Report from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Follow-up of the European Council of 21 September: the situation in the European tourism sector.
Date: 2001-11-13
Institutions: European Commission
Subjects: EU aid, United States, air transport, economic consequence, report, terrorism, tourist profession

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001
COM(2001) 668 final

REPORT FROM THE COMMISSION
TO THE COUNCIL, THE EUROPEAN PARLIAMENT,
THE ECONOMIC AND SOCIAL COMMITTEE
AND THE COMMITTEE OF THE REGIONS

Follow-up of the European Council of 21 September: the situation in the
European tourism sector.

REPORT FROM THE COMMISSION
TO THE COUNCIL, THE EUROPEAN PARLIAMENT,
THE ECONOMIC AND SOCIAL COMMITTEE
AND THE COMMITTEE OF THE REGIONS

Follow-up of the European Council of 21 September: the situation in the
European tourism sector.

TABLE OF CONTENTS

Introduction ................................................................................................................................ 3

I.

General overview ......................................................................................................... 3

The short-term impact on EU inbound tourism ........................................................... 4

The short-term impact on EU outbound tourism ......................................................... 4

II.

1.

2.

Particularities within the EU market ............................................................................ 5

Forms of tourism .......................................................................................................... 5

Destination types and countries ................................................................................... 5

III.

Specific sectors............................................................................................................. 6

1.

2.

3.

4.

Air transport ................................................................................................................. 6

Travel agents and tour operators .................................................................................. 6

Accommodation ........................................................................................................... 7

Other sectors................................................................................................................. 7

IV.

Requests from the tourism industry stakeholders ........................................................ 7

V.

Conclusions.................................................................................................................. 8

2

INTRODUCTION

The  Commission  report  of  17 October  2001 1  provided  to  the  Gent  Summit  an  Overview  of
EU action in response to the events of 11 September and assessment of their likely economic
impact. The report explained what the EU had done in this respect, up to that date, and listed
the  implications  for  priorities  both  in  terms  of  action  and  of  resources  at  EU  level.  It  also
examined the impact of the events of 11 September on the EU economy and on four specific
sectors, one of them being tourism.

Concerning  the  impact  on  EU  tourism,  the  Commission  has  assessed  the  situation  as  it
developed.  It  has  invited  European  and  international  associations  in  the  field  of  tourism  to
present their views with regard to short and medium term impact and policy consequences. In
addition  to  the  replies  from  these  associations,  several  national  associations  and  tourism
administrations of Member States also reacted.

To complete the assessment, a meeting was held on 18 October between the representatives of
the European tourism industry and the Commission services concerned, to which the Member
States' tourism administrations were also invited. It provided a broad forum for discussing the
situation. Chapters II to IV mainly refer to information made available by these sources.

I.

GENERAL OVERVIEW

Europe, with the greatest diversity and density of tourist attractions, is the most visited tourist
region in the world. Two million tourism enterprises in the European Union account for about
5 %  of  both  GDP  and  employment,  i.e.  more  than  8 million  jobs.  Tourism  also  generates  a
considerable amount of activity in other sectors.

An impact simulation carried out immediately after 11 September forecasted dramatic losses
in  tourism,  with  severe  effects  on  GDP  and  employment  world-wide.  The  simulation  also
included  alarming  figures  for  Europe.  The  Commission,  based  on  wide  consultation  of
European  stakeholders,  did  not  find  confirmation  for  these  results.  It  believes  that  the
information available does not yet allow the release of precise figures on the short-term, nor
medium to long-term impact of the 11 September attacks.

The European Commission therefore largely agrees with the analysis and conclusions issued
by the World Tourism Organisation: that is that, from an economic viewpoint, the impact on
tourism in Europe can be  expected  to  be  rather  limited  in  scope  and  time,  provided  that  no
new dramatic events take place. No doubt, as further explained below, the short-term impact
is significant in particular for certain forms of tourism, destination types and specific sectors.
It  is,  however,  conceivable  that  there  will  be  no  measurable  impact  on  EU  tourism  in  the
medium to long term. In addition, the effect on overall EU economic growth and employment
could also be mitigated to some extent by the fact that short-term cuts in consumers' tourism
expenditure could lead to reallocation to other goods and services.

1

COM(2001) 611 final.

3

                                                
What complicates the analysis is the fact that the impact of the 11 September atrocities, both
travel  behaviour  and  on  business,  overlaps  considerably  with  other  preceding
on 
developments, such as the global economic downturn and the outbreak of the foot-and-mouth
disease  which  had  already  had  an  extremely  damaging  effect  on  inbound  tourism  in  the
United  Kingdom.  In  the  above-mentioned  report  to  the  Gent  Summit  the  Commission
predicted  a  scenario  of  recovery  beginning  in  the  second  half  of  2002  and  with  an  annual
growth rate of around that achieved in 2001.

Existing  evidence  points  to  some  change  in  the  behaviour  of  the  European  traveller  over
recent  weeks,  which  is  expected  to  continue  during  the  next  few  months.  This  would  mean
more independent than package holidays, fewer trips by plane and more travel by private car,
coach and train. Shorter trips to more traditional destinations are now preferred. In turn, the
effect of the terrorist action is that it may take some time for travellers' fears to be overcome.
However, this effect should not be significant in the longer term.

The short-term impact on EU inbound tourism

The  impact  on  European  tourism  from  outside  the  EU  of  the  terrorist  attack  on  the  United
States  is  unambiguously  negative.  These  events  have  confirmed  the  high  degree  to  which
tourism is an integrated and interdependent trade sector.

Manifest fear of travel primarily affects the high-spending tourists from America, Japan and
the Middle East who concentrate on specific destinations. There are substantial cancellations,
no shows at airports and a reduction in both air routes and subsequently the aircraft fleet. The
volume of tourism movement of these countries to Europe has dropped by up to an estimated
30 %. Ireland  and the UK have registered even higher losses. These effects have been quite
serious  particularly  for  those  destinations  hosting  incentive  groups,  i.e.  tourists  offered  the
stay by the enterprise employing them, and international conferences and exhibitions.

Beyond the immediate negative effect it is expected that this situation, especially as far as the
flow of American tourists to Europe is concerned, is likely to stretch into the winter vacation
period. According to reports from wholesalers there are no bookings and the prospects for the
autumn and winter seasons as regards business and leisure travel are very pessimistic. Many
American tourists are not booking a winter vacation trip overseas until they are assured of a
measure  of  stability  in  the  political  and  economic  environment.  However,  contrary  to  EU
inbound  tourism,  which  accounts  for  no  more  than  13 %  of  nights  spent  but  much  higher
spending and yield, the European markets are less affected and have adopted a “wait and see”
strategy until the situation becomes clearer. Travel within Europe seems to have been affected
only to a limited extent.

The short-term impact on EU outbound tourism

As  for  tourism  by  EU  citizens,  one-quarter  go  to  other  (non-EU)  parts  of  Europe  and  to
worldwide destinations, while the other three-quarters remain within the EU. There is already
a serious fall-off in European travelling to destinations outside Europe, which is contributing
to the economic instability of European airlines. The big European tour operators in the sector
anticipate  in  a  reduction  in  bookings  to  all  destinations  but  especially  to  the  US  and  the
Middle East. Bookings for destinations in Southeast Asia, the Caribbean and Southern Africa
are  still  going  reasonably  well.  In  future,  overseas  destinations  looking  to  recover  their
markets are expected to offer creative pricing packages to attract Europeans.

4

II.

1.

PARTICULARITIES WITHIN THE EU MARKET

Forms of tourism

Business  travel  and  specifically  the  meeting  and  incentive  sector,  tourism  offered  by  an
enterprise to its employees to stimulate or to reward  increased performance, are particularly
badly  affected.  Large  numbers  of  conferences  and  incentive  travel  groups  have  been
cancelled.  It  is  expected  that  demand  for  business  travel  will  return  next  year,  but  at  levels
significantly below those of previous years.

The impact on the cruise industry in Europe, which is largely dependent on American tourists,
is  equally  severe.  Countries  with  an  established  cruise-industry  and  ports  on  the  routes  of
cruises report a drop of up to half of the usual business. One major company that operated a
significant  number  of  cruises  in  the  Mediterranean  stopped  its  undertaking.  Other  cruise
companies have relocated vessels from Europe to, for instance, the Caribbean.

2.

Destination types and countries

In Europe,  significant  negative  effects  are  felt  mainly  in  capitals  and  other  major  cities,  for
which  a  large  share  of  tourism  volume  is  business,  congress  and  incentive  tourism  and/or
cultural/sightseeing  tourism  by  overseas  visitors  (in  particular  from  US  and  Japan).  Other
types of destination are less affected.

This  general  picture  shows  differences  between  certain  groups  of  countries.  Ireland  and  the
UK,  with  a  traditionally  important  or  above-average  share  of  American  visitors  are  more
affected  than  other  EU  countries.  On  the  other  hand,  Spain  and  Portugal  do  not  report  any
measurable effect.

Some experts estimate that, due to a shift towards more independent holidays, countries with
a greater dependence on package tours are likely to be more affected. Tour operators have to
decide  now  whether  or  not  to  reduce  capacity  for  the  next  season  and  whether  to  change
destinations  to  places  considered  to  be  safer  than  others.  The  current  lack  of  bookings,
although largely a consequence of a postponement of travel decisions, may lead to financial
(cash  flow)  problems  affecting  not  only  wholesalers  but  also  hotels  in  Mediterranean
countries.  Other  sources,  however,  expect  that  the  coastal  and  island  destinations  of  the
Southern European countries will benefit from the reluctance of some Europeans to travel to
long haul destinations.

Those  destinations  that  redirect  their  promotion  campaigns  to  markets  less  affected  by  the
crisis and create new products (e.g. in co-operation with National Tourist Boards and airlines)
are  expected  to  recover  quite  quickly.  In  some  cases  creative  pricing  may  generate  new
markets.

5

III.

SPECIFIC SECTORS

According  to  information  provided  by  the  European  tourism  industry,  the  situation  can  be
summarised as follows.

1.

Air transport

The  Commission  Communication  of  10 October  2001  on  the  Repercussions  of  the  terrorist
attacks in the United States on the air transport industry gives detailed figures regarding the
impact  on  the  European  air  transport  industry,  which  is  the  sector  of  the  economy  most
seriously  affected  by  the  events,  resulting  in  a  severe  reduction  of  staff.  The  decline  in  the
number  of  first-class  and  business-class  passengers  and  of  long-haul  passengers  is
economically the most significant. The impact on air transport is manifest in the reduction in
scheduled flight operations to and from Europe and to a certain extent within Europe. Flights
within Europe have been reduced as a result of financial constraints rather than as a result of a
falling market. Low-cost carriers or so-called no-frills airlines serving mainly European routes
have not been seriously affected.

Announcements  of  reductions  of  services  and  personnel  by  major  European  airlines  have
undermined confidence in their ability to operate at pre-disaster schedule levels. However, the
immediate  shift  from  air  travel  to  rail  travel  is  likely  to  continue  only  in  the  short  term.
Reduced  capacity  and  more  expensive  fares  due  to  increased  cost  (insurance  and  security
measures)  risk  contributing  to  a  reduction  in  air  travel  in  the  medium  term.  However,  as
airlines  recover  and  realise  that  they  have  to  promote  air-travel  in  order  to  win  back  their
markets,  and  as  travellers  realise  that  additional  security  measures  make  air  transport  safer
than before, capacity and air  traffic volumes  are  expected to recover  in  the medium to long
term.

2.

Travel agents and tour operators

Travel agents and tour operators are perhaps the most seriously affected segments within the
core  tourism  industry.  Some  80 %  of  air  tickets  in  Europe  are  sold  through  travel  agents,
representing  up  to  40 %  of  their  turnover.  Just  after  11 September  travel  agents  faced  huge
numbers  of  cancellations,  partly  requiring  reimbursement.  There  are  drastic  reductions  in
immediate international travel and significant ones in bookings for travel  in the  near future.
The  significant  decline  in  the  most  profitable  segments,  i.e.  first-class  and  business-class
passengers,  long-haul  flights  and  normal-budget  (as  opposed  to  low-budget)  carriers  is
particularly damaging to travel agents.

Some operators are more affected than others. Large tour operators suffer in particular from
the  effects  on  their  business  as  charter  air  carriers,  which  in  nature  is  similar  to  those  of
scheduled  airlines.  Travel  agents  and  tour  operators  specialising  in  destinations  that  show  a
particularly strong decline in tourism activity are  experiencing extremely high  losses.  Small
and medium-sized companies lack financial reserves to bridge the immediate negative effect
on business. A number of companies have announced staff reductions or are said to be close
to  bankruptcy.  Some  must  be  expected  to  drop  out  of  the  market,  and  the  trend  towards
concentration that already existed before the events is likely to increase.

6

3.

Accommodation

Mainly  large  and  high  standard  hotels  in  capitals  and  other  major  cities  accommodating
overseas  and  business/congress/fair  guests  are  significantly  affected  by  reductions  in  the
number  of  guests  that  could  amount  to  more  than  half  of  the  normal  guest  figures.  These
losses, and the prospects for overcoming them, are in direct relation to the effects mentioned
above for destination types and countries. For some countries, overall losses in occupancy in
urban destinations are estimated at 20 % to 30 %. In this regard, no change is expected until
the end of this year. First positive developments are expected for the second quarter of 2002,
if nothing more happens.

This  impact  also  affects  the  labour  situation  in  the  accommodation  sector.  Hotels  in  main
cities report their intention to lay off employees or want, as a first step, to reduce the normal
working hours for all employees.

In low budget accommodation youth hostels are most affected, since their percentage of  US
guests is higher. The effect on European youth hostels might be more significant in summer
2002,  since  the  terrorist  attacks  occurred  after  their  main  season.  According  to  their
geographical location, they expect to lose between 5 % to 20 % of next year's turnover. While
in  principle  business  with  younger  Europeans  will  be  affected  to  a  lesser  extent,  a  major
influence  on  youth  hostels  will  be  if  authorities  impose  restrictions  or  conditions  on  school
travel, as was partly done (e.g. France) after the terrorist attacks.

4.

Other sectors

For  short-term  rental  to  private  and  business  travellers,  the  European  car  rental  industry  is
forecasting a decrease in turnover of one-third until the end of this year. During the first three
weeks  after  11 September,  one  of  the  largest  companies  recorded  a  15 %  reduction  in  car
rental  at  airports.  A  parallel  12 %  increase  at  railway  stations  could  not  in  any  way
compensate  for  these losses since it is based  on  a  much  lower  level  of  business.  There  will
also  be  a  significant  impact  on  car  manufacturers,  since  the  current  fleet  is  expected  to  be
renewed at a slower rate, and in reduced numbers, with impacts on both the new and second
hand markets.

Regarding leisure parks, a 30 % and more reduction of visitors after 11 September is expected
to result  in less investment  for new equipment in  that  sub-sector,  especially  by  SMEs.  This
effect also applies to sectors mentioned previously. The repercussions would lead in the short
term to financial problems for  suppliers  and  manufacturers  of  equipment,  and  closures  may
occur. In the longer run, concentration in all areas may result, leading to a less diverse offer.

IV.

REQUESTS FROM THE TOURISM INDUSTRY STAKEHOLDERS

Several requests for policy action have been made by the European tourism industry. Above
all, the European tourism industry emphasises the need to co-ordinate, more than ever before,
the promotion of Europe in its overseas markets and has asked that the Commission play an
active role in the promotion of Europe as a safe destination. The European tourism industry
has  called  upon  the  Commission  to  ensure  that  policy  measures  in  the  relevant  Community
policy  areas  are  developed  taking  into  account,  as  far  as  possible,  the  best  interests  of  the
tourism  sector.  Close  co-operation  with  the  industry  has  been  requested  with  a  view  to
overcoming the immediate crisis and supporting (including financially) this important service
sector.

7

Beside some calls for a lower VAT rate for tourism businesses and special support for SMEs,
the professional stakeholders ask for the reduction of airport departure taxes, which can be as
much as 30 % of some budget fares; otherwise, revenue from these taxes is seen to be at risk
of  serious  erosion.  They  think  that  alleviation  of  taxes  on  travellers  will  help  to  encourage
more  travel  and  resurrect  airline  finances  without  the  necessity  for  public  sector  financial
contributions to ailing airlines. The tourism industry  considers  action  to  mitigate damage  as
important for loss limitation, including the tax revenues to governments from tourism.

The EU Social Dialogue Committee in the Horeca/Tourism sector has started  to discuss  the
possible impact of the 11 September events. None of the social partners has yet ventured to
quantify the possible  effect. Calls for implementing measures in the context of the  different
EU policies in a co-ordinated way to assist the sector, can be expected.

V.

CONCLUSIONS

In its communication of 10 October 2001 on the Repercussions of the terrorist attacks in the
United States on the air transport industry 2 the Commission has set out its political response.
Some  of  the  measures  proposed  also  respond  to  requests  made  by  the  European  tourism
industry.  These  refer  to  increased  safety  levels  for  the  travelling  public,  including  co-
ordination throughout the EU and regular inspection of implementation of safety precautions.
They  refer  also  to  governments  underwriting  the  additional  insurance  costs  ,  and  aid  to  the
financial recovery of airlines.

Despite  the  immediate  crisis  situation  with  which  specific  market  segments,  sectors  and
destinations  are  faced,  measures  which  harm  the  long-term  prospects  for  growth  and
competitiveness of the European tourism industry must be avoided.

The  challenge  therefore  will  be  to  develop  a  strategy  for  the  European  tourism  sector  that
meets the medium and long-term political and economic challenges ahead. This, together with
the requests from the European tourism industry stakeholders for integration and co-operation
should  be  met  by  the  new  co-operative  approach  for  the  tourism  industry  set  out  in  the
Commission communication of 13 November 20013 entitled “Working together for the future
of  European  tourism”  The  measures  favoured  under  this  approach  aim  at  improving  the
integration of the concerns of all tourism stakeholders in Community policies and initiatives
affecting  tourism,  and  at  promoting  a  better  interface  with  the  tourism  industry  and  other
parties  involved.  It  is  suggested  that  this  be  put  into  effect  through  the  open  method  of  co-
ordination.

Since  uncertainty  remains,  the  Commission  will  continue  to  monitor  the  impact  of  current
events  on  tourism  and  keep  it  under  review.  This  will  be  done  in  co-operation  with  the
Member States, the tourism industry, and the other stakeholders.

2
3 

COM(2001) 574 final.
COM(2001) 665 final.

8