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Travel set to ramp up IT investment 2011

23 Mar

Travel industry expenditure on IT is set to outstrip the average for all UK businesses in 2011 for the first time since 2008, according to the results of research for the first Travolution Innovation Report.

Official government data analysed by KEW Associates has forecast a significant bounce back following two years of little or negative growth during the recent period of economic recession.

But as the recession’s impact recedes, travel will reinvest in its IT with a projected 6.7% growth in expenditure this year compared to 6.4% for all UK enterprises. This takes travel IT spend growth back to a level last seen in 2008 (6%) when UK expenditure growth was just 2%.

Travel industry IT expenditure this year will represent 1.2% (£1.30 billion) of total expenditure on IT by all UK enterprises (£104.36 billion). In 2009, travel industry turnover stood at £59 billion or 1.4% of the total for all UK enterprises, the number of enterprises in travel was 0.9% of the total and the number of employees 1.8%.

What is clear from the figures is that travel IT spend typically lags UK GDP growth by around a year, compared to the IT spend by all UK business sectors, which lags by just two quarters.

This has seen travel tracking behind the UK IT spend trend throughout the period of our research, starting in 2007 when travel cut back by 2%, while all UK enterprises grew 6%. It should be noted that 2007 was characterised by major consolidation, particularly in the tour operator sector, with the mergers of the big four into the big two.

Although the major vertically integrated operators saw consolidation as an opportunity to drive synergies, not least through IT integration, the figures suggest operators will lead the bounce back.

A projected 26% rise in IT spend this year follows a 14% rise in 2010, ending a period of three successive years of decline. The ONS data suggests this pick up reflects a predicted surge in staff numbers, although the numbers will not exceed the level recorded in 2006 and 2007.

Less marked upturns are predicted in all other travel sectors except Passenger Air Transport, which has probably been hit more than most by the downturn as well as rising fuel prices.

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