Impacts of Energy Price Increases on Tourism

Anyone who has paid bills in the past few years can certify that life on the whole is becoming more expensive. As ready access to natural resources diminish, the cost of the fuels we rely on to keep us living in comfort increase. Unfortunately, this is not an isolated phenomenon, but a global trend spreading across all continents. No matter where we live or what job we have, we pay more to keep our homes warm, our fridges full and our cars operating. Although the financial connections between the different parts of our life may not always be immediately apparent, changes in the energy industry may even force us to choose cheaper vacations.

Tourism – the fourth biggest global industry

Tourism is one of the many sectors affected by energy costs increasing. According to the United Nations Environment Programme (UNEP), 5% of the global Gross domestic product (GDP) is represented by the tourism economy, which employs 1 in 12 people in advanced and developing economies. After fuels, chemicals and automotive production, tourism ranks fourth in global exports, “with an industry value of US$1 trillion a year”. As reported by the same source, this is equal to 30 % of the world’s exports of commercial services and 6 % of total exports. This is not surprising, considering the complexity of this specific economy. For every job in direct (or core) tourism, other jobs (1.5 according to UNEP) are required by the additional industries supporting tourism: transport, accommodation, catering, infrastructure development, marketing and so on. In fact, tourism is a mix of three industries, whose global energy consumption has been calculated by the U.S. Energy Information Administration (EIA): transportation (which accounts for 20% of total energy use), commercial (12%) and residential (18%). Obviously, all of these direct or indirect tourism-related sectors are interconnected businesses affected by higher energy costs.

Travel energy consumption and future trends

According to EIA, “the transportation sector accounts for the largest share (63 percent) of the total growth in world consumption of petroleum and other liquid fuels from 2010 to 2040.” Air transportation is probably one of the most energy-consuming branches involved in tourism and, at an average annual growth rate of 6.5% estimated by UNEP, it is not likely to disappear as a result of the rise in fuel prices. In fact, as reported by the World Tourism Organization (UNWTO), in 2012 international tourist arrivals grew by 4% to surpass the historic one billion mark. “This growth came despite a stalled global economic recovery, particularly in the Eurozone” and has continued to grow in 2013.

However, as energy costs increase, airlines are forced to either cut back on services or increase ticket prices, both undesirable options for the customer. As the trip is an essential part of the overall travel experience, customers are likely to choose a different means of transportation to the desired location or even change the destination completely, choosing one that involves cheaper travel costs. Traveling between the airport and the exact location of the hotel comes with additional costs for buses, taxis and other smaller fueled vehicles. In these specific cases where alternative energy is not a likely option, the ticket price is almost guaranteed to go up along with the fuel price. Generally speaking, all industries involved in tourism are struggling to become as energy-efficient as possible, primarily to reduce operation costs and, secondly, to attract customers interested in the green trend. A good example regarding the cruise industry is given by Iglucruise: “From [installing] solar panels to powering private islands with waste materials, cruise companies have been making great strides in becoming greener.” The design and operation of modern cruise ships – some of which can carry up to 4,000 passengers including the crew - are focused on reducing energy consumption by any means necessary, and some ships even turn off one engine during the winter months (when demand is reduced), to avoid the unnecessary use of fuels.

Accommodation energy use

Hotels and other accommodation facilities are probably the most visible part of the tourism industry. As opposed to regular private buildings whose interior conditions can be controlled by individuals, these are environments whose temperature must never fail to meet the comfort expectations of their customers. This means that, at any given moment, the rooms must be lit, heated, cooled and (de)humidified, according to location-specific requirements. A badly managed hotel can act as an energetic black hole, and before energy-efficient strategies were implemented, whole buildings were unnecessarily conditioned although only a few rooms were occupied. However, since energy prices started going up, intelligent management systems have made it possible to control the room conditions individually, thus reducing the overall energy consumption and cost. Unfortunately, integrating renewable technologies and smart management systems come with a cost and, usually, improvements in the hotel’s energy efficiency are supported by higher cost policies. In most cases, the greenest hotels are also the most expensive ones.

Additional energy costs of tourism

Every meal served at the exotic restaurant or touristic cafeteria includes hidden costs determined by the rising energy costs, as catering is yet another micro-industry integrated in the tourism economy influenced by the energy market. Generally speaking, cooking and refrigerating food, but also keeping storage spaces to specific conditions and ventilating spaces properly are energy-consuming activities that must go on for long schedules. Because of food safety issues, restaurant kitchens cannot afford to cut back on service quality and therefore must increase their prices. Apart from this, getting the food from the source to the restaurant’s storage area falls under the pressure of transportation fuel costs.

It appears that rising costs throughout the tourism industry as a result of increasing energy prices are inevitable. Until "green" alternative modes of transport and tourism become more accessible (and affordable) to the wider public, it's likely tourists will change their travel habits to keep vacations within financial reach.

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