(Bloomberg Opinion) -- We’re not going on a summer holiday. That’s the unfortunate consequence of the U.K.’s latest travel restrictions.
Just as confidence was returning in the overseas vacation market, Britain advised against all but essential travel to Spain, and then late Monday added its Balearic and Canary Islands.
Coming amid what would normally be the peak season for summer holidays, this is nothing short of a disaster for tour operators such as TUI AG, the world’s biggest package-holiday company, On the Beach Group Plc and Dart Group Plc, which owns Jet2.
We are right in the middle of the so-called “lates” market, generally the period from June to the end of August, where people in Europe book their holidays anywhere from one day to six weeks in advance. This period can account for up to a quarter of all bookings and tends to be more profitable in a normal year, because prices are higher nearer to the time of travel.
Until the weekend announcement, the signs of summer travel resuming across Europe were good. There was high demand for domestic holiday properties, such as those offered by Airbnb Inc., and some travelers were venturing farther afield.
But fears of a second virus wave, with spikes in cases being reported in Spain and Belgium, are jeopardizing any nascent recovery. The U.K.’s travel guidance bodes ill for summer holidays across Europe.
First there are the practical implications. In the U.K., when the government advises against all but essential travel, tour operators cancel holidays and customers are entitled to a full refund. TUI said on Saturday that it would allow those due to travel to all parts of Spain between July 27 and August 9 to cancel, or amend their holidays to another destination or time, and receive a full refund or credit.
This cash outflow comes just as it and other operators were restarting their summer programs and spending on marketing, as well as making commitments for flights and hotel rooms. TUI is particularly vulnerable to the changing guidance on Spain, because this is the top destination for both British and German holidaymakers, who account for about half of its customers. The group would be in even deeper trouble if other countries such as Germany follow the U.K. in introducing travel restrictions to Spain.
But the biggest effect of the U.K.’s announcement will be on consumer confidence. Even if it scales back the restrictions, the damage may have already been done.
On top of the health risks, people may be worried by the fact that the advice on Spain came with little notice. Being unable to travel at the last minute, being stuck in a destination far from home and being forced to undertake a lengthy quarantine have all suddenly become possibilities again. That does not inspire confidence in booking a holiday. Worse, it increases the risk that jitters could spread beyond the peak summer season and into the autumn and winter holiday periods, which were looking promising.
Some of the money that would have been spent on Spanish holidays could find its way into domestic economies instead. Staycations already looked appealing to Britons, thanks to hotels lowering their prices in response to a new VAT cut. People might also want to take advantage of the U.K.’s “eat out to help out” initiative, whereby restaurants can offer half-price meals from Monday to Wednesday during August.
But according to analysts at Bernstein, the last time there was a spike in staycations — after Britain voted to leave the European Union in 2016 — only 60% of the money that would have been spent abroad found its way into the British economy.
This year the shortfall in the amount repatriated could be even more severe, as far more people are shunning foreign travel and some may still feel nervous about days and meals out. There could also be a shortage of U.K. holiday homes available in August.
So let’s hope the U.K.’s warning on Spain doesn’t portend a broader effort across Europe to keep consumers at home and protect domestic economies. Such a strategy may not work, and it would cast a long shadow on tour operators and holidaymakers alike.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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