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27 Jul, 2009

Europe Sees Bleak Travel Outlook in 2009

Thanks to the economic slowdown, European travel & tourism is expected this year to slide back to 2006 levels, and the impact of the swine flu virus could make it worse, according to the second quarter report of the European Travel Commission released late last week.

The ETC tracks travel trends to and within Europe, but its data and analysis is equally applicable to outbound travel from Europe,

In a foreword to the report, Rob Franklin, Executive Director, ETC, and Leslie Vella, Chairman, ETC Market Intelligence Group, write that although there is growing optimism at the emergence of so-called ‘green shoots’, “there is a risk that this optimism will prove premature. Output is still falling in most of the industrialised world.”

“Air passenger demand continues to fall, but the double-digit declines seen in the first quarter have slowed to 7-8%. The lodging sector has also seen the falloff slow, with year-to-date declines in occupancy rates moderating over the past two months. Yet the trend remains worryingly negative.

“Travel to European destinations in 2009 has been well below last year’s levels. Of the 19 countries for which 3-5 months of arrivals and/or overnight data is available, only Serbia has posted growth (and that is only for arrivals, with overnight volume unchanged over 2008), while ten countries have seen volumes contract by over 10%.”

According to Mr Franklin and Mr Vella, “The shift towards shorter-haul travel and a weaker euro should bring some stability to the intra-European market. However, sterling remains weak vis-a-vis the euro, stunting UK outbound travel. Tourism Economics expects inbound travel to Europe to decline by more than 5% in 2009.

“The World Tourism Organization is even more pessimistic, forecasting a drop of between 5% and 8%. At best, international arrivals are likely to fall back to 2006 levels. With a relatively slow recovery forecast, regaining 2008 levels will take two years, Tourism Economics predicts, followed by above-trend growth in 2012-13.”

They said that these forecasts were made before the recent spread of the H1N1 influenza virus. “The impact of the pandemic is still difficult to predict but, if it intensifies, the effect on travel and tourism demand could be very severe.

“However, even if it remains relatively benign, leisure travel will continue to be constrained by job losses and weak consumer confidence generated by the economic crisis. Most households are still expected to travel, but their trips will generally be marked by shorter length of stays, shorter distances and bargain hunting. Domestic travel should also benefit, if not evenly across Europe.”

Says the report itself, “Although this is a broad generalisation, it seems that business travel has been more heavily affected than leisure, that domestic and short-haul trips are holding up better than long-haul travel, that length of stay and spending are down more than arrivals, that secondary holidays (short stays, etc) are being sacrificed more often than main holidays, and that the cruise market is performing better than average.

“However, consumers generally have tended to leave bookings until the last moment, partly because of their lack of confidence in their employment prospects and financial situations, and partly in the hope of picking up last-minute special offers and bargains. But, for varying reasons, there are plenty of exceptions among the individual destinations and source markets.”

It says that Europe’s long-haul markets “have been falling the most dramatically, due in no small part to the cost of airfares. While there are signs that Europeans themselves have been starting to look at long-haul destinations again because of lower costs in the destinations themselves and attractive flight offers, the strong euro continues to deter tourism to Europe from non-euro markets.

“Another important factor has been exchange rates, which typically have a stronger effect on visitor spending than on arrivals. Exchange rate fluctuations cause shifts in purchasing power as well as a move toward destinations with more affordable currencies.

“Despite its recent appreciation against the euro, the pound sterling remains weaker than it was last summer, and considerably weaker than in 2007. After strong gains against the euro late in 2008, both the US dollar and Japanese yen have retreated steadily from their peaks.

“In general, the euro has become more expensive for foreign visitors over the course of the year, continuing to put pressure on volumes from long-haul markets. Still, the euro remains relatively weak compared with its peaks of 2008.”

The report says that US travel to Europe contracted by 10% through the first four months of 2009, despite the strengthening dollar. And spending was down overall by 9% over the same period. All reporting destinations in Europe, with the exception of Serbia, have registered declines from the USA – most in double digits.”

The analysis says there are “anecdotal reports that the decline in Chinese demand for Europe is slowing. According to the China National Tourism Administration (CNTA), outbound trips overall increased by 1% from January through June – despite a slowdown since Q1 due to cancellations of tours because of swine flu – and the growth is expected to increase to 3% by year end.

India has “performed worse than expected to date”, posting declines for every European country for which data is available and double-digit declines to all but two. One explanation is that Indians are travelling closer to home, although reports from the Indian market suggest that some European destinations are actually seeing growth. These are said to include Switzerland and France.”

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