The global tourism industry is no stranger to disruption, particularly after the last six years. The latest surge in aviation fuel prices, however, presents a challenge not seen since the 1970s.
Following escalating tensions and conflict in Iran, the cost of aviation fuel has risen sharply, in some cases doubling in a matter of months—a situation that has been destabilising enough to force one major American carrier out of business.
For travellers, the effects are already becoming visible in the form of higher ticket prices and reduced availability on certain routes. For businesses, particularly those in European countries that are particularly reliant on international visitors, the question is this: what will the impact be, and how can they adapt to a landscape where long-haul travel is suddenly less accessible?
Why fuel prices matter so much
Fuel is one of the largest operating costs for airlines, often accounting for a significant share of their total expenditure. While airlines often lock in fuel prices for a period of months, that window is likely closing, or has already closed at this point. And while gradually rising prices can be partially absorbed, a sudden spike like we’re seeing at the moment leaves very little room for manoeuvre.
With no end still in sight to the war in Iran, airlines have been forced to act quickly. Higher fuel costs are being passed on to passengers through increased ticket prices, fuel surcharges and, in some cases, fewer flights on less important routes. Less profitable routes are often the first to be cut, particularly those connecting smaller destinations, or which rely on seasonal demand, rather than carrying regular business traffic.
Related article: How Trump’s war in Iran is impacting businesses in Europe
This is the piece of the puzzle that will concern the European tourism industry. With the summer season looming, the frequency of flights shouldn’t be heavily affected. But fewer flights and higher prices would inevitably mean fewer international visitors, especially from long-haul markets like North America and Asia. Travellers who might previously have considered a trip to Europe might start looking closer to home instead.
A shift in travel behaviour
Rising airfares have an inevitable impact on tourism, particularly on long haul flights. While short haul tickets represent a smaller percentage of the total cost of a family holiday, for a longer trip, they could be the biggest single expense. This price increase comes on top of existing changes in the airline industry, where Economy seats are being nixed in favour of more Premium Economy and Business class seating, driving up the lower end even more.
Within Europe, this may just mean that rail and road travel will become more appealing, particularly when it comes to journeys between neighbouring countries. High-speed rail networks in countries like France, Germany and Spain are a more than viable alternative to short-haul flights, and the current fuel crisis could accelerate a shift that was already underway for environmental reasons.
Conversely, there might be an impact from holidaymakers’ reluctance to go to or through the Middle East. Many flights to Asia have gotten longer because of unsafe airspace near Iran, and many tourists will still be put off visiting hotspots such as Dubai because of the lingering threat of attacks. This could see an extra boost to domestic and local tourism, even for wealthy people who remain relatively unaffected by price hikes.
The impact on tourism-dependent economies
Some European countries are more exposed to these changes than others. France, the most visited country in the world by most metrics, is probably the prime example. The country’s cities, coastlines and countryside attract over 100 million visitors each year, playing a vital part in the national economy. This is particularly true of Paris, where they support jobs in hospitality, transport, retail and culture, but also areas like the French Riviera and the Alps.
Fewer tourists might be a relief for some people, but it’s a serious concern for businesses. What will be interesting is the extent to which tourism decreases, or whether the dynamic simply changes. A recent survey by Alliance France Tourisme indicated that, amidst global conflict and budgetary constraints, 71% of French holidaymakers were planning on taking trips within France. Similar stats have been seen in the UK in recent years, with 67% of Brits planning a staycation in data released last year.
The major advantage that Europe has over other parts of the world is the strength of its transport infrastructure. Most major cities in Europe are connected via train lines, with many of them offering high speed point-to-point services. As aviation fuel prices and petrol prices continue to rise, these will become even more economical, driving both strong domestic travel and tourism from neighbouring countries.
Turning towards domestic tourism
What businesses should focus on is how this could change the makeup of their target audience. In France, this might mean pulling back on foreign language advertising, moving away from attracting American tourists and towards French speakers. The tone of that advertising might change as well, as might the pitch. Campaigns might move from promoting the usual tourist hot-spots to lesser-known regions, and unique local experiences that domestic travellers will appreciate.
Related article: Iran conflict: Does Europe need to become more self-sufficient?
The length of holidays might also dictate what products and services you offer. Weekend and city breaks tend to take precedence over long getaways when ‘staycations’ are booming. This could mean changing the packages you offer, or shifting your product focus. For rentals, self-catered and flexible bookings might become more important, as people look to slot in a couple of nights away on shorter notice, rather than booking a big holiday ahead of time.
In terms of marketing, this is where local search could become even more important. An increase in domestic tourism to smaller towns and cities could massively benefit businesses who can capitalise on local SEO, and dominate a less crowded market. Investing in your website and social media presence can help position you at the top of searches like ‘restaurant near me’, and be a big differential in harnessing the domestic tourism boom.
The longer-term outlook
As with most issues at the mercy of Donald Trump, it’s difficult to predict how long the current fuel crisis will last. Much depends on a cascade of geopolitical developments, and the stability of global energy markets, which are already seeing many countries reconsider their energy portfolios. If prices remain high, the changes currently taking place could become more permanent.
Even if fuel costs eventually stabilise, the experience is likely to leave a lasting impression on both travellers and businesses. The pandemic already demonstrated how quickly travel patterns can shift, and the current situation reinforces the importance for everyone—from countries to the aviation industry to tourism businesses—of being resilient and adaptable.
For the European tourism industry, this could lead to a more diversified model in the long term. International visitors will always be an important part of tourist economies, and we could even see a bump similar to after the pandemic, where pent-up demand for foreign holidays sees demand rise again. But much like countries are looking at alternative fuel sources for long-term security, domestic tourism may also become more of a focus going forwards.
While the rise in aviation fuel prices is definitely concerning for major tourist economies like France, particularly ahead of the summer season, it should be at least partly offset by domestic travel. The trick for businesses and entrepreneurs will be shifting focus to that audience, and capitalising on the demand for different kinds of experiences.
What might be a trickier time for Parisian businesses could be a boon for those in smaller towns and cities. In either case, it’s a reminder that flexibility is key, and that opportunities exist for those canny enough to capitalise on them. Businesses that take advantage and pivot towards these shifting demographics could get ahead of the curve, and find elation in the trend for staycations.
