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Will we be in Sardinia or Iceland this August?
Due to the cold and dark winter days of January, Scandinavians often book their summer vacations in advance. The United Nations World Tourism Organization says tourism will return to pre-pandemic levels this year. However, despite the increase in tourist numbers, travel operators face long-term threats from climate-related weather events.
Southern Europe's brutal heat wave, which regularly exceeds 40 degrees Celsius, and wildfires like the one that raged in Greece last year are starting to affect holidaymakers' plans, according to the European Travel Council. That's what it means. Travel companies and hotel owners will be aware of the risk of stranding their assets if tourists avoid popular destinations in the southern Mediterranean. Operator valuations remain weak compared to pre-pandemic levels.
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Cool destinations such as Iceland and Denmark are among Europe's top 10 best-performing destinations in 2023, according to the United Nations, based on percentage change in international tourist arrivals compared to 2019.
According to ETC, around 14% of European travelers currently cite extreme weather as their main concern when considering travel plans. Although this is still relatively modest, it is up from 7% in the previous survey in May.
Rex has long argued that investors, including those in the tourism sector, are underestimating climate risks. Travel companies are belatedly beginning to recognize this threat.
Tour operator Tui has started offering year-round holidays in some destinations in the southern Mediterranean, including Antalya, Turkey. The hope is to entice travelers who are put off by the extreme temperatures during the peak summer months to vacation in the spring and fall instead. Two rival jet companies have ordered investigations into the physical risks climate change poses to their business models.
Tui owns 38 percent of the hotel, the majority of which is currently operated under management contracts. This reduces their flexibility to adapt to fluctuations in consumer trends. Wildfires on the Greek island of Rhodes caused €25 million in damage during the peak summer season. However, the impact was limited as tourists expressed their intention to return soon.
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Consumer demand is not yet sufficient to warrant a significant increase in production capacity in cooler regions such as Northern Europe. Significantly more beds will be required. Compare Spain, which has about 2 million tourist beds in 2021, with Finland, which has less than 139,000. Vacationing in the Nordic countries doesn't come cheap either.
The southern Mediterranean, including Spain, Greece and Turkey, remains a top summer destination. It is expected that more travel companies will encourage travel to familiar destinations during the so-called shoulder months of spring and autumn.
Extending the travel season is not easy. Travel organizations will need to negotiate with local authorities to ensure other facilities remain open. School holidays create problems. But if the heatwave continues for a few more years, consumers' travel plans could change quickly.
