Terrorist attacks: The impact on the European Hotel sector.

Abstract

Incidents of terrorism have been radically increased in Europe over the last decade. Beside their social costs, terrorism attacks may also entail significant economic costs for many sectors of the economy. Among the various economic sectors, the tourism industry is likely to bear the highest portion of these economic costs since the link between terrorism attacks and demand might be stronger for tourism products and services. Theoretical work but also common sense suggest that as terrorism attacks increase in a country, the preferences of potential tourists alter resulting in a lower demand for tourism products in a country. However, despite the theoretical negative link between terrorism and tourism performance, existing empirical work in the field provides rather mixed results. Along these lines, this study aims to investigate whether terrorism attacks have indeed a significant negative impact on the performance of the hotel-sector in Europe and further provide measures directed to lessen the adverse effects of terrorism on hotel performance at the micro-level. Using a balanced panel dataset of 22 European countries for the period from 2008 to 2018 drawn from Eurostat and the Global Terrorism Database (GTD), this study employs a fixed effects regression model to examine whether terrorism has a negative effect on the performance of the hotel sector in Europe. Estimation results conclude that terrorism attacks are having a negative impact on the number of nights spent at hotel and similar establishments in the 22 European countries. Despite the fact that the hotel industry has grown significantly, terrorism will always represent a major challenge and threat to the industry.