Travel, Leisure, UK Economics, Business
You won’t find many hoteliers, travel agents or restaurateurs smiling much this year. The travel and leisure sector has been in a rapid decline since the global financial crisis set in. The appetite for wine and song is still dismal. This has directly affected investor interest in the segment.
Folks are eating in over dining out and foregoing overseas trips for modest domestic travel. A weakened pound is a big cause for holidaymakers to stay in the UK. Plus, soaring unemployment means uncertain earnings for many - this naturally pushes people to slash spending on life’s little luxuries.
Today’s chart shows the FTSE 350 Travel & Leisure Index over the past year. You can see that the sector nosedived by 30% from July last year to date. And the past six months have shown only minimal signs of improvement.
Restaurants, hotels and travel companies are feeling the pinch
Source: Financial Times
For those who claim that the ‘green shoots’ of recovery are here, this is yet another counter to disprove that. Investor sentiment remains weak, and the travel and leisure industry is reflecting this. And with business activity low, the corporate market segment’s lowered budgets for conventions and work trips have hurt prospects for companies in this sector.
Travel and leisure was a huge driver of Britain’s M&A activity less than two years ago, with 80% of all deal volume coming from the sector. But activity is low at the moment and we don’t see it picking up until early or mid 2010.
As an investor, you’d do well to steer clear of investing in this sector for now. We’ll re-evaluate things when exotic vacations and fine dining move back in favour.
Recommended article: To read Bill Bonners interpretation of bankers pay and inflation, please click here
P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.
