purposes will often need hotel space or, if they aren't staying overnight, will eat out before or after the event.
The chief commercial officer at Visa, Mark Antipof, said: "Britons have been in belt-tightening mode since last summer. February’s cold snap certainly didn't alleviate this situation. On the other hand, hotels, restaurants and bars experienced another strong month. The resilience of this sector is somewhat unique, having reported uninterrupted growth since February 2011."
Household income rises
At the same time, another survey reported by IHS Markit showed that household incomes are experiencing the fastest growth since 2016. The speed of the increase is most likely to have come about as a result of the increase in the minimum wage, on 1st April 2018. This, and the steady increase in the cost of living are raising concerns about interest rate rises in 2018.
Consumer spending has been dropping since uncertainty set in last summer. But if household incomes are beginning to rise, it may be that people are beginning to spend more on hotels, bars and restaurants as the outlay is relatively small and outlets are easily accessible.
Competition in the market is also pushing prices down slightly which also helps. This means that managers and executives in the hospitality sector need to keep a careful eye on local and regional prices to stay competitive.