Staycation summer makes domestic travel a hot sector
As the UK moves closer to the end of lockdown (preliminarily set for June 21st), many people’s thoughts will be turning to their well-deserved summer holidays. If they haven’t booked them already, that is.
However, despite the optimistic sentiment prevailing in the UK, international travel remains difficult and highly constrained. At the time of writing, the UK’s “green list” of areas to which travel is permitted comprises just 12 countries and territories, many of which are tiny islands or principalities, with only a handful of popular holiday destinations.
As a result, summer 2021 is likely to follow the same trend as summer 2020, when domestic travel or “staycationing” boomed. Last year, Brits flocked to seaside holidays, countryside retreats or city breaks to enjoy the good weather, the reopening of hospitality and generally to blow off some steam after long months of lockdown.
This year, following an even longer lockdown and with consumer sentiment likely to be running even higher due to the success of the UK’s vaccination programme and the planned total lifting of lockdown, staycations are set to be an even bigger market.
This booming trade also means that the domestic travel sector within the UK will offer a range of potentially lucrative acquisition opportunities for those looking to buy into the industry.
International travel – the current picture
If there’s one thing the majority of UK holidaymakers crave, it’s sunshine and hot weather. Even in the summertime, the UK gets precious little of this. However, this year those looking for tropical foreign holidays will find them hard to come by.
In the UK, optimism continues to grow as a result of the success of the vaccination programme, coupled with consistent declines in COVID-19 cases, hospitalisations and deaths. Despite concerns over variants, the UK looks on course to lift lockdown measures in June.
Elsewhere, however, things are different. Many other countries, including some that are among the most popular destinations for UK holidaymakers, are struggling with ongoing or resurgent waves of COVID-19, new variants or stalling vaccination rollouts.
Last year, the fairly free international travel that UK residents enjoyed under the government’s “travel corridor” programme was arguably a contributor to the devastating second wave that began in the autumn. With that in mind, the government seems to be taking a far more cautious approach to travel this summer.
Despite the UK’s erstwhile success, the situation here remains fragile and as a result international travel will continue to be largely prohibited even once lockdown is fully lifted within the country. On the UK’s current green list, Portugal is the only EU nation that could be considered a popular summer holiday destination.
Demand for international travel will still exist of course, and more countries may yet be added to the green list, but large numbers of people are likely to be wary of the risks of travelling abroad.
This situation has had a catastrophic impact on the international travel industry, meaning that M&A in that sector is largely restricted to consolidation and distressed acquisitions, with big industry players snapping up struggling smaller operators as they hope for a return to relative normality next year.
However, these difficulties are also leading directly into the success that domestic travel is experiencing. For acquisitive parties looking to invest in a booming market rather than targeting distressed acquisitions, domestic travel offers an incredibly attractive opportunity.
The UK’s stay-at-home summers
In 2020, the pandemic saw bookings for UK holidays surge and this year looks set for an even bigger boom with the UK due to be fully out of lockdown around a month before the school summer holidays begin.
Sentiment for domestic travel (and wariness of international travel) has likely never been higher – with the UK’s vaccine rollout in particular likely to contribute to an even bigger year for the staycation market.
Early figures are already seeming to confirm this. In February, campervan and motorhome booking site Camplify reported a 209 per cent increase in bookings. Meanwhile, on February 22, the day the Prime Minister announced the UK’s “roadmap” out of lockdown, luxury camping and glamping site Canopy and Stars reported the biggest day for bookings in its ten year history.
This trend has only continued. At the beginning of April, holiday cottage booking firm cottages.com revealed that 80 per cent of its Cornwall properties had already been booked for the summer, driven by increased demand for domestic travel and self-catering accommodation.
Simon Altham, Chief Commercial Officer at cottages.com parent firm Awaze, said: “We’ve definitely seen a marked increase in demand and traffic to our sites over the last week or so as we get nearer to restrictions being lifted and people look to lock in a UK getaway.
“The south-west and traditional honeypot locations are booking up fast for the summer already, with Cornwall more than 80 per cent sold and Devon nearly 70 per cent sold.”
What opportunities does the sector offer?
Even before the pandemic, the domestic travel sector had grown more diverse than ever. The days of a UK holiday calling to mind seaside hotels, stuffy B&Bs and outdated holiday parks are long gone.
These days, holidaymakers within the UK have become both more independent-minded and adventurous. This has resulted in increasing popularity for self-catering accommodation (spurred on by the rise in AirBnB) camping and (for those that are less outdoorsy) glamping or campervan/motorhome hire. These are trends that have only accelerated as a result of the pandemic.
The site features high-spec glamping pods, each with their own kitchen, shower, living area, sleeping quarters and hot tub. These features are bound to prove massively popular given the increased importance of sanitation and hygiene during the pandemic.
In addition to the glamping business, the sale includes a four-bedroom farmhouse and a stable block that has planning permission for future development.
Glenn Howard of H&H Land and Estates, which is marketing the business, commented: “Headswood on the Wall is a stunning development and would be an exciting undertaking for any potential buyer.”
“Set just off Hadrian’s Wall, the location is scenic, sought after and accessible. The various facets this property offers will provide the new owners with both an existing business and an exciting challenge, for further development.”
"Opportunities to purchase such a dynamic, well-established business are hard to come by, especially ones located in an area which is such a sought after, year-round tourism magnet.”
Sub-sectors like self-catering and glamping saw their popularity skyrocket as lockdown eased last year. In June 2020, shortly after the Prime Minister announced that hospitality would reopen from July, self-catering accommodation rental site cottages.com reported a 455 per cent surge in booking, while rival firm Sykes Holiday Cottages recorded a 417 per cent increase.
That announcement also saw bookings at camping site pitchup.com quadruple, while Cool Camping reported that bookings were up 750 per cent compared to 2019.
These sub-sectors of domestic travel naturally lend themselves to smaller, independent operators. For example, people in rural areas who set up camping glamping businesses in a spare field, or property owners who lease out a cottage for holiday rentals.
There are numerous reasons why these kinds of businesses are likely to be open to an acquisition, should the right offer come in. With staycationing more popular than ever, those who aren’t particularly business-minded may find that this is the perfect opportunity to cash in on their fledgling business while its value is at its highest.
On the other hand, those who are more business-minded may see an acquisition by a bigger operator or group as a quick and logical way to scale-up their operations to help them fully take advantage of the upsurge in domestic travel. An acquisition could also feasibly boost their cashflow, by making them less reliant on an intermediary listing company (e.g. Sykes Holiday Cottages) which charges a commission on each booking.
There are a huge array of diverse opportunities available for parties considering buying into the UK’s highly-fragmented domestic travel sector. The industry currently represents an incredibly attractive investment opportunity and the nature of the sector and the current climate means that those who acquire at a large scale could be particularly primed to reap the rewards.
Looking beyond COVID-19, moreover, it’s likely that domestic travel will continue to see a lasting positive impact from the pandemic. International travel will, of course, recover, but it’s also possible that 2020 and 2021 will convince many that they can save time and money and still have an incredible holiday by looking closer to home.
It is understandable that the owners chose to sell now following more than 20 years of ownership. This park, located in an ideal position near the tourist honeypots of seaside towns Whitby and Robin Hoods Bay and the national park, is likely to be incredibly hot property ahead of the staycation summer.
The site is set among 4.65 acres of mature grounds, is fully licenced and features 30 static pitches, 9 touring pitches and a campsite, as well as showers and w/c’s.
Tom Watson, director of Cundalls, the company overseeing the auction, commented: “It is in a national park where it is incredibly difficult to get permission for a new caravan park. This is an established park in a lovely part of the world, so this sale is a rarity. It’s going to be popular. It is a retirement sale; the current owners have been there about 20 years and want to retire.”
Clearly, COVID-19 has been an overwhelmingly grim time for the travel sector, with holidaymakers and dealmakers alike put off by the tense, unpredictable situation. However, UK domestic travel is likely more popular now than at any time since international travel became widespread and affordable.
The sector offers a wealth of dealmaking opportunities for acquisitive parties looking to take advantage of this. With the sector being both diverse and incredibly suited to consolidation, those wanting to do deals have the scope to make acquisitions that could rapidly provide a significant return on investment.
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