Crises have a profound effect on a wide range of sectors. Over the last two decades, sectors have had to contend with several crises, including but not limited to the 9/11 terrorist attacks, the 2008 financial crisis, terrorist attacks on tourist destinations, and more. How these sectors recover varies significantly on the severity of the crisis in question, the nature of the sector, and its overall performance pre-crisis. The longer recovery takes, the more likely it is that sectors are going to have to battle through another crisis whilst they try to recover from the previous one.
The 2008 financial crisis was the most severe shock to hit the global economy in more than 70 years. The collapse of investment firm Lehman Brothers in September 2008 triggered a series of events that led to a deep recession. In late September of the same year, the stock market crashed as the Dow Jones Industrial Average fell 777.68 per cent. This drop was even worse than the 684.81 loss after the 9/11 terrorist attacks in 2001. The financial crisis was followed by the deepest recession since the Second World War. The effects of the crisis persisted for an extended amount of time, significantly longer than previous economic downturns. For example, as a result of the financial crisis, the UK economy is 16% smaller than it would have been if the crisis had not occurred.
In 2013, the Centre for Economics and Business Research investigated how much consumers cut back on spending since the financial crisis. The report found that, on average, each household spent £3,150 less each year since the beginning of the crisis. Of this figure, £1,750 was discretionary spending on non-essential goods and services, which has fallen three times and much as essential spending on items such as food, housing, and energy. Consumers spent less money on non-essential retail and hospitality goods and services such as eating at restaurants and buying clothes as they scrambled to save money in the wake of the crisis.
In the United States, approximately 8.8 million jobs were lost due to the financial crisis. The unemployment rate jumped from 5 per cent in December 2007 to 10 per cent in October 2009. As a result, thousands of Americans limited their spending significantly, especially on discretionary spending such as eating at restaurants and participating in leisure activities.
The financial crisis was economically damaging to millions of people around the globe. It made the global economy more vulnerable to other negative shocks, such as terrorist attacks, pandemics, and other such crises.
The global travel industry has weathered many storms over the years. The 9/11 terrorist attacks in 2001 affected airlines in particular, and it took approximately six years for airlines to recover capacity after the attacks. The SARS epidemic of 2003 resulted in a drop of international tourist arrivals of almost 9.4 million, and a loss of between $30-$50 billion in revenue.
In 2008, the financial crisis hit the industry hard. As the global economy suffered hardship, consumers limited discretionary spending and cancelled planned trips abroad. Airline stocks declined by 68 per cent, and hotel, resorts, and cruise lines fell by 74 per cent.
UK search data for ‘flights’ reveals a slow decline in search traffic. Searches for ‘flights’ dropped significantly in the years after the financial crisis. The economic effects of the crisis meant that individuals were limiting non-essential spending on travel and leisure activities.
Search data from the United States shows that searches for booking a holiday saw a drop between 2006 and 2011, with particular lows in 2009 and 2010 as the effects of the financial crash became devastating to household funds, meaning a holiday was not possible.
2008-2010 was a particularly bad period for the travel industry. Thousands of travel industry professionals lost their jobs, particularly travel agents. Employment figures for accommodation, airlines, and travel agents saw slow recovery over many years. They only reached pre-crisis levels in 2014 for accommodation, and 2018 for air travel. Travel agent employment is approximately half of what it was in 2008. The drop in travel demand due to the financial crisis had a snowball effect that meant thousands of individuals lost their jobs in Western nations. Even before the pandemic, areas of the travel industry were still recovering from the financial crisis.
Global travel and tourism contributed a staggering $9.25 trillion to the global economy in 2019. There were 1.4 billion tourist arrivals in 2018. Terrorist incidents have a significant effect on the global travel industry. Evidence suggests that tourists and visitors are at great risk of being victims in the cities they visit. Acts of terrorism affect tourism by damaging the reputation of tourist destinations. This means that destinations receive fewer visitors and therefore less revenue. The threat of terrorism seems to intimidate tourists more than natural disasters, and as a result, tourist hotspots must do all they can to make their destination safe for visitors.
The threat of terrorism in Turkey has been a concern in recent years, and this is reflected in the United Kingdom search data. Searches for flights to Turkey would typically peak in July and August of each year, and drop again as the winter months approached. Throughout the 2010s, particularly from 2015 onwards, the British government has warned that ‘terrorists are very likely to try to carry out attacks in Turkey.’ The Atatürk Airport attack which occurred in June 2016 seems to have been a turning point for British travellers. From then on, searches for flights to Turkey have reduced significantly, even in the summer season.
In terms of search data, recovery does not appear to have occurred for Turkey just yet. Interest in travelling to Turkey for a holiday appears to have peaked in 2005 and has reduced year-on-year ever since. Full recovery will not be possible until the threat of terrorism in the country is significantly reduced.
The effects of terrorism appear to have a slow recovery period for sectors, none more so than the travel industry. This can be demonstrated by the events that happened at a Tunisian hotel in 2015. In June 2015, a mass shooting occurred at the tourist resort at Port El Kantaoui which took the lives of 38 people. Search data shows a spike in searches in the aftermath as people researched what had happened, followed by a sustained dip in search demand.
For some time, the Foreign Office advised against travel to the country unless it was necessary. There are still areas of the country that are deemed unsafe. Pre-COVID, the country was deemed as mostly safe. This does not appear to have persuaded British people into travelling to the once-popular tourist location. It appears that in cases of terrorism and the travel industry, recovery is slow.
It appears that certain crises affect countries in such a way that some sectors, such as the travel industry, will take many years to recover. This is particularly visible when comparing the recovery time of the financial crisis and terrorism on the travel industry. The problem is that long recovery times open sectors up to further damage if another crisis occurs, which is exactly what has happened to some in the age of COVID-19.
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