As European tourism has started its path towards recovery following the devastating impact of the Covid-19 pandemic, the sector is now facing a major crisis with Russia’s invasion of Ukraine. The conflict might cause another setback in the recovery of European tourism, particularly in Eastern European destinations.
This conflict has already triggered a sharp spike in energy prices, which will directly affect the costs of transportation and tourism services while also posing risks to wider consumer demand in Europe. The war also threatens Europe’s international image as a safe destination in long-haul markets, as well as causing disruptions in air connectivity.
To address this pressing matter, the European Transport Commission (ETC) held a webinar, Impact of the Ukraine war on European tourism, encompassing a discussion between various experts in the field of travel and tourism.
Travel is a force for peace, understanding and respect.
LuĂs AraĂşjo, ETC President
1. Solidarity with Ukraine
Starting off the webinar, ETC President LuĂs AraĂşjo reiterated the ETC stand on Russia’s invasion of Ukraine. “First of all, I have to say that we firmly stand in solidarity with Ukraine. We’ve been deeply shocked by the military invasion of Ukraine by the Russian government. And we have been stating that, by all possible means, we condemn this attack on freedom in Europe. And we call, of course, for the immediate restoration of peace. Our thoughts are with the Ukrainian people and our travel and tourism colleagues in Ukraine, whose livelihoods have been destroyed.”
2. Hopeful forecasts
Despite everything, the forecasts are not as dim as one might think. DG GROW Director Valentina Superti highlighted the fact that “it’s always good to look at the figures, not because they are figures, but because they mean something”, reason for which the European Commission is launching a survey to more clearly determine the impact of the war on the travel and tourism industry.
Nevertheless, Superti is hopeful about the future, since, before the conflict in Ukraine, the tourism ecosystem was already showing “very good signs of recovery and notably with very good winter results”.
The same optimistic forecast is shared by the Tourism Economics Managing Director, David Goodger, who explained that, all in all, taking into account the invasion itself deterring people from travelling to Europe, but also the higher cost of travelling imposed by inflation and the soaring energy prices, the full recovery of the travel and tourism industry has only been pushed back one year.
Explaining why the industry is less affected by the war than the Covid-19 pandemic, Olivier Henry-Biabaud, founder of TCI Research, referred to the difference between the two “enemies”. While two years ago “the enemy was kind of unknown and very invisible and deciding to travel was kind of running the dice and you had a very good chance to be exposed to the virus and contaminated”, Russia’s invasion of Ukraine has a much more tangible effect, “the enemy has a face”, and people know almost certainly where it is safe to travel and where it is not. “This is impacting quite sharply, but not at the magnitude that we could expect compared to some other crises”, he added.
If I decide to go tomorrow to Bratislava, the chance for me to be killed by the Russian army is just like close to 0%.
Olivier Henry-Biabaud, founder of TCI Research
3. The economics of the travel and tourism industry
Tourism represents 10% of European GDP and provides 23 million direct and indirect jobs. Mrs. Superti admitted there is clearly already a direct impact caused simply by the loss of Russia as an important market for tourism destinations, as well as the territories surrounding the conflict. The European Commission however expects regions that are further away from the war zone to be relatively less affected, but everybody will suffer the indirect effect, like energy prices
Mr. Goodger stressed the fact that inflation and higher energy prices will also impact the tourism industry, as they lead to an increase in overall travel expenses, but the “silver lining” is that CPI is expected to reach a peak this year.
To soften the economic impact on the industry, Mrs. Superti said the European Commission is working on a “rightly so generous” framework to support the travel and tourism operators affected by this crisis. Furthermore, she said they will continue their collaboration with the ETC to promote Europe as a safe destination and, lastly, they are working on a transition roadmap for tourism to achieve a more resilient ecosystem.
4. Travel sentiment and destination reputation
One of the factors affecting the travel and tourism industry is, of course, what people think about a certain destination. Whether they believe a place is safe or not or if their experience will be affected.
Talking about travel sentiment and destination reputation, Mr. Biabaud explained TCI Research aggregates data from the media, companies and consumers, social conversation being the driving factor for a certain destination’s reputation. And if a destination’s reputation is better than its neighbours’, it has a higher chance of being chosen by travellers.
Keeping this in mind, only one third of the conversations on travelling to Europe are about the Ukraine crisis, which is not such a profound impact, at least compared to the pandemic, at the beginning of which between 50% and 70% of the conversations were about Covid-19.
After 2 years of uncertainty, this is the first year that people are showing a very strong desire to travel. In North America, travellers are not cancelling their plans, but postponing or just adapting their itinerary within Europe. Furthermore, the big markets like France, Italy and Spain remain largely unaffected in terms of reputation.
We hear a bit of anti-Russia or Russian hate developing, just like, we had a bit of anti-China resentment when the Covid crisis started two years ago.
Olivier Henry-Biabaud, founder of TCI Research
The most affected market however will be Russia. Besides the obvious reasons related to how the conflict develops and when it ends, even after the conclusion of the invasion, the stigma will stick. The fallback will be felt for a longer period of time by Russia than other destinations in Europe, nevertheless “the Russian market will come back, maybe in 6 months…but probably in 6 years”.
5. Aviation
When it comes to the impact on the aviation industry, Olivier Ponti, Vice President Insights of ForwardKeys, also presented a promising view. The intra-European level of travelling was, right before the invasion, at 80% of the pre-Covid level and only dropped to 65-70%, while the trans-Atlantic bookings dropped from 86% to 74% the week the conflict started but returned quite quickly to pre-war levels.
Furthermore, airlines have not adapted their capacity in reaction to the war, continuing their return to pre-pandemic levels.
We should also expect specific travel businesses, like travel retail or duty-free operators to suffer from the lack of high-end shoppers coming from Russia.
Olivier Ponti, Vice President Insights of ForwardKeys
He also stressed the fact that some European destinations will not be affected the most by the lack of tourists who fear visiting the continent because of the war, but by the lack of Russian tourists, who can no longer go on holiday, the most affected being cities on the Mediterranean and the Black Sea.
