UK economy set to profit from staycation boom?

Many Brits are planning a summer at home or a local holiday this year. Will the trend for staycations give the UK economy a much-needed boost?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As uncertainty continues about restrictions to travel outside the UK, holidays at home are the safe choice for another summer. UK destinations have seen a surge in bookings. Will more staycations have a positive effect on the UK economy?

[top_pitch]

Will holidays at home benefit the UK economy as a whole?

A rise in visitors boosts local economies in the most popular areas – Scotland and Wales, Cornwall, Devon, Yorkshire, Cumbria and Norfolk. As the top locations fill up, visitors spill over into traditionally less popular regions.

Areas that are not usually considered holiday destinations may experience an increase in traffic as people look for alternatives to the busier areas listed above. While the staycation boom will predominantly benefit certain regions of the UK, all regions could benefit.

Will families spend big on staycations?

An increase in the number of staycations is a direct result of travel restrictions and wider concerns about travelling and Covid. Economic uncertainty during and post-Covid may also be a factor. The surge in staycation bookings has been widely reported, with lodge parks and caravan sites full well in advance of July and August. 

Although high demand allows resorts to increase prices, a survey carried out by Parkdean Resorts in 2020 showed a downward trend since 2019 in how much people were willing to pay for their UK holiday. This could indicate that spending while on holiday during Covid restrictions may be more frugal as well. 

Will global travel affect the UK economy?

The UK is an international holiday destination, welcoming visitors from across the globe. Many UK tourist hot spots have suffered a drastic drop in international visitors for well over a year.

A stark drop of 75% in passenger numbers has hit the aviation industry. This reflects not only that fewer people are travelling out of the UK but also that far fewer are arriving. 

Will the increase in staycations be enough to offset the loss to the UK economy of tourists from abroad? A forecast by Visit Britain suggests income from tourism will be almost as low as in 2020.

Visit Britain 2021 forecast: Our revised scenario for inbound tourism in 2021 is for 11.3 million visits, up 2% on 2020 but only 28% of the 2019 level; and £6.2 billion to be spent by inbound tourists, the same as 2020 but only 22% of the 2019 level.

So, revenue from visiting tourists will be less than a quarter of the revenue in 2019. Spending by those on staycations, who would normally holiday overseas, must exceed the loss from foreign tourism to bolster the UK economy.

[middle_pitch]

Can Brits on holiday help the UK economy?

A true staycation is not a holiday in the same country, but a holiday in your own home. While urban dwellers rush to the great outdoors for the summer hols, UK city economies could feel the pinch.

Can locals make up for fewer international tourists? Vaccines have given people the confidence to venture out, but social distancing and ongoing restrictions are still a factor. Those forgoing a holiday altogether may choose to spend their cash on home improvements or save

It won’t be until the holiday season is over that we will know if the UK economy has benefited overall from the staycation trend. Difficulty booking a holiday at home may indicate that the leisure industry is booming, but most UK holiday businesses are just hoping to make up for recent losses.

How can I boost my local economy on staycation?

The sensible approach when it comes to a holiday this summer could be to put the money in a savings account and hope for better things next year.

While staying at home on a genuine staycation, you can support the UK economy and your local area by providing much-needed support for jobs and businesses. This kind of staycation is a great way to reach a savings goal for future holidays and still have fun. You could:

  • Eat out and get takeaways from local independent cafes and restaurants
  • Visit local attractions, and join The National Trust or English Heritage
  • Shop for mementoes of your ‘staycation’ at independent businesses
  • Treat yourself to a sparkling ‘holiday home’ and get a one-off house clean before your staycation starts

Should I book a staycation this summer?

The chances are that most coastal holidays are booked up already. Try less popular destinations, and you may find a less expensive, hidden gem.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »