Europe faces many economic, political, and security crises that have negatively impacted tourism in some countries like Turkey and Greece, while Spain and other Mediterranean destinations have benefited from redirected travel. However, tourism to Europe overall continues to grow due to strong intra-regional travel and demand from large markets like the US and China. Upcoming visa-free travel for Turkish citizens to Europe represents a major new source of tourism that destinations are working to attract through better understanding of Turkish preferences and the growth of mobile travel sales. The future of European tourism remains uncertain with risks of further economic and political turmoil.

1. Turmoil in Europe: Travel Resilient in Uncertain Times
Opinion | 26 May 2016
Europe is at the epicentre of many external
shocks and aftershocks, and the region
dominates global media headlines, with a long
list of crises, including economic, financial,
geopolitical, social and humanitarian, or a
combination of all of the above. Economically, the EU is still underperforming after the
Great Recession, with GDP growth revised downwards to 1.4% for 2016, according to
Euromonitor International's Global Economic Forecasts, exhibiting a lacklustre
performance, except in a few bright spots, such as Spain and Ireland.
Seismic shocks
Terrorism is active on Europe's shores, with major atrocities in Paris and Brussels in the
last several months and the European transport and tourism infrastructure a key
target for bombings and attacks, including the targeting of planes, airports and trains.
Such attacks have an immediate impact on tourism, with short, sharp declines felt in
the aftermath, with France, for example, witnessing a countrywide decline of 8% in
arrivals in January 2016 following the 13 November attacks in the city, according to
UNWTO.
Europe is no stranger to terrorism, having experienced national terrorist groups, such
as the IRA and ETA over the decades; however, the Paris attacks perpetrated by IS
revealed the indiscriminate nature of this new form of terrorism that aims to destroy
the very heart of European values, such as freedom and culture.
Adding to the sense of uncertainty and political confusion is the migrant and refugee
crisis, where Southern Europe is the first port of call for those seeking to flee war and
economic hardship from North Africa and the Middle East. The exodus from south to
north has prompted the selective closure of some country borders within the
Schengen zone in response to the strain faced in processing and dealing with the safe
passage of migrants.
With the Schengen zone - held up as the bastion of free trade and borderless travel -
under pressure due to heightened concerns about safety and security, the foundations
that the European Union is built on are beginning to crumble. With the UK on the cusp
of a 'remain or leave' vote to the stay in the EU and what a potential Brexit could
unleash for Europe, the stakes for the region have never appeared higher.
Crisis, what crisis?
Yet, when you take a close look at tourism statistics for Europe, the travel industry
just keeps on growing and growing; arrivals are up, tourists are spending more, and
most destinations and travel operators are content in their growth mind-set, thanks to
continuous tourism demand, with destinations like Barcelona even struggling with
excessive demand. We may ask if we are living in a parallel universe to those landing
on Europe's shores seeking refuge?
Caroline Bremner
Head of Travel
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2. According to the latest UNWTO Barometer, arrivals to Europe (including all subregions)
have grown by 4.2% year-to-date in 2016, which is marginally slower than the 4.6%
increase seen in the previous year, with receipts tracking volumes at 4.7% in 2015.
Europe is the world's largest region for international tourism demand, a highly mature
market where there is strong price pressure, exacerbated by sluggish economic
fundamentals and stifled income levels for its 500 million inhabitants that make up the
majority of the region's inbound arrivals.
Research from Euromonitor International into travel product categories in Western
Europe reveals that the strongest performing areas are short-term rentals (no
surprises there), bus transport and low-cost carriers, which is a strong indication that
value for money continues to be paramount. All offline categories exhibited negative or
negligible growth over 2011-2015, whilst online performed well, with double-digit
growth of 18% for mobile sales and in-destination activities, with 14% growth forecast
for 2015-2020 in constant US$ terms.
Such resilience stems from Europe's intra-regional market, strong demand from key
markets like the US and a rise from emerging markets like China, although growth in
China outbound is expected to tail off from 10% in 2015 to a forecast 6% in 2016.
Forecast Key Categories Performance in Western Europe: % CAGR 2015-2020 in
Constant US$
Note: Provisional data subject to revision before publication of Travel 2016
Playing out in destination
It cannot be said that tourism is a zero-sum game, but it is true, to an extent, that
when one destination suffers, whether at the hands of pandemics, terrorism or natural
disaster, other competing countries will pick up the slack, along with domestic tourism
benefiting from the shift.
Turkey, as a destination, is experiencing a sustained decline in demand, with year-to-
date 2016 negative growth of 10%, following increased frequency of terrorist attacks
in Istanbul and other cities/resorts, as well as it sharing a border with Syria, housing
thousands of refugees and being one of the key exit points for refugees sailing into
Europe. While Greece survived its first Grexit scare, it is now suffering from increased
media attention on the migrant and refugee crisis, which is primarily affecting its
islands, with growth dropping from double digits in 2014, 7% in 2015, falling into a
decline in 2016. When demand falls, capacity follows suit.
Category Value % CAGR 2015-2020
Short-term rentals 4.6
Bus 4.4
Low-cost carriers 4.2
Cruise 4.1
Spas 2.5
Medical tourism 2.2
Museums 2.1
Luxury hotels 1.9
Airlines 1.8
Other transport 1.7
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3. Fear factor
In response to falling demand for Turkey, Greece and further afield, with Egypt and
Tunisia being out of bounds because of the fear factor, European tour operators have
refocused their attention and capacity on destinations like Spain. Arrivals to the
country have grown by 14% so far in 2016 which has been a stand-out winner of
capacity shifts towards sun and sea.
The substitution effect is noticeable for perceived safer destinations around the Med,
including Croatia, Cyprus, Portugal and Malta, which are all experiencing double-digit
growth, with Germany and the Netherlands also performing above average. Not to
mention the rise of long-haul destinations that rank high in terms of perceived safety
such as the Caribbean.
Winners and Losers - Select European Destinations vs Competitors: % Growth
in Arrivals over 2015-2016
Source: Euromonitor International from UNWTO
Security front of mind
Safety and security are very much front of mind and dominate many a travel
conference. The World Economic Forum reports that security is a critical factor in a
country's attractiveness and competitive positioning. The Global Peace Index is a
useful indicator of peace and stability, with Iceland, Denmark and Austria ranked top in
2015, while the WEF listed Switzerland, Austria, Luxembourg and Portugal amongst the
highest in Europe for safety and security, based on an assessment of levels of crime,
violence and terrorism, along with police response times. We may see destinations
increasingly promote their "safety record" in future.
Turkey on tap
In every crisis, there is an opportunity. Following the deal between Turkey and the EU
to help curb the migration crisis, Turkish residents are on the verge of receiving visa-
free travel to the EU. This visa liberalisation opens up a huge new source market,
waiting to be targeted by travel brands with Turkey outbound representing almost nine
million trips in 2015, and the EU already accounting for almost half of all Turkish
outbound trips. Popular outbound destinations include Greece, Bulgaria and Germany.
Turkey is not becoming an EU member, despite the scaremongering by right wing
press; however, it is useful to look at the uplift that countries like Romania and
Bulgaria enjoyed when their visa restrictions were eased during EU enlargement in
2003/2004, before their official membership in 2007. Average outbound growth for both
% Volume Growth 2015 % Volume 2016 YTD
Winners
Spain 5.0 13.9
Croatia 9.0 17.0
Portugal 9.7 15.0
Losers
France 0.9 -8.0
Turkey 3.4 -9.9
Greece 7.0 -11.0
Egypt -5.0 -46.0
Tunisia -25.0 -18.7
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4. © Euromonitor International 2016
nations was 18% following the easing of travel restrictions and citizens were able to
explore Europe more freely. It is likely that Turkey outbound travel will experience a
similar boost of over 10% in the year following visa-free travel being implemented.
With a new source of demand on tap, the next step is for European destinations to
understand Turkish travellers better in terms of preferences and spending patterns,
where domestic spending is higher than international spend by Turkish residents.
Online sales are already established and continuing to grow well; however, mobile
travel sales are still in their infancy.
According to Euromonitor International's Digital Consumer research, smartphone
penetration is marginally higher in Turkey than the European average, at 69% vs 66%
respectively in 2015 in terms of smartphone possession by residents. Clearly, with a
strong smartphone base, mobile travel sales will quickly reach breakthrough point over
the next few years.
Turkey Select Travel Categories: Value Sales 2015 and % Growth 2010/2015
Bumpy ride ahead
The short-term future for the Euro Zone looks fairly tumultuous, with the UK's Brexit
vote merely a month away, which is stoking uncertainty. Euromonitor International
forecasts a 3-6% probability of a sovereign debt crisis in Spain and Italy and a 6-10%
probability of a full-blown European recession (again) over the coming year, with both
scenarios involving the exit of Greece from the Euro Zone. The biggest downside risk is
a stagnation scenario, where output stagnates and the zone falls into recession in
2017.
Whether it is Brexit, Grexit or the collapse of the European Union itself, one thing is for
certain: there has never been a better time to go and enjoy what Europe has on offer
while you still can.
For further insight, please contact Caroline Bremner, Head of Travel at Euromonitor
International, at: caroline.bremner@euromonitor.com.
US$ million at constant 2015 fixed exchange rates
Categories US$ million 2015 % Value Growth 2010/2015
Domestic expenditure 10,208.0 15.3
Outbound expenditure 5,287.0 8.8
Airlines 10,334.0 0.1
Online travel sales to residents 7,229.0 41.5
Mobile travel sales to residents 321.0 na
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