Image by: Wall Street Journal
Published: May 24, 2016 / Market Watch / By ROBERT WALL
A spate of terror attacks and airliner disasters across Europe and its periphery is starting to catch up with the region’s travel industry.
Tourism officials and airline executives typically brace for a sudden drop in flight and hotel bookings after a terror-related incident or headline-grabbing aircraft accident. Those booking typically rebound quickly, though, often in just a matter of weeks.
This time, however, things were starting to look different even before EgyptAir Flight 804 disappeared from the radar Thursday and plunged into the Mediterranean Sea with 66 people aboard. Each time bookings seemed poised to start ticking back up, another deadly incident struck, extending the dismal streak.
Michael O’Leary, CEO of Ryanair Holdings PLC, Europe’s biggest budget carrier, said Monday that the pace of bookings — an early sign of passenger sentiment — again started slowing after the EgyptAir tragedy. He didn’t provide figures.
Ryanair reported higher profit for its latest fiscal year, but warned that recent terror attacks could drive down ticket prices more generally across Europe. “If people have a feeling this is terrorist-related, then we probably will see a kind of softening of demand,” said Neil Sorahan, the airline’s chief financial officer.
The pressure on bookings adds to the headwinds facing Europe’s airlines. Several carriers have put new planes in service, increasing the number of seats available, and strikes in Germany, France and Belgium have disrupted air travel.
Last year, Russian and British airlines suspended flights to the Egyptian beach resort town of Sharm El Sheikh after a Russian jetliner with 224 people aboard went down on Oct. 31. Russian and Western investigators believe the plane was the target of a terrorist bombing, and an Islamic State affiliate in Egypt has claimed responsibility for the crash.
The crash was followed by the terrorist attacks across Paris in November that left 130 dead. Airlines in the U.S. and Europe reported a slump in demand, but executives predicted things would eventually return to normal.
In March, suicide bombers killed at least 32 at the Brussels Airport and a subway station in the city.
All that is having a cumulative effect. Willie Walsh, chief executive of British Airways parent International Consolidated Airlines Group SA, said after the Brussels attack that the impact on demand had been “a bit more pronounced” than usual. The airline has pared its capacity growth in response. The company wouldn’t comment on bookings since EgyptAir Flight 804.
Last week, U.K.-based tour operator Thomas Cook Group PLC scaled back its full-year profit expectations, saying summer bookings were down 5% from last year. It cited terrorism fears. German rival TUI Group said bookings were up 1%, thanks to a thriving cruise business, but said growth would have been stronger if not for a string of recent terror attacks in Turkey, another prime tourist destination.
Despite the industry’s worries in Europe, travel world-wide is expected to climb briskly. Global tourism measured by its contribution to global economic output is expected to grow to 3.5% in 2016, up from 3.1% last year, according to the World Travel & Tourism Council.
“They change destinations, but they do not tend to stop traveling as a whole,” said David Scowsill, the council’s president.
So far, Americans aren’t avoiding Europe generally. A strong dollar has made overseas travel especially attractive, and bookings by Americans for summer trips to the continent are up 9.3% this year from last, according to Allianz Global Assistance, a travel-insurance provider.
But many are staying clear of cities viewed as most vulnerable. Bookings this summer to Paris are up just 0.6%.
Paris was Europe’s second-most-popular destination for Americans last year, behind London and ahead of Rome. Booking for those cities are up 7% and 15%, respectively.
Americans’ bookings to Brussels for the summer are down 30.4%, according to Allianz, and bookings to Istanbul are down 43.7%. Turkey’s biggest city — another tourist favorite — has been hit by a series of bombings as Turkey battles Islamic State and Kurdish groups. In January, an Islamic State suicide bomber struck near Istanbul’s Blue Mosque, one of its best-known landmarks, killing a dozen mainly German tourists.
Chinese tourists, meanwhile, are shunning Europe, according to travel-industry data provider ForwardKeys.
During the Lunar New Year holiday, a popular travel period that fell in February this year, travel to Europe was down 5.4% from a year earlier. Meanwhile, travel surged for destinations in Asia and North America.
–Susan Carey and Dahlia Kholaif contributed to this article.