Energy tourism and other effects of inflation

The winter season presents itself again with the usual uncertainty of the last two years. This time the distorter lies in the war in Ukraine, which through inflation represents the current great threat to Tourism, although it also brings some opportunities to mitigate this effect. Let's see it: 

 

Strategies for cutting travel budgets

 

Although vacations are a basic necessity for our main source markets, almost on par with the basic costs of living, such levels of inflation can drastically reduce the travel budget and even cancel vacation plans, especially in the case of the most modest segments.  

 

The potential tourist's pocket is literally attacked with price increases from several fronts: originally with the cost of living (electricity & gas, food, etc.) and in the tourist package in practically all its components (flight, accommodation, expenses extras at destination). According to an August survey by YouGov for the Deutsche Presse Agentur, in relation to inflation, 39% of Germans would have the intention of “saving by sacrificing vacations”, although 30% of those surveyed affirm that “they are not going to give up to a getaway.” 

 

 

However, Central European tour operators have more optimistic forecasts. According to another recent survey commissioned by TUI, 74% of Germans intend to travel during the winter season (it's impossible for that many to actually travel, but the intention shows a positive trend). Stefan Baumert, CEO of TUI Germany, highlights the search for deals and all-inclusive packages as a strategy to avoid canceling travel plans. As tourists seek budget security and cost transparency, according to Baumert, this winter "we will see a race to buy all-inclusive deals." The German executive notes that currently more than one in two TUI bookings for the winter are all-inclusive, with this trend on the rise. He also emphasizes the Canary Islands' position as a favorite winter destination and the competitive all-inclusive offers in Egypt, Turkey, Tunisia, and Cape Verde.

 

On the other hand, Hospitality Insights is optimistic that inflation won't have such a significant impact on tourism behavior for three reasons: "the low unemployment rate, along with savings that are still available, and the possibility that the energy crisis won't be as severe." Furthermore, the potential decrease in winter visitors to the Canary Islands due to travel cancellations caused by inflation could be mitigated by the opposite effect—that is, trips to the Canary Islands that occur precisely because of inflation. Let's look at the two most discussed cases:

 

Choice of destination: shorten distances   

 

The aforementioned search for more economical travel options can lead tourists to switch from long-haul to medium-haul destinations. For example, instead of traveling to the Caribbean, they might travel to a closer destination like the Canary Islands or Egypt ( maspalomas24h.com, 22.08.22 ). If short-haul destinations are chosen, the option of switching from medium to short distances during the winter months isn't as readily available as it is in the summer (e.g., swapping the Canary Islands for the Mediterranean). Therefore, from this perspective as well, the Canary Islands are in a privileged position.

 

 

 

Energy tourists: leakage of heating costs   

  

In recent weeks, the concept of “energy tourist” has gained weight, that is, the decision to travel for a long stay to a warmer destination to avoid heating costs (if it were a short trip you would hardly notice the savings), or prolong a trip already decided to a warm destination due to energy costs.

 

Let's recall that in May, the German Association of Travel Agents proposed a €500 subsidy for retirees spending their winter holidays in warmer destinations (see: “Senior Tourism: German Voucher and Silver Strategy” ) . The subsidy was never granted, but the proposal alone has fueled the idea of ​​this energy migration, and Turkey and Greece, despite not having a truly warm winter climate, have quickly positioned themselves as destinations to attract the anticipated winter exodus of Germans. Now, the Canary Islands have also joined the promotion.

 

What the government did approve a few days ago within its package of energy-saving measures and aid is a €300 grant for pensioners (and €200 for students) to be paid in a single installment on December 1st. It is not intended to encourage emigration to warmer climates, as the Association of Travel Agencies had requested, but rather for general use to offset costs. However, we cannot rule out the possibility that some will use it to avoid paying their heating bills while traveling. The German government has indeed identified pensioners as one of the key profiles for this “energy migration,” given the flexibility afforded by their free time. Furthermore, this group coincides with the Canary Islands' traditional main tourist market in winter (see: “Silver Tourist and Age-Friendly Destinations” ).

 

The other prominent profile is that of teleworkers , that is, Germans who can work remotely, where we have to differentiate between two profiles: the tourist who teleworks on vacation (“workations”), who mainly chooses tourist accommodations and has tourist behavior, and the digital nomad, who mainly has resident behavior and opts for rental or vacation homes, the latter may have undesirable effects in additional pressure on the rental market and strengthening the underground economy, given the high level of illegality in vacation rentals (see: “The two tourist faces of teleworking” ).

 

In short, we see that, despite inflation, there are reasons to expect a winter tourist season with good occupations in the Canary Islands, since, once again, tourists' desire to travel prevails in the face of new threats and the climate returns to give the Canary Islands the status of “destination-refuge”.  

 

Opinion article: Antonio Garzón

www.antoniogarzon.com