Terror attacks have cost the travel industry $8.2 billion
In the space of a few weeks, a Russian jetliner carrying vacationers crashed, killing all on board, and ISIS claimed responsibility; 130 people were killed in a series of terror attacks in Paris; and gunmen took hostages in a hotel in Mali leaving more than 20 dead.
The mass shooting that took place in San Bernardino, Calif., this week is being investigated as an act of terrorism.
These recent acts of violence are beginning to take a toll on the travel industry. About 10% of American travelers have canceled a trip in response to the terror attacks, eliminating a potential $8.2 billion in travel spending, according to a survey of about 1,064 people by data collection site YouGov. Nearly one quarter of those surveyed said they had delayed travel plans and 18% said they had switched their plans to a destination they considered safer.
The State Department issued a Worldwide Travel Alert on Nov. 23, urging U.S. citizens traveling abroad to exercise caution and remain alert in public places. The alert lasts until Feb. 24, 2016, and a State Department spokesman said in a statement that the agency will then re-evaluate the security situation to determine if it should be extended. Travel Alerts are typically issued in the aftermath of terror attacks, while the agency publishes Worldwide Caution bulletins about every six months to provide details on ongoing threats of attacks on U.S. citizens.
Though the current Travel Alert is aimed at Americans traveling internationally, the State Department spokesman said those remaining stateside can benefit from the information as well.
As the holiday season ramps up and Americans spend more time traveling, shopping or gathering in public places, will the events of recent weeks cause people to alter their behavior, or will the shock recede and life go on as usual?
“When something goes wrong, we tend to judge that it’s much worse than it might be,” says Oscar Ybarra, a social psychology professor at the University of Michigan. “We think it’s better to be safe under those circumstances by not doing anything even if we forgo the benefits of having new experiences.” Even long-standing plans, like annual vacations to the same location, can be called into question in the wake of a major event.
Because of that, travel may be the industry most affected by recent events, short term. Immediately following a negative event that introduces uncertainty, like a terror attack, people have a tendency to remain in place, Ybarra says.
But even as there has been increased uncertainty in the performance of retail and travel sales as the year comes to a close, past patterns and current airfare and hotel patterns suggest not much will change.
Analysts are accounting for the uncertainty in their outlook for the rest of the year. In a note to investors on foreign tourism, Wells Fargo analyst Ike Boruchow wrote that while flight reservations from the U.S. to Europe have been on the rise for early 2016, “given the recent turmoil in Paris, those bookings may not come to fruition, but it is too early to tell.”
New York Governor Andrew Cuomo said in a press release on Nov. 23 that 46 additional police officers will be hired to increase counterterrorism efforts at Grand Central Terminal, Penn Station, Metro-North Railroad, Long Island Rail Road and Staten Island Railway. The Metropolitan Transportation Authority has also released a “See Something Say Something” mobile app to help increase public awareness on transportation services.
In a note on Abercrombie and Fitch , Susquehanna International Group analyst Thomas Filandro wrote that “international unrest related to recent events create a higher degree of near-term uncertainty that is difficult to predict.”
Retailers haven’t been able to measure a clear effect on consumer behavior from recent terror events, says Jesse Tron, a spokesman for the International Council of Shopping Centers, a trade organization. However, after major events, the council communicates its continuing efforts to improve security at shopping centers. “This isn’t something that is reactionary from a security standpoint,” Tron says. “We’re diligently looking at security measures 365 days a year.”
And as the holiday season nears, major sites like Rockefeller Center and Times Square in New York City become potential new targets, though like retailers, officials are reiterating the extensive safety measures in place. On Wednesday, a group claiming to be ISIS released a threatening video that featured footage of Times Square. After the video was released, New York City Mayor Bill de Blasio said there was no credible threat to the city, and Police Commissioner William Bratton said the city was adequately prepared for any such attempt, according to The Wall Street Journal.
NYC & Company, the city’s tourism organization, said in a news release that it expects 1 million revelers to attend the Times Square New Year’s Eve celebration this year. Since the attacks on Sept. 11, 2001, attendees have been required to pass through security checkpoints and are prohibited from bringing bags.
While some travel agents reported cancellations in the week following he Paris attacks, airfare and hotel rates haven’t gone down, suggesting retailers aren’t worried about a long-term drop in demand, says George Hobica, founder of low-airfare alert site Airfarewatchdog.
Hobica says that while travel plans aren’t likely to be affected in a major way, it’s a good idea for consumers to consider travel insurance, which allows you to cancel your trip in the event of a terrorist attack. Services like Medjet Horizon also help travelers evacuate from dangerous situations and provide emergency assistance if an unexpected threat arises. A one-year membership to Medjet Horizon, for example, costs $409 for an individual and $534 for a family.
“It’s important to look at these policies, just for peace of mind,” Hobica says.
Because of the seemingly random nature of terror attacks, it’s difficult to formulate a strategy around avoiding them, aside from staying away from locations where such events occur frequently, says Michal Herzenstein, a marketing professor at the University of Delaware who studied the effects of repeated terror attacks in Israel on consumer behavior. Herzenstein says she changed her family’s plans to vacation in Paris this week, opting for London instead.
Herzenstein says in the aftermath of one-off attacks, consumers typically resume normal behavior quickly compared with incidents in locations that experience frequent attacks. Consumers in high-frequency areas, however, will adjust their behavior over time to avoid situations where they have less control.
“We found that people will look for commonalities across attacks and attempt to derive a ‘strategy to survive,’ Herzenstein says. “A local attack may alter the behavior of local citizens if they believe it will be repeated and depending on whether they think they can somehow affect their chances to become victims.”
In her study, “Living with Terrorism or Withdrawing in Terror: Perceived Control and Consumer Avoidance,” published in the July issue of the Journal of Consumer Behavior, Herzenstein and her co-authors found that consumers who felt they had the least control after experiencing a terrorist attack tended to depend more on delivery services that allowed them to avoid public places. They also found that after suicide bombings in Israeli buses in 2002 and 2003, private car drivers altered routes to stay away from public buses.
Herzenstein says such avoidance behavior can be “psychologically helpful,” even if it may not seem entirely rational.
The number of terrorist attacks world-wide has quadrupled since Sept. 11, 2001. Herzenstein says the drastic increase is unlikely to change overall consumer behavior, though it may affect some consumers more than others.
“I think the changes will last longer as the attacks become more frequent, but I don’t believe the change will be permanent,” she says. “Over time we forget or become less sensitive, or some sort of ‘what the hell’ effect happens.”