Jeremy Warner's Outlook: 'Hi-De-Hi' economics grips the nation
Tuesday 22 July 2008
Not so much "lipstick economics" as "Hi-De-Hi economics". The idea of lipstick economics comes from Leonard Lauder, who noticed post the terrorist attacks of 9/11 that his companies were selling a lot more lipstick. When the economy turns sour, observed the chairman of Estée Lauder, people spurn big ticket spending but try to boost their mood with little comfort purchases that might make them feel good about themselves.
Now we've got our very own version of the phenomenon. Pontin's, the holiday parks group recently acquired by private equity, yesterday announced that bookings for the rest of the summer are up 10 per cent year on year.
A similar story is told by the discount hotel chains Travelodge and Premier Inns. Both are investing heavily in seaside resorts to take advantage of buoyant demand. UK holiday breaks were apparently up 13 per cent in the first quarter of this year. I'm not sure where Travelodge gets the statistic that 30 per cent of Brits are turning away from foreign holidays this year, since all the main overseas tour operators report strong demand too, but the point is well made.
It's not just Gordon Brown (holidaying in Southwold) and David Cameron (Cornwall). The weak pound is forcing us back in our hundreds of thousands to the traditional British holiday.
Nor is it just the British weather that provides the pull. Pontin's boasts three new acts to entertain its guests – singer James Stone, comedian Craig Harper and dance act Vizage. Just in case you were wondering "who they?", all were finalists on Britain's Got Talent.
Travelodge and Premier Inns are in addition benefiting from the parallel phenomenon of a more parsimonious business market. Occupancy is surging as business travellers trade down from more expensive Hiltons and Holiday Inns. Alan Parker, chief executive of Whitbread, which owns Premier Inns, reckons the process has a long way to go. He's aiming to expand room capacity by 50 per cent over a five-year period.
The expansion programme for Costa Coffee, also owned by Whitbread, is even more ambitious. Here the aim is to double the number of outlets to 2,000. Is the cappuccino really recession proof? Whitbread's plans will be the true test of whether there is any such thing as lipstick economics.
Personally I would have thought overpriced coffee served out of a cardboard cup with a baby-friendly lid for sipping through would be one of the first things to go when the grim reality of enforced belt tightening hits home. We'll see. For the time being, sales are just fine.
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