Strikes, inflation, now war: Uncertainty escalates for Europe’s travel season
By Ceylan Yeginsu
Diego Sanz, a tour guide on Spain’s southeastern Mediterranean coast, received his first international group booking in more than a year in mid February. It was, he thought, an augury of better things to come.
“Here we live in paradise, and we were sure that when COVID restrictions were lifted, we would not have any more problems and tourists would come back to us like the honeybees come to the nectar,” said Sanz, sitting in a quiet cafe in late March in the port city of Alicante.
Then Russia invaded Ukraine and brought new international bookings to a grinding halt. In the first week of the war alone, airline bookings within Europe fell by 23% and trans-Atlantic bookings to European countries fell by 13%, according to the travel data company ForwardKeys.
“We are in the middle of a big storm,” said Sanz, speaking both literally and figuratively. Outside the window of the cafe, the Costa Blanca region was enduring one of the heaviest rainstorms in its history, with 18 consecutive days of heavy downpour that caused flash flooding and washed-out roads.
“The sun will come back, but what will happen with the war and the economic problems?” he continued. “I don’t know if we will be able to make any profit this summer.”
Many of the European countries including Spain, Greece, Italy and Croatia that are heavily dependent on tourism had hoped to start the travel season early to make up for lost revenue from the pandemic. That’s now looking unlikely. So far, the worst-hit destinations are those in proximity to Ukraine, including Poland, Bulgaria, Croatia, Estonia and Hungary, which saw a decrease in bookings between 30% to 50%, according to ForwardKeys. Many travel operators in those countries are swept up in efforts to help refugees fleeing Russian forces, unable to contemplate what impact the war might have on their livelihoods.
Across the continent, damage is already being felt with rising fuel costs, supply chain issues, inflation and labor strikes. Energy prices in Italy have surged in recent months, worrying hotel operators. Truck drivers in Spain have been on strike for more than 10 days, causing sporadic food and goods shortages. Hotels and restaurants are scrambling to find affordable replacements for key supplies like wheat and sunflower seed oil, of which 75% to 80% of the world’s supply comes from Russian and Ukraine, according to the United Nations World Food Program.
“We are trying to be flexible and find replacements for products in short supply, like we use olive oil instead of sunflower oil, so it does not impact the customer experience,” said Javier Garcia Cuenca, the vice president of Magic Costa Blanca Hotels and Resorts. “But the problem is managing cost, it becomes more expensive.”
Croatia often ranks among Europe’s most tourism-dependent economies, with tourism accounting for about one-fifth of the small nation’s gross domestic product, according to the Croatian Bureau of Statistics. The country’s main attraction, its slice of the Adriatic coast, drew most of the 13.8 million visitors and 84.1 million overnight stays to Croatia in 2021. It drove a 10.4% growth in GDP year-over-year according to the Bureau of Statistics.
Although cancellations have been minimal in Croatia so far this year, the country is also experiencing a slowdown in bookings.
Dubrovnik Boats, a private excursion and charter company with a vast majority of clients from the United States, was expecting a record year before the war. But then the rate of bookings suddenly fell by 70%.
“To a foreigner, we’re one centimeter away from Ukraine on a map,” said Niksa Smojver, the owner.
In other parts of Europe, particularly in countries dependent on tourism, the outlook was bleaker. Cancellations in Italy dampened an increasingly optimistic attitude among tour guides and operators, even as some expressed hope that the war would end and salvage the season.
“The mood in general is depressive, because everything seemed to be over and instead there’s been a new downturn,” said Margherita Capponi, a tour guide based in Rome.
Bernabò Bocca, the president of the Italian hotel association Federalberghi, said he was most concerned over energy costs, which have surged in Italy in recent months. “Hotels are energy-intensive companies, they’re open seven days a week, 24 hours a day,” he said. “The cost of energy has become a very important component, a price the entire world is paying.”
Before the pandemic, tourism accounted for about 14% of Italy’s GDP, according to the country’s tourism ministry, and Italy’s national tourism agency, ENIT, said that in 2019 more than 63 million foreigners traveled to Italy.
At a recent trade show, Italy’s tourism minister, Massimo Garavaglia, cited a February poll of American travel sentiment by the market research firm MMGY Global, which reported that 47% of the 4,500 surveyed were waiting to see how the situation in Ukraine evolves before they make plans to visit Europe. “It’s clear that if half of Americans don’t come to Europe, it’s going to be a drama,” he said.
However, other travel operators both large and small still express optimism for the upcoming season, despite concerns over the war and the coronavirus. Last week, the online travel agency Expedia announced a forecast for a strong summer in Europe, saying search interest among U.S. travelers looking to travel to Britain, Germany and France this summer increased fivefold compared to the same period in 2020.
On Costa Blanca, members of the local hotel industry have signed fixed-price contracts with tour operators, which are likely to result in fewer cancellations. The main challenge for hotels will be managing rising costs and adapting to supply chain problems.
Cuenca, of Magic Costa Blanca, said he had not yet increased rates and fees at his hotels and expressed cautious optimism about the summer, after already booking about half of his hotel rooms for the season. “We will have to watch inflation and may have to adjust our rates to keep our profit margins,” he said.
Last year the hotel chain had a successful summer season by attracting the domestic Spanish market, but Cuenca was unable to open one of his hotels because of little demand from the international market, particularly from British tourists who faced stringent, unpredictable travel rules at home.
“We will not have as strong a year as we expected,” he said. “But there is still strong demand as people realized during COVID that they could die and they will not live forever so they prioritize holidays and leisure.”
Sitting in the lobby of the Port Benidorm Hotel last week, Toni Mayor, president of the HOSBEC, the Costa Blanca hotel association, said the 89% hotel occupancy, mainly of British tourists, was very encouraging. “They are coming back,” he said.
Wendy Hartfield, a history tutor from Yorkshire, England, arrived in Benidorm last week hoping to get some sunshine and play golf, but instead spent most of her vacation reading indoors because of the rainstorms.
“I want to come back in the summer, but with the way everything is going it might be too expensive,” Hartfield said. “First we have to pay the bills at home.”