Building on our ‘Tourism, leisure and events: Market in Minutes’ published in October 2024, this Spotlight explores the market in more detail and reports on the recent performance, emerging trends and challenges facing the wedding, holiday accommodation and visitor attractions sectors.

Technological advances, economic pressures, environmental factors, policy and demographic shifts are shaping the tourism, leisure and events sector

Political and economic backdrop

Tourism, leisure and events businesses will be impacted by new government policies. For example, short-term holiday lets in England and Wales could face minimum energy efficiency targets, while the City of Edinburgh Council is adjusting its licensing policy to address accommodation shortages during the Edinburgh Festival period. Policy change can be positive or negative – the challenge is to remain informed and compliant.

The 2024 UK Budget has significant economic implications for businesses and consumers: the reforms to agricultural property relief (APR) and business property relief (BPR) from inheritance tax will have a monumental impact on many of the country’s farms and estates. Since 1992, the owners of agricultural businesses have benefitted from 100% relief from inheritance tax on the agricultural value of their assets and their businesses’ trading property. From 6 April 2026, this will change. Under the new rules, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property. After that, a 50% relief from inheritance tax will apply to a deceased individual’s estate, meaning an effective inheritance tax rate of 20%. Our recent research estimated 88% of the UK’s farmland is impacted by APR and BPR reform.

Additionally, an increase in the minimum wage and employers’ National Insurance contributions from April 2025 will raise labour costs – and business rates relief will decrease from 75% to 40% in 2025/26. Tax benefits for furnished lets will be removed, and the higher rate of Stamp Duty Land Tax on additional dwellings rose from 3% to 5% from 31 October 2024.

The challenge for businesses is to balance discounting to attract customers with raising prices to cover increasing costs.

VisitEngland reports a strong correlation between admission prices and visitor numbers, with popular sites able to charge a higher entrance fee. Figure 1 shows how inflation and wages have changed over time. Inflation impacts the cost of goods and services.

SAVILLS INSIGHT

“The national picture is generally mixed – with some cautious optimism, but also concern over significant challenges which lie ahead. Recent policy announcements from the government substantially influence this sentiment. Businesses are preparing for imminent changes, including adjustments to inheritance tax, minimum wage levels and employer National Insurance contributions.

Despite adverse weather, the financial performance of the tourism, leisure and events industries generally improved in 2024 compared to 2023. Consumer spending rose as cost-of-living pressures eased slightly from post-pandemic peaks. However, inflation remained above target levels, presenting ongoing financial challenges.

Despite these challenges, we’ve seen businesses with greater resilience that often buck the national trends. Those who achieve the greatest success offer high-quality and value-for-money propositions, continue to innovate and effectively embrace the emerging trends of authenticity, sustainability and wellbeing.”

Unlocking rural potential

The tourism, leisure and events sector brings significant benefits to rural areas by supporting local businesses and creating jobs through spending on accommodation, food, transport and activities. The industry also promotes and preserves local cultures, traditions and heritage via festivals, exhibitions and events. Sustainable and eco-tourism help preserve the natural environment and wildlife.

The shift away from agricultural subsidies, increased business costs and recent policy changes are putting a strain on farm and rural estate incomes. In England, the Defra Farm Business Survey for 2023/24 reports a decrease in average farm business income of -53% compared to the previous year. The tourism, leisure and events sector offers many diversification opportunities for farmers and landowners to secure alternative sources of income. Successful diversifications can lead to increased income and reduced business risk.

According to Defra, just over two-thirds of farms in England had some form of diversified activity in 2023/24. This has gradually risen by 10% since 2014/15.

Defra Secretary of State Steve Reed emphasised the government's commitment to farm diversification at the 2025 Oxford Farming Conference. He announced reforms to help farmers innovate and diversify their businesses and plans to ensure permitted development rights allow conversions of larger barns into farm shops, holiday lets or sports facilities.

Industry trends

• Authenticity  The demand for authenticity, whether for holidays, weddings or day trips, continues to rise. Increasingly, people are looking for unique, organic and genuine experiences. For example, Generation Z (born 1997–2012) is known as the digital generation – but for weddings at least, this does not necessarily translate into an abundance of technology, filters and social media. Instead, they tend to favour unplugged ceremonies, natural photography and vintage elements.

• Sustainability  According to a YouGov Survey, 72% of UK travellers confirm sustainable travel is important to them, while Booking.com research highlights that 53% seek accommodation with ‘wow-factor sustainability innovation’. As well as positively impacting the environment, tourism providers can benefit from promoting their sustainability efforts – such as accommodating active travel options, offering discounts for using public transport and promoting eco-friendly accommodation and venues to attract environmentally conscious tourists.

• Wellbeing  Prioritising wellbeing is a recurring trend, with a McKinsey report finding 73% of UK consumers consider wellness a top priority in their everyday lives. An analysis by YouGov also showed that 70% of Britons stated relaxation and wellness as their primary goal for a holiday.

• Technology  It is predicted that the use of artificial intelligence (AI), apps and social platforms will increase, helping to promote brands, improve business efficiency and enhance customer experiences. ABTA reports 4% of people use AI to research holidays, with one in 10 teens and 20-somethings using AI for this purpose. Showcasing visitor destinations via social content provides further inspiration and improves customer expectations before a visit.

• Value for money  Fuelled by the cost-of-living crisis, operators must consider how they can offer the best value. Can wedding venues partner with photographers and caterers to offer a better value-for-money wedding package? Can accommodation providers partner with local attractions to deliver discount tickets but increase footfall? By crafting enhanced experiences, all businesses can add value.

¹ABTA, ²Booking.com, ³McKinsey

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