Leisure spending has seen a continued uptick in performance over the last 12 months, in spite of consumer belt-tightening and cost of living increases
key consumer and occupational trends
When headlines regarding the cost of living, surging product prices, and a recessionary environment took hold in 2022, we saw a dramatic uptick in inflation; the Consumer Prices Index (CPI) reached double-digits for the second time in September that year and remained there until the end of Q1 2023.
Since last April, however, inflation has been trending steadily downwards. Most recently, CPI rose by 4.0% in the 12 months to January 2024, the same as the previous month but up from 3.9% in November. Despite this marginal increase, it remains a significant improvement on its most recent peak in October 2022 at 11.1% and represents the first time the rate has increased at all since February of last year.
At the same time, we have seen a steady rise in consumer confidence. Currently, the GfK index stands at -29.3 on a rolling twelve-month basis, below the -10.9 average of the last two decades but 12.8 points higher than in March last year, the lowest point the index has fallen in the last 20 years.
The obvious conclusion to any improving customer fortunes is a similar uptick in the performance of each of the UK’s leisure subsectors. Revolut card spend data supports this notion; both entertainment and pub, restaurant and fast food spend collectively, have been trending above their long-term averages for some time, on a rolling seven-day basis (Figure 1).
This is perhaps unsurprising considering the comparatives include the doldrums experienced through the Covid era. Nevertheless, entertainment spend, which includes membership clubs, cinemas, ticketed events, sports, galleries, and tourist attractions, has also performed above its pre-Covid benchmark at a number of significant points throughout 2023. Easter and the summer months saw the biggest spikes in entertainment spend, peaking in July at 240 basis points above the mean for February 2020.
Meanwhile, pub, restaurant and fast food spend has seen even more impressive results. Spending between May and November 2022 indexed above pre-Covid levels. Most recently, February to November 2023 saw the same level of performance, peaking in the summer months at 400 bps above the February 2020 benchmark. In both 2022 and 2023, there was a brief hiatus in pub, restaurant and fast food spend in the run-up to Christmas, where, once again, performance indexed above the criterion before typically slowing in the post-festive period.
GlobalData’s monthly survey of 2,000 consumers, and their monthly spending activity (carried out among a representative sample of the population in terms of demographics and geography), does much to support the findings of Revolut’s card spend index (Figure 2). It suggests consumer spend on leisure activities has remained elevated for some time. It has, in fact, trended significantly above the August 2018 index base since April 2021, as we emerged from the pandemic-driven dip in participation that came with the government's lockdown initiatives. December 2023 saw the index reach 142.4, which implies we saw 42.4% more spent on leisure as people geared up to celebrate over the festive period, compared to the pre-Covid benchmark. This is an increase of 15.8 on the previous month and 21.9 versus December the previous year.
Although it may seem counter-intuitive, elevated performance in certain leisure sectors is not unusual when consumers seemingly swing into belt-tightening mode. With the austerity we have witnessed over the last two years, the retail market has seen an increased focus on trading down and value-orientated shopping. This, in turn, has allowed consumers to make savings in their everyday, essential purchases and elevate the funds at their disposal that allow them to prioritise experiences – with many consumers still keen to make up for lost opportunities during the pandemic or keen to escape the pressures of a tightening economy.
The strong performance of pubs compared to restaurants suggests the consumer has been opting for a more affordable casual dining experience than a more formal restaurant meal
Sam Arrowsmith, Director, Commercial Research
Figure 3 highlights Barclaycard spend in 2023, in which hospitality and leisure spending grew by 10.3% over the year. There was growth across a number of subcategories too, including eating and drinking (7.1%), pubs, bars and clubs (6.8%) and takeaways and fast food (7.8%) – undoubtedly a positive result for the leisure market. Meanwhile, it was the bigger-ticket and non-essential spend that saw the largest declines, including DIY (-4.7%), electronics (-2.9%) and furniture sales (-4.8%) as consumers look to make savings and redistribute their expenditure elsewhere.
Despite an uptick in performance across several leisure pursuits, restaurants actually saw a spending decline of -6.3% in 2023 on Barclaycard card transactions, despite the overall uptick in eating and drinking spend. The strong performance of pubs compared to restaurants suggests the consumer has been opting for a more affordable casual dining experience than a more formal restaurant meal.
This certainly rings true when we consider the fortunes of the food and beverage (F&B) sector in the out-of-town market, which continues to see such significant appetite for growth, it is deserving of some specific focus.
The pandemic brought with it an explosion in the take-up and space requirements of a number of F&B operators across retail parks when social distancing was a key part of the public’s consciousness. What is clear is the factors that made retail parks appealing to consumers since their inception, namely convenient, easily accessible, highly visible roadside locations with large units and adjacent free parking, is why we continue to see such strong consumer demand for such schemes, particularly for drive-thrus.
In 2023, the out-of-town market has seen 733 new openings. 20% of those are F&B operators (leisure, as a whole, accounts for 30% of all new openings). Figure 4 highlights the top 20 most acquisitive brands in the retail warehouse sector in 2023. Eight F&B operators appear in the top 20, accounting for as many as 97 units.
Read the articles within Spotlight: UK Leisure – 2024 below.