HILLS BALFOUR WEEKLY REPORT – 27 January 2012

WHAT’S HAPPENING IN THE UK TRAVEL INDUSTRY:

‘Golden age of travel’ will create jobs... A global study released at the World Economic Forum in Davos shows the importance of travel in stimulating the economy. The research revealed that international travel is considered even more important than the internet, TV/movies, or political diplomacy at boosting the economy and breaking down cultural barriers. The study was conducted by market research firm Penn Schoen Berland on behalf of Marriott International and included the views of 1,100 global travellers and opinion leaders from eight countries, including the UK, the US, Brazil, China and France. ‘I believe we are entering a “Golden Age of Travel” where opportunities to do business and travel abroad are opening up like never before,’ said Arne Sorenson, Marriott International’s chief executive-elect and current president. ‘Travel opens up your mind, your heart and your wallet. This survey shows it is also a powerful form of soft diplomacy in the world today.’ The poll showed 96% of respondents believed that travel and tourism stimulates the economy, while 77% felt that ‘the more people experience other countries and cultures, the more peace will spread’. According to the World Travel & Tourism Council (WTTC), the industry is predicted to account for an extra 69m net jobs by 2021 - almost 80% of which will be in Asia, Latin America, the Middle East and Africa. WTTC estimates that total contributions of travel and tourism to the global gross domestic product (GDP) are forecast to rise by 4.2% annually to $9.2 trillion by 2021.  

STA names 2012 the ‘year of student travel’. University fees and youth unemployment will trigger a boom in student travel this year, according to STA Travel. The youth travel specialist predicts 3m young people will plan a gap trip this year – higher than official estimates of 2.5m that have recently been published. STA Travel group managing director John Constable said: ‘For many young people, 2012 will be their year of travel as they re-evaluate future plans. ‘Young people have used travel to broaden their horizons for many years, however this avenue has become more formalised with many young people incorporating some sort of skill and CV-boosting activity while they're away.’ Last year the average age for an STA Travel customer was 23 years old. However, STA expects the average age to drop in 2012, with more 18-year-olds heading off after their A-levels. STA Travel has seen the number of students heading overseas to work, study and take part in volunteer projects rise by more than one-third in the past 12 months. The company also said there has been a change in the length of overseas trips taken by young people, with ‘snap gaps’ – shorter gap experiences becoming common.

Mild winter boosts easyJet results.

EasyJet has reported “strong” results for the first quarter, carrying 8.1% more passengers than the same period last year with total revenue increasing 16.7%. The no-frills carrier made £763 million in revenue, which it attributed to an improvement in unit revenues, which was up 9.2% to £51.83 per seat. It said both ticket and non ticket unit revenues “showed good growth” but average sector length declined slightly. The airline also benefited from the mild winter this year, with seats flown increasing by 6.9% to 14.7 million. Its cost performance improved due to the lack of snow, with cost per seat excluding fuel declining by 1.6%. It said that excluding the impact of the snow disruption, planned increases in airport charges and crew costs meant that cost per seat excluding fuel rose by 2.5% on a reported basis. In November it said it expected a 4% increase in the first half of the year.

Value-driven market boosts all-inclusive bookings. Value-driven consumers have boosted the all-inclusive market to make up half of all package holiday bookings, according to a new report. Research released by Key Note Market Assessment has found that bookings for all-inclusive holidays,

which includes cruises and activity holidays, increased 50% between 2008 and 2011 and is estimated to take a third of the package holiday market share. Its popularity has grown as consumers look for prices within their budget, financial protection and convenience during the weak economic climate. It is thought that the outbound holiday market will remain stagnant this year due to continued consumer uncertainty, while domestic breaks could be more popular although its all-inclusive share may show little difference. Generally the all-inclusive market is set to have ‘strong

growth’ in 2012, according to the report, although taxes, last-minute bookings and moves to online distribution will be significant factors.

 

WHAT’S HAPPENING IN THE UK ECONOMY:

Financial Services Bill is unveiled by Osborne. The Chancellor George Osborne has revealed details about the Financial Services Bill that will overhaul regulation of the sector. It will give the Chancellor the power to veto decisions made by the Bank of England when dealing with bank bailouts and other interventions. One aim is to prevent a repeat of the Northern Rock collapse. The bill will replace the so-called Tripartite structure, introduced by the previous Labour government. The structure was made up of the FSA, the Treasury and the Bank of England, a system George Osborne said was "incoherent" and "without clear lines of accountability". One major change will see the abolition of the Financial Services Authority.

UK economy shrinks by 0.2% in last three months of 2011. UK economic activity shrank by 0.2% in the last three months of last year according to official figures. It marks a sharp drop in economic activity from the third quarter of 2011, when gross domestic product (GDP) expanded by 0.6%.

The figures, from the Office for National Statistics (ONS), are a preliminary estimate, which could be revised either up or down by 0.2%.

The ONS figures also show that the economy grew by 0.9% during 2011.

Osborne to gamble on early tax cuts. George Osborne is looking into the possibility of expediting the increase in the personal tax allowance to £10,000 a year ahead of the current 2015 target. The Chancellor is trying to help low and middle earners so that they can increase spending, following signs that the economy shrank by 0.2 per cent during the last three months of 2011. The Liberal Democrats made this tax cut a key pledge during the 2010 election, and Nick Clegg has been granted clearance from the Treasury to call for “further and faster” action towards the £10,000 tax-free income target.

 

WHAT THE UK PAPERS ARE SAYING:

Costa tragedy: Cruise line offers £9,000 compensation. Costa Cruises has offered passengers from the stricken Costa Concordia around £9,200 in compensation for lost baggage and psychological trauma. The cruise line will also reimburse passengers the full costs of their cruise, travel expenses and any medical expenses they sustained after the ship ran aground and capsized. The announcement was made today following negotiations between the cruise line’s representatives and Italian consumer groups, representing 3,206 people from some 61 countries who apparently suffered no physical harm when the ship struck rocks off the coast of Tuscany. In a statement, the line said that those passengers who lost loved ones, or who were injured would be covered under a separate proposal that would “take into account their individual circumstances”. It added: “This compensation package is higher than the current indemnification limits that are provided for in international conventions and the laws currently in force. The €11,000 lump-sum payment will be offered to all passengers, including non-paying children, regardless of their age.

Libya slips back towards the barbarism of Gaddafi. The United Nations has criticised Libya’s National Transitional Council for its failure to bring the country’s militia groups under control, following critical reports from human rights groups. Amnesty International has claimed that prisoners accused of supporting Muammar Gaddafi have died following torture, while Médecins sans Frontières has decided to pull out of Misrata after being asked to treat victims of torture. It is believed that the new Libyan authorities are targeting sub-Saharan Africans, because they are seen to have fought as mercenaries on behalf of the Gaddafi regime.

Hostages are saved by men who killed Bin Laden. The US Navy Seal Team Six, famed for their killing of Osama Bin Laden, continued their successful run and rescued two kidnapped civilian mine-clearers from Somalia on Tuesday night. American Jessica Buchanan, 32, and Danish Poul Thisted, 60, had been held hostage since October when their bodyguards tipped off a local gang. With "actionable intelligence" pinpointing their location and with favourable weather, President Obama sanctioned the mission to go ahead Monday. Obama had codedly let slip the success prior to his State of the Union address, when he pointed to Leon Panetta, the Defence Secretary saying: "Good job tonight."

Syrian army 'attacks restive Homs and Hama'. The Syrian army has launched renewed assaults on several cities including Homs and Hama, killing dozens of people, according to activists. Most of the deaths have occurred in Homs, rights groups say. The Arab League says there has been a "high escalation" of violence in recent days. A BBC reporter in Damascus says the regime appears to be losing control of rebellious areas of the capital. The UN Security Council is due to discuss a possible resolution on Syria. The BBC's Jeremy Bowen in Damascus says opposition fighters have set up checkpoints and appear to move around freely in the suburbs of Douma and Saqba. President Bashar al-Assad's forces still operate in these areas, but they do not appear to be able to maintain control, our correspondent says.

And on a lighter note…

Hands up who’s keen to ride on this roller coaster... no one?