IBR

The tourism sector is wobbling on its feet

Mati Nõmmiste Mati Nõmmiste

The tourism sector is very sensitive to current events – if terrorists strike in some region or country, as we saw recently in Paris, or the political situation is tense, tourism is quickly affected. Negative events have a long-lasting impact.

It’s well-remembered how consumers cut spending after incomes shrank during the economic downturn. It’s logical – holiday travel isn’t essential like meals or paying the power bill, so it’s easier to save on those items. In business tourism, too, the weak economy was immediately felt – companies cut their spending on conferences and business travel and they're still counting their money more carefully than they did before the crisis.

Economic insecurity and mass migration

The political situation is also an important influence on the amount of travel. The downturn in Russia has led to a drop in the number of Russian tourists, who are regarded as big spenders. Greece’s economic problems have lasted for a long time and the problems have spilled over into the streets on occasion, which may also ward off tourists. Strikes and demonstrations have become the norm in other countries, too – in the case of the transport sector, a strike can have a direct impact on tourist movements, but mass rallies can also be unsettling for tourists. To say nothing about the terrorist threat, which likewise is not good for the sector.

Tourism is thus constantly under fire due to changes in the world’s economy and politics. Yet around the world, tourism companies are optimistic about the sector’s future and expect growth in turnover and profits. That came out of Grant Thornton’s International Business Report, which surveyed tourist sector companies in more than 30 countries. There were several reasons for the optimistic tone.

It’s becoming cheaper to fly

Substantially lower fuel prices are one reason – that translates into cheaper airfares – just a little less, but nevertheless, lower. For example, International Air Transport Association is expecting a 5.1 per cent drop in the price of airfares this year.

The dollar is also stronger than it was. That makes travel cheaper for US tourists, also known for spending habits, leaving them with more money to spend on lodging, food and entertainment at the destination.

Russian and Asian tourists are the variables for the Estonian tourism sector

If we look at the situation in the Estonian tourism sector, the greatest changes have taken place with regard to visitors from Russia and Asia. Statistics Estonia data show that this year the number of tourists from Russia has dropped every month. More and more people are coming from Asian countries for a trip to Estonia – the numbers were up about 25% compared to the same month a year ago.

Since July, the total number of foreign tourist arrivals to Estonia has grown by 1% compared to the same period last year.

The closure of Estonian Air will unfortunately not have a positive influence on keeping the foreign tourists coming to Estonia. Last year, over 500,000 people flew with the national carrier. Other airlines will be able to claim the most lucrative routes formerly operated by Estonia’s Air, but without a national carrier, will Estonia be able to ensure the sufficient number of direct connections to all of the destinations it needs? Even if it were possible, the loss of Estonian Air sows uncertainty for travellers, at least in the short term. If a foreign tourist was planning a city break in a Baltic state in the near future, they will now tend to opt for Riga, as it’s easier to get there quickly and comfortably and Tallinn and Vilnius (the national carrier Air Lituanica failed in May in the latter) will be left aside