Consumers appear to be cutting back on everyday luxuries, but are still planning to splash out on holidays in 2018, according to research by leading audit, tax and consulting firm RSM.
The survey of more than 2,000 adult consumers across the UK revealed that over half of those questioned (51 per cent) now describe themselves as ‘cost- conscious’ buyers when it comes to spending on clothes, homeware, technology, beauty and eating out.
However, a quarter of consumers across all generations said they had spent more on holidays in the past 12 months, with the same proportion planning to increase their spend on travel and tourism next year.
The findings appear to contradict the theory of the Lipstick Index – the notion that in times of economic hardship, consumers choose affordable luxuries over big ticket purchases – and point to an attitudinal shift among consumers who favour experiences over things.
Ian Bell, partner and head of travel and tourism at RSM said:
‘We’re seeing the rise of the experience economy. Whilst our research illustrates the emergence of cost-conscious consumers as the economic squeeze on living standards intensifies, today’s consumers still want to spend big on brag-worthy experiences whilst showing more restraint on everyday necessities.’
David Taylor, managing director of Neilson Holidays said:
‘The summer holiday remains sacrosanct – they’re effectively ring-fenced, and it is during these holidays that consumers will have the propensity to spend more, come what may. Whereas winter holidays remain more discretionary and vulnerable to the cost-conscious, particularly in times of austerity.’
Asked on why the Lipstick Index may no longer apply, he added:
‘Life is a lot more pressured than 25 years ago. Our lives are busier. The pressures applied at school and in our jobs are far greater. Holidays have therefore become the beacon for reconnecting with our family and friends and unplugging from our daily lives and distractions. Holidays, and more significantly experiences, have become far more important to us.
‘The fast growing experience economy is fuelled by both ends of the demographic scale - by a health-conscious generation Z who have always prioritised active holidays and experiences, and by the more mature who increasingly want to do more than sit on a beach. Consumers across the board are recognising that people switch off better by switching on – it’s a more effective means of distraction from our daily lives.’
Ian Bell adds:
‘While travel operators are likely to be the biggest winners in the experience economy, success is not guaranteed. Gathering consumer data, watching trends and tracking shopper behaviours will deliver the information retailers and operators need to stay relevant. The key will be to employ people with the right skills to make sense of it.’
The survey, entitled ‘Who are today’s consumers?’, also asked respondents to list their top three choices of how they would spend an unexpected windfall of £1000. Around 60 per cent said they would choose to pay off their debts, while just over half (53 per cent) said they would put it towards a holiday and a third (34 per cent) would spend the money on clothes and shoes.