With healthier lifestyles and advancements in medicine, people are living longer and working longer. This helps drive growth in personal wealth amongst older generations – the grey pound – as well as giving them time to enjoy their affluence. This, combined with the ability to be more active as we age, has meant that this increasingly large and wealthy demographic represents an exciting opportunity to the tourism industry and an area ECI continues to pursue with interest.
Over 50s now account for more than a third of the UK population with the number of people over 60 predicted to grow to 20 million by 2030, an increase of 31% from today. Alongside increasing numbers, men at 65 can expect another 10.6 years in good health, with women expecting another 11.5. This is resulting in people working till much later in life, with 10% of over 65s still employed, compared with just 5% in 2000. When they do retire, they enjoy a life of prosperity; aided by increased house prices and favourable pension schemes in recent years, annual household income has increased by 24% for over 60s in the last 5 years and the group accounts for 76% of the nation’s wealth – known as the grey pound. ‘Platinum pensioners’, those with a gross annual income of more than £38,700, have driven 38% of the growth in consumer spending and, more specifically, have been spending more and more on holidays, with an estimated 80% increase in spending on package holidays.
This generation generally feel younger than they are and are enjoying life more than ever, being more carefree and more adventurous. Active holidays such as skiing have seen a boost from the grey pound, even while overall tourist numbers to ski resorts have been in decline. The 55-64 age group have nearly doubled their holidays to resorts each season, prompting the industry to respond by making it more friendly to an older generation, with higher quality restaurants and senior lift passes (which include queue jump). Older age groups than this prefer more managed, package holidays with greater security, peace of mind, and quality experiences. Still with money and time to burn, this group enjoys learning new skills abroad, as well as holidays with high levels of cultural immersion such as cruising or rail journeys. Capitalising on this trend has proved successful for ECI’s recently exited portfolio company – Great Rail Journeys.
Great Rail Journeys (GRJ) thrived by developing propositions that play to the needs of an older demographic. GRJ’s core customer base of affluent over 55s are attracted to their content-rich rail itineraries that have a cultural slant and take the organisational hassle out of traveling with easy online booking and tour guides. GRJ was able to further appeal to this generation by expanding their offering to include river cruises as well. A historically buoyant industry, cruises follow the planned travel model GRJ has seen success with and allows over 55s to reach more destinations using the same trusted brand.
Other countries such as USA, Germany, and Japan are also seeing a similar demographic shift, with equally profound effects on their tourism market. GRJ saw this as an opportunity, expanding its offices to the US and having more multilingual tour guides and agents. The affluence and spending habits of over 55s allowed ECI to achieve an impressive 3.6x return on investment in GRJ and to be awarded Mid-Market Exit of the Year at the British Private Equity Awards 2018.
Even with concerns around Brexit, surveys have shown that 85% of people intend to take at least the same number of holidays next year, with 60% of over 50s currently taking 3 or more holidays per year. As these demographic trends play out over the next decade and beyond, the grey pound looks set to be a good long-term growth driver for investing in the tourism sector, as well as more generally across ecommerce, leisure, and food & drink sectors. ECI will continue to have a keen interest in consumer businesses that are able to capitalise on the opportunities it offers.
If you would like to talk to someone about the opportunities in the travel sector, please get in touch with george.moss@ecipartners.com.
