How tourism hotspots can bounce back after terrorist attacks
Over the past 15 years, terrorism has been on the rise, So what does it mean for the travel & tourism industry?
On Friday, a terrorist attack took place in the Tunisian city of Sousse, one of the most popular beach destinations in the country. The attack took the lives of 39 people and injured many more. This event took place on the same day as attacks in Kuwait City and Lyon, France.
Over the past 15 years, terrorism has been on the rise. There has been a fivefold increase in terror related deaths since 2000. These attacks have plagued the news. From 9/11 to the Madrid bombings and Charlie Hebdo to the latest attacks in Tunisia; it is clear that terrorist attacks are very diverse in terms of their location, the impact as well as the perpetrators. The insights generated from these events have enabled policymakers and the industry alike to understand the implications of terrorism.
Below you can see a graph from STR Global and Deloitte illustrating terrorist attacks and demand trends in selected locations:
So what does it mean for the travel & tourism industry?
1- Cancellations come first
While last week’s terrorist attacks have been condemned around the world; the fact remains that terrorism causes chaos and leads to panic and fear. Indeed, safety is a pre-requisite for the success of the tourism industry, and the mere threat of events can cause tourists to rethink their decision to visit a destination.
The extent of cancellations differs greatly depending on the targeted destinations. For instance, following the attacks on 9/11, the federal government closed airports and called thousands of flights. Even when the airports re-opened tourists were wary of air travel, and airlines experienced at least a 30% reduction in demand during the initial shock period. In Paris, however, following the Charlie Hebdo attacks, the impact on cancellations appears to be minimal.
Tunisia however is likely to have quite a number of cancellations. Indeed, earlier this year, following the terrorist attacks on the Bardo Museum in Tunis in March, the Tourism Ministry reported that there have been over 3000 holiday cancellations and reservations have tumbled 60%.
2- The costs are high
The costs of terrorism are extremely high- and while it is near to impossible to calculate the loss of life, other economic and social costs are also considered in the case of terrorism.
In effect, the cost of terrorism includes the property destroyed and the number of cancellations. It also includes indirect costs which may be linked to the diversion of foreign investment, tourism international trade, consumption, savings, unemployment and short term capital flows among others.
Estimating the costs is extremely challenging given the direct and indirect costs, both short and long term, associated to terrorist attacks. Research on the Boston Bombings however tried to estimate the losses, amounting to approximately $438 million. This includes the costs of having a city on “lockdown”, property damages and even indirect medical costs (estimated at $31 million).
3- Destinations bounce back
The hotel industry is becoming more resilient to shocks from terrorism. In effect, the time that it takes for destinations to recover from these shocks has significantly decreased over the past 15 years.
For instance, occupancy levels in New York hotels took 34 month to recover from 9/11 attacks, and the wider U.S. market took 45 months, with the impact compounded by an economic recession. In comparison, it took Madrid 12 months to recover from the 2003 train bombings and London 9 months from the July 2005 attacks. More recently the Boston Marathon Bombing had a limited impact on hotel occupancies as well as Paris, following the Charlie Hebdo shootings.
4- The need for security protocols
The ability of nations and destinations to bounce back relatively quickly can be partly attributed to the design and implementation of security protocols to respond quickly and efficiently to terrorist attacks. Being proactive, rather than reactive is a key success factor. It is essential for countries to have robust contingency plans, disaster recovery programs and risk management protocols among others. It is also critical for countries to liaise with other nations in times of crisis, to support, and if required, collaborate on the evacuation of foreign nationals from the targeted areas.
For instance, the recovery efforts following the Bali bombings in 2002 were designed only after the attack took place- which led to a slow and laborious recovery of tourist confidence and revenues. On the other hand, the response to the London Underground bombings in 2005 was quick and decisive, leading to little effects on the tourism industry.
5- Limiting publicity
Although domestic and regional travelers appear to be less deterred by isolated incidents, international demand is sensitive to the threat level portrayed by the press and travel advisories. Governments and businesses alike should take measures to re-boost the tourism sector once the situation has normalized, focusing on attracting the tourists, changing the perception through media by creating impactful communications campaigns and collaborating to develop strategies to attract new tourists.
On the whole however, it appears that there has been a shift in mentality among consumers and companies over the last ten years, with the emergence of a “carry on as normal” culture in response to terrorism.
While the road to recovery can be long and arduous, the scale of the economic benefits from tourism makes investing in Travel & Tourism worthwhile. Indeed, tourism has the potential to drive foreign trade, increase access to international markets; increase foreign investments spur entrepreneurship in an industry with low barriers to entry and spur broader economic development given the sector’s strong linkages with other industries.
Author: Tiffany Misrahi, Community Manager, Travel & Tourism Industries, World Economic Forum.
This article was first published by WEF Agenda Blog on July 1, 2015