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In recent days, British tourists were among the thousands evacuated from La Palma, Spain, due to raging wildfires. For northern Europeans, the increasing heatwaves caused by climate change have made summer trips to the Mediterranean riskier. However, the holiday industry is showing little signs of adaptation, but that is expected to change.
The scorching temperatures gripping Mediterranean tourist destinations are causing discomfort and posing a heat stroke risk as they reach the mid to high 40s centigrade.
Despite these conditions, the stocks of major tour operators like Jet2 and Tui remain strong. In fact, Tui reported that Greece, Spain, and Turkey are still popular destinations.
Nevertheless, a minority of holidaymakers are being influenced by extreme temperatures, as reported by the European Travel Commission. Higher-end travel agencies are experiencing a surge in interest for cooler destinations, such as Iceland and Norway.
The tourism industry faces a challenge as its investments are heavily concentrated in areas that are being affected by heatwaves. Hotels, for example, have 1.5 million beds in Spain compared to only 10,700 rooms in Iceland. These hotels are owned by local businesses or industry giants like Tui, which has a direct ownership stake in 38% of its hotels.
The solution lies in promoting travel during the “shoulder” months of the demand curve, which were previously less popular. According to a survey by the European Travel Commission, the number of Europeans planning to travel in August-September this year decreased by 3% compared to 2022, while the number of those planning to travel in October or November increased by 5%.
However, the constraint lies in the fact that most families can only travel during school summer holidays. If heatwaves continue to occur in the Mediterranean, travel businesses may face significant write-offs on their fixed assets in the region. In response, they may need to expand their cruise fleets, which offer greater mobility.
Travel industry stocks have experienced a post-coronavirus rebound in demand. However, with Europe warming at a faster rate than the global average, travel companies cannot ignore the impact of future heatwaves.
We, the Lex team, are eager to hear your thoughts. Please share your insights on how climate change will affect the holiday industry in the comments section below.
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