Irish households expected to spend €6.5 billion on holiday trips this year, back at Celtic Tiger levels
- Holiday trips are up by 7.4% this year suggesting a jump to €6.5 billion;
- €4.83 billion (80%) was spent on foreign holidays and €1.23 billion (20%) on domestic holidays last year;
- 5,155,000 foreign holiday trips were made averaging 8 days and costing approximately €1,000 on average;
- 5,323,000 domestic holiday trips were made, typically short breaks of 3 days with an average spend of €230.
Dublin, August 15, 2019: The latest Consumer Market Monitor (CMM), published today by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School shows that the recession is well and truly over if the level of spending on holidays by Irish households is anything to go by. The €6 billion spent on holidays last year was back to the heady level last seen in 2007, and this year is poised to increase again as overseas trips are up by 7.4% in 2019, signalling a potential rise in spending to €6.5 billion.
Fortunately, these strong figures are based on a much sounder footing than at the last peak, reflecting a larger working population with good incomes rather than reckless borrowing, according to Marketing Professor Mary Lambkin of UCD Michael Smurfit Graduate Business School, author of the report.
Commenting on the report findings, Tom Trainor, Chief Executive of the Marketing Institute of Ireland, said: “The continuing growth in employment and income are leading to improvements in household finances and consumer spending, which continues to grow despite weakened confidence due the uncertainty of the Brexit outcome.”
Other key findings from the Consumer Market Monitor report include:
- Household finances have been boosted by the increasing value of peoples’ homes, with household net worth per capita now standing at €158,000, up 70% from the low of 2012;
- The disposable income of Irish households rose by 6% in 2018 to a total of €110 billion, significantly overtaking the last peak of €101 million in 2007;
- Unlike during the Celtic Tiger, credit and borrowing are not major contributory factors in recent spending, with the ratio of debt/disposable income of Irish households down from a peak of 215% in 2012 to 124% this year;
- Savings deposits grew by €4 billion in 2018, with deposits for a house purchase estimated to be a major factor, with approximately 30% of renters or 10% of all Irish households saving for a deposit.
The Irish consumer economy continues to perform strongly and remains a key contributor to overall economic performance, accounting for 51% of GNP. Personal consumer spending grew by 3.4% in 2018 to €105 billion, and this positive trend is continuing in 2019 with spending up by 2.9 % in the first quarter and indications that it has also grown strongly during the second quarter. Consumer spending is forecast to grow by 2.6% for the full year 2019, to about €108 billion, and by a further 2.4% in 2020.
This strong spending is particularly impressive against a backdrop of weaker consumer confidence resulting from anxiety about the outcome of Brexit. It is likely that this uncertainty will continue to weigh on sentiment in the coming months, up to the October deadline but, hopefully, the strong fundamentals in the Irish economy will outweigh any negative sentiment associated with Brexit.
The key fundamentals are the continuing growth in employment and incomes, leading to significant improvements in household finances. There are now 2.3 million people at work, up 50,500 (2.3%) year-on-year, and up by 439,000 or 20% from the low in mid-2012. Employment is expected to continue growing but at a moderating rate as the economy approaches full employment. Projected growth of 2.4% for 2019 and 1.7% in 2020 will add another 100,000 people to the workforce.
Earnings growth has played a more significant role in recent years as wages have begun to rise. Wages have been increasing by around 2.5% per annum since 2015 and wage growth is expected to reach 3.6% this year and 3.7% next year, as the labour market approaches capacity.
The combination of more people working and higher wages has led to substantial increases in the amount of disposable income circulating in the Irish economy. Aggregate disposable income has increased by about 5% a year from 2015 to 2017. This accelerated to 10% in 2018 reaching €110 billion and was up again in Q1 of this year by 8.5% year-on-year, suggesting a final figure of about €120 billion.
Consumer spending has also been supported by improving household finances, mainly influenced by the increasing value of peoples’ homes. Household net worth per capita now stands at €158,000, up 70% from the low of 2012. Perceptions of increasing wealth feed confidence and encourage consumers to release some of their wealth for spending.
Irish consumers are also beginning to supplement their own resources by taking on some debt, mainly to support the purchase and furnishing of homes. Following a decade of deleveraging when repayments consistently exceeded new borrowing, borrowing is beginning to increase again at a modest rate. Net new lending of €1.4 billion was advanced in 2018, an increase of 2%. €1.1 billion of this was for the purchase of residential property with the balance for other personal consumption. Much of this is going on purchases of household goods, the strongest retail category currently.
It is important to note, however, that credit and borrowing are not major contributory factors in recent spending, unlike in the last boom. The ratio of debt/disposable income of Irish households has continued to fall, down from 215% at the peak in 2012 to 124% this year, a reduction of 40%. Also, savings deposits grew by €4 billion, or 3.6% in 2018, indicating that consumers are not spending all of their income on consumption. One obvious reason for saving is to generate a deposit for a house purchase and survey evidence suggests that this is a definite objective for about 30% of renters or 10% of all Irish households.
55,000 homes were sold in 2018 and sales have been flat so far this year suggesting a similar outcome for 2019. However, the number of mortgages approved is up 10% in the first half of the year indicating that demand is still strong. 65% of those mortgages are going to first time buyers demonstrating that this is still the predominant need.
The market for cars is the most troubled sector right now; sales for the first half of this year are down by -12.9% for a total of 50,861. Annualised, this suggests sales of 105,000 for the year. This continues a negative trend for the past two years, with sales down -10.5%, in 2017 to 127,045, and by a further -4.6% in 2018 to 121,157. In contrast, there has been a large increase in the number of imported second hand cars reaching 99,456 in 2018. This trend is continuing in 2019 with sales up 4.9% in Q1 to 25,906, suggesting a final figure of about 104,000.
In summary, car registrations were flat in 2017 and 2018 at about 220,000. This looks like dropping to 210,000 for 2019 with sales divided more or less equally between new and imported second hand cars. This compares to a total of 240,000 in 2007 of which 180,745 were new cars.
About the Author
Mary Lambkin is Professor of Marketing in the UCD School of Business where she teaches courses to undergraduate and postgraduate students and is involved in a range of research projects under the general heading of marketing strategy. She has written extensively on this subject in academic journals, and also writes commentaries on marketing topics of contemporary interest for professional publications. She has served as Head of the Marketing Group, as Dean of the UCD Business School and as a member of the Governing Authority of the university at various times, and also holds a number of positions in companies and professional organisations outside the university.
About UCD Michael Smurfit Graduate Business School
The UCD Michael Smurfit Graduate Business School is Ireland’s leading business school and research centre offering world-class business programmes that equip students to become future industry leaders. It is the only business school in Ireland, and one of an elite group of schools worldwide, to hold the ‘triple crown’ of accreditation from three centres of business and academic excellence—EQUIS, AACSB and AMBA.
Academic programmes at UCD Smurfit School consistently rank among the world’s best and are accredited by the most internationally respected organisations. The Masters in International Business Management is ranked 7th in the world by the Financial Times and the school is ranked 24th among leading European business schools.
Engagement efforts have resulted in one of the world's top, business school, alumni communities with over 75,000 professionals around the globe in over 35 international chapters. Along with academic administration, leadership derives from two advisory boards, the Irish Advisory Board and the North American Advisory Board.
The UCD Michael Smurfit Graduate Business School is one of four constituent parts of The UCD College of Business and offers postgraduate courses, including the MBA and a wide range of MScs in business, to approximately 1,300 students per year. The Michael Smurfit Graduate Business School opened a campus solely dedicated to graduate business education in 1991 and grew most recently with a new centre for PhD research in 2017.
About The Marketing Institute of Ireland
The Marketing Institute is the professional body for Ireland's marketing people. It exists “to enable marketers to build great brands and great careers”. It does this by sharing best practice, insights and expert content, building the community of marketers, and aiding marketers in career progression. The three themes of content, community and career underpin all Institute activities. The Marketing Institute also owns and operates the All Ireland Marketing Awards, the CMO Summit, and DMX Dublin, Ireland's largest marketing conference.