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Will it be Sardinia or Iceland this August?
Cold, dark winter days in January often spur northern Europeans to book your summer holidays in advance. This year, tourism will return to pre-pandemic levels, says the UN World Tourism Organization. But even as numbers climb, tour operators are facing the longer-term threat of climate-related weather events.
Intense heatwaves in southern Europe that regularly top 40C and wildfires such as those that raged in Greece last year are starting to affect holiday-maker plans, says the European Travel Commission. Tour operators and hotel owners will be aware of stranded asset risk if tourists shun popular destinations in the southern Mediterranean. Operator valuations remain depressed compared with pre-pandemic levels.
Cooler destinations such as Iceland and Denmark appeared among the UN’s top 10 best-performing European destinations in 2023 by the percentage change in international tourist arrivals versus 2019.
About 14 per cent of European travelers now cite extreme weather events as their main concern when considering travel plans, according to the ETC. While still relatively modest, that is up from 7 per cent during a previous study in May.
Lex has long argued that investors, including those in the tourism sector, are underpricing climate risks. Travel companies are somewhat embarrassed starting to acknowledge the threat.
Tour operator Tui has begun to offer holidays in some southern Mediterranean destinations such as Turkey’s Antalya year-round. The hope is that travelers who are put off by extreme temperatures in peak summer months can be persuaded to holiday in spring and autumn instead. Rival Jet2 ordered a study into the physical risks to its business model posed by climate change.
Tui owns 38 per cent of its hotels, even if the majority are now operated under management contracts. This reduces its flexibility to adjust to swings in consumer trends. Wildfires on the Greek island of Rhodes cost it €25mn during the peak summer season. But the impact was limited by tourists proving willing to return quickly.
Consumer demand is not yet sufficient to warrant significant increases in capacity in cooler destinations such as the Nordics. Significantly more beds would be required. Compare tourism beds in Spain, at nearly 2mn in 2021, with Finland at under 139,000. Holidaying in Nordic countries is not cheap, either.
Southern Med destinations including Spain, Greece and Turkey remain top summer destinations. Expect more travel companies to encourage trips to familiar places in the so-called shoulder months in spring and autumn.
Extending the travel season is not simple. Travel groups must negotiate with local authorities to ensure other facilities remain open. School holidays pose a problem. But another few summers of extreme heat could quickly change consumers’ travel plans.