Europe has been in the news lately for many discouraging reasons. The fallout from UK’s vote on EU membership plunged the UK’s economic and political systems in turmoil; an event that history will look upon as a pivotal moment in the country’s socio-economic course. With Belgium and France reeling from terrorist attacks since November last year, the news cycle has been on heightened alert for any further signs of violence across Europe. I was in Turkey last Thanksgiving and in under a year, the country has gone from a secular, peaceful, and welcoming state to witnessing several bombings, a failed coup, accumulation of power in the hands of one man with uncertain intentions, suppression of press freedoms, and a sudden uncanny friendship with Russia.
This has affected travel to Europe in general, not just the affected countries. Already hotel occupancy for Q2 in many countries was flat compared to same time last year, with modest increases in nominal average room rate (probably eroding that lead in real terms). Brussels showed a decline of 28.8% in hotel rooms sold in the city – a direct impact of the March terrorist attacks. If this is any indication, France will have a delayed reaction to the Nice attacks and hotel occupancy numbers are likely to fall further than the 5.5% that they fell in Q2, 2016. The UK’s wounds are unfortunately self-inflicted. The desperation of Bank of England showed when it cut interest rates to avoid a post-Brexit recession – when it was expected to follow the US Fed and raise rates by the end of this year. The pound has fallen making British goods and services cheaper, but making international travel more expensive for Britons. While hotel occupancy in the UK remained almost flat in Q2, it is likely to slip further as business travel will take a hit from Brexit’s continued fallout.
What does this mean for travelers thinking of going to Europe? In one word, deals! And lots of them. When demand falls, prices tend to fall and it’s already showing for the airline and hotel industries with very high fixed costs. By one account, both, hotel occupancy and rates in France, have halved since the Nice attacks (which will no doubt show in Q3 results). Some unaffected countries like Italy and Portugal are doing relatively well, but in general, folks are avoiding Europe overall. This makes the tourism-dependent economies of towns and regions across Europe vulnerable which in turn makes them amenable to giving greater discounts. This has a two-fold effect on anyone wanting to visit Europe right now.
It makes travel hassle free. No more waiting in long lines of summer tourists to enter museums, or go up the Eiffel Tower. Restaurant reservations can be easily had and for the shopaholics like me, an abundance of sales as businesses try to offload accumulated inventory. As callous as this sounds, you won’t be fighting for beach chairs in the French Riviera for a while. This reduces the ‘cost’ of your trip, in monetary terms and also the energy spent during a vacation making your travel relaxed and comfortable. It’s the airline equivalent of having an entire row of seats to yourself!
Experience of a lifetime. That’s because something you wished you could do in Europe – like splurge on an expensive hotel suite is no longer that expensive. So instead of staying in the same 4-star hotel at a reduced price, people tend to buy up to a 5-star hotel that has now reduced rates to what only 4-star or lower rated hotels could offer previously. The fact that variable cost of an occupied room is low, plays a big role in these steep discounts and they are yours to snap up.
For all these reasons, Europe is a fantastic getaway right now – fewer tourists, lower rates, and great shopping deals. If you were thinking between Boston and Berlin, in my mind, it’s a no-brainer where you should be headed.
But what about security concerns?
It's no myth that flying is the safest form of travel in the world, yet, it makes headline news when a plane goes missing or crashes. Even if it crashes, today’s aviation industry is far better equipped to prevent any casualties, as evidenced by the recent Emirates crash in Dubai. We all know the statistic – you’re more likely to be killed in an auto accident than in a plane crash. This doesn’t stop people from irrationally attributing one crash to a blanket safety record. France and Belgium have both implemented robust security measures since their attacks. Cooperation between law enforcement agencies will improve, intelligence gathering will get sharper and these kind of attacks will be thwarted. Second, these events aren’t like the SARS epidemic when hotel occupancy in Toronto (the city most affected by SARS outside Asia) was obliterated because for all you knew at the time, you could get SARS from flying – it was contagious. But these events, however horrific, are preventable, not contagious and still extremely rare. Now, this still doesn’t excuse the individual from common sense measures, like always being cognizant of your surroundings, knowing where your nearest exits are in any crowded place and avoiding certain areas or times. But the chances of you being caught in an armed siege of Amsterdam Schipol airport are fewer than you slipping and falling in your bathtub at home. In short, you’re no safer in Rio than you are in Rome and these recent attacks haven’t changed much.
So why won’t people still travel?
Travel is inherently discretionary, you don’t have to take a vacation. Or perhaps not take one right now. There will always be another time to visit when things calm down. There are plenty of other places to visit on the planet that offer different but unique experiences. Let’s be clear, pure arithmetic says that some other destination did benefit from Europe’s current misfortune. If Brussels lost 28% occupancy, not everyone stayed at home – they went elsewhere. Business meetings moved, beach destinations changed, and some destinations somewhere have benefited from this European fallout. This impact is harder to quantify and is often overlooked. Perhaps, Boston did win out over Berlin. The other reason people won’t go to Europe is the human tendency to generalize things and see patterns where there are none. Even though the ‘hot-hand’ is just a myth, its ardent believers will associate trends to random events where none exist. When Ebola broke out, safaris as far as South Africa suffered a lot when demand from Europe fell. What these European travelers didn’t realize is that they were closer in Paris to the Ebola outbreak than their safari in South Africa would've been. A lack of understanding world geography certainly plays a role. Europeans, perhaps are getting a taste of their own medicine.
However this plays out in the next six months to a year, and however we’d want it to, things will get worse before they get better. The impact of such events on the hotel industry lags by a quarter or two and this will be no different. The hotel industry will brace itself and recover in due course – as it has done in past. But for travelers worldwide who’ve always dreamed of looking over Paris from the top of the Eiffel Tower or experiencing high tea at The Savoy hotel in London, this will be a missed opportunity of a lifetime.