July 24, 2016

Travel Industry Hit by Terrorism and Political Unrest

by Malek Murison

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Terrorism and political uncertainty
Security was heavy in France during Euro 2016

In times of increasing fear, civil unrest, and political uncertainty, the travel industry is often hit as tourists pull back from their usual holiday plans. It's been a month since the UK voted to leave the European Union, causing widespread financial chaos, confusion over the future of European travel, and enormous currency fluctuations. There has been yet another tragic terrorist attack in France; this time in the popular tourist city of Nice. More recently, in another European holiday favourite, an attempted military coup in Turkey has led to the government declaring an official state of emergency. What a mess, eh? Today, we're going to try and unpick these three issues and look ahead (hopefully with some positivity!) to what's in store as a result for the travel industry.

Brexit - Why Even a Short-Term Knock to Consumer Confidence Can be Costly

Ah Brexit. The political shockwave that few saw coming - just ask the bookmakers and pollsters in the UK. As a result of the historic referendum result, stock markets worldwide took huge hits, and the British Pound shrunk to lows against the dollar that haven't been seen for decades. You'll be happy to know that we will be avoiding all possible political analysis on this blog, but one thing we will be looking closely at is how the Brexit decision will affect the travel industry.

Thr first thing to understand is that Brexit has had ramifications far from where the vote took place. Banks in Italy collapsed as a direct result, for example. And trillions of dollars were wiped off of stock markets around the world. This impact has also been felt by travel companies operating in the UK and countries heavily reliant on UK tourism.

Earlier this month, travel firm Lowcosttravelgroup collapsed into administration, affecting 27,000 customers already in resorts and 110,000 with bookings. The cause? A dwindling pound and currency markets fluctuating due to post-Brexit uncertainty. With the British Pound suddenly devalued, the company had lost a significant chunk of its value, while its customer base was having similar problems. A weaker Pound has meant that, for Brits at least, holidays to Europe have suddenly become more expensive. The bottom line is that normally spend-happy travellers are being much more reserved with their spending, or even holding off on booking trips completely.  

The group experienced significant market headwinds in the run up to the EU referendum as holidaymakers delayed decisions. This was compounded by the Leave vote itself and the subsequent fall in the value of the pound. Regrettably, in these extraordinary conditions, the directors had no option but to place Lowcosttravelgroup Limited into administration." - Finbarr O'Connell of Smith & Williamson.

The driving force of the travel industry has always been consumer confidence. The Brexit vote or, more aptly, its uncertain aftermath, has led to a loss in that confidence that is continuing to hit the big travel companies where it hurts. As Chris Photi writes in TravelWeekly, the UK government needs to step in and reassure travellers and agencies alike. "The travel industry has seen many significant geo-political and financial issues in the recent past and there is sufficient resilience and talent to override these problems, providing the government gets to grips with national and international confidence."

Terrorism Strikes Again in France

A matter of days after hosting the enormous sporting event of Euro 2016, which passed - a few crazy Russians aside - without too much negative incident, terrorism struck again in France. On July 14th, as locals celebrated Bastille Day in the streets, a lone attacker took the lives of more than 80 in an event that shook the watching world.

We've posted before about the importance of travel agencies at times of crisis and terrorism. Our view is that operators can take a leading role in keeping travellers safe, offering advice on destinations, and cutting through the media hysteria that necessarily follows any event similar to what unfolded in Nice.

When the dust has settled, the attack in Nice is clearly the latest in a series of tragic events hugely damaging to French tourism. Back in November, after the shootings in Paris, net reservations for air travel into the French capital dropped, understandably, by 101 percent. Over the following three months, the reaction softened, but net reservations remained down by more than 20 percent.

Standard flight reservation levels were yet to return to normal before the attacks in Nice, and the outlook is similar for the hotel industry, where room bookings are down nearly 20 percent compared to the year before. As approximately 9 percent of France's GDP is directly linked to tourism, these drops, however short-term, are having a real impact.

In an interview with ABC News, Lori Pennington-Gray, the director of the Tourism Crisis Management Initiative at the University of Florida, had this to say on terrorism and the travel industry. “I like to think of tourism globally as a zero-sum game, so destinations that are being attacked or are going through times of crisis, are likely to be short-term losers in overall demand where people will make a decision to travel to safe destinations in light of recent events."

All local officials and agencies can do, she said, was that “this can happen anywhere, but we are prepared to be able to provide a safe trip for you, and these are the things we’re doing that show that we are here to keep you safe."

Turkey's Political Unrest Sure to Drive Away Tourists

Turkey has become on of the continent's most popular tourist destinations in recent years, from the blue skies and beaches of Bodrum to the vivacious culture of Istanbul. Yet recent political events have rendered the country something of a no-go area for tourists. Europeans living in the country have also made preparations to leave following the attempted military coup, including German international footballer Mario Gomez. There have also been a number of fatal terrorist attacks in Turkey in recent months.

Speaking with Travel Daily MediaEuromonitor International’s Nadejda Popova, said “The recent political events in Turkey will be catastrophic for its travel industry. “Several terrorist attacks, a failed political coup as well as the collapse of Turkey – Russia relations will be detrimental to the recovery of its tourism industry."

Short term, the market will suffer direly from those events, but with the right approach by the government, proving the strengthened security and reassuring tourists, it could recover faster than we can now foresee". - Euromonitor International’s Nadejda Popova.

“The fear factor amongst tourists and high level of uncertainty are expected to shift the interest of travellers from Turkey to other destinations, which will now also include travel away from Europe.”

In 2015, Turkey received 34.7 million international arrivals but this level of performance is expected to be hit hard by the events in 2016. As continues to grip the country, we may even see travel firms seek to completely extract themselves from the area.

From Chaos Comes Opportunity?

Here at Travelshift we are all about looking on the bright side. Yes, political uncertainty and the threat of terrorism are both having a negative impact on many traditional sectors of the travel industry. But that's not to say that there isn't still an opportunity for niche travel operators to come in and cater for people looking to get away from it all.  For example, as a result of traveller doubts over some of the normal go-to destinations in Europe, not to mention the Brexit vote, many UK tourists are now planning Staycations.

Britain’s beach resorts (we use the term resorts very loosely) and countryside hotspots are expecting a busier summer than ever before, with millions more UK holidaymakers expected to stick around and overseas tourists lured by the favourable exchange rate. This summer there are also record numbers of Germans staying at home, which is significant given that as a country only America spends more on travel.

So perhaps, in a time of crisis, political uncertainty and terror, the thing travellers want is simply to be closer to home. Therein lies an opportunity for startups, who can offer domestic trips with a difference. Interested in setting up your own travel marketplace? Well it just so happens that you're in the right place. Check out our software solution and contact us today to find out more.