As far as a tank of gas will take you

Europeans are saving on city trips and taking vacations closer to home. The travel industry is hitting back with ever lower prices.

From city trips to all-inclusive beach vacations: everything is on sale this summer, online as well as at the travel agent's. That happens every year, but this year is different: the vacation sales started months earlier than usual, and the prices are lower than ever.

The European tourism industry is suffering from the Europe-wide recession, says Wicher Meijer, director of the international school of tourism in Breda. "In the Netherlands, the industry still saw some growth last year, but that was already the exception in Europe."

Smaller margins

The predictions for 2009 are even gloomier. Greece is expecting 10 percent less visitors. In Spain, the number of tourists dropped by 12 percent in the first quarter of this year. The Dutch tourism office is expecting 4 percent less visitors, about the same as the 3,8 percent European average.

These are alarming statistics for an industry that had gotten used to year after year growth. "The industry has never sunk so deep," says Meijer. An additional problem is that fierce competition has made the profit margins ever smaller, for travel agencies as well as airline companies.

The slump in the tourism business is relatively small compared to losses elsewhere. That's because tourism has not come to a full stop. The number of nights booked may be down, but few people are cancelling their vacations outright. In Meijer's words: "Vacation has become a primary need."

It is the nature of tourism that is changing because of the economic downturn, Consumers have various means of saving money on vacations: they can spend less when they're there, or they can holiday closer to home. "We have redefined our action radius to how far we can drive with a full tank of gas," Meijer jokes. Vacationing closer to home is getting more popular, a trend that can be witnessed throughout Europe.

City trips

Not all types of vacation are equally sensitive to the recession either. Few consumers are willing to give up their annual holiday, but city trips are abandoned more easily. "We're talking about people cancelling a third or fourth vacation they might otherwise take in a year," says Hans Dominicus, manager of the Amsterdam tourism office. Amsterdam is expecting ten percent less tourists in 2009.

To compensate, the tourism office wants to make Amsterdam a more attractive destination for Dutch tourists. But that is proving harder to do in Amsterdam then in, say, Paris. Forty percent of all visitors to Paris are French, says Paul Roll, manager of the Paris tourism office. Because of the crisis more French people are vacationing closer to home, but it will not be enough to make up for the 17 percent decline in visitors to Paris in the first six months of 2009.

In Britain, the home market is a bigger compensation for the decline in foreign, especially American visitors, says Jacqueline French of the London tourism office. It is still too early in the year to make accurate predictions, but French is reasonably confident. "We expect a slight overall decline. The home market cannot compensate entirely for the drop in visitors from abroad." But the British tourism industry is getting some help from the strong euro: "When people see the exchange rate, they say: it's about time we discovered our own cities."

Euro disadvantage

The strong euro generally makes the eurozone countries less attractive to foreign tourists this year. The unfavourable exchange rate not only puts off Brits and Americans but tourists from non-euro countries in Eastern Europe as well. Eastern Europeans take less holidays in any case. In Hungary, 63 percent is probably not going on holiday this year, 48 percent in Lithuania and Latvia, according to Eurobarometer statistics. In the Netherlands, Luxembourg and Sweden, only 22 percent is thinking about staying home this year.

But for those who are still going, there are a lot of deals to be had. The entire sector seems to have decided that lowering the prices is the best way to guarantee at least some turnover. The question is how low can travel agencies go? The 2010 predictions aren't looking much better than the ones for 2009.

Kees van der Most, a researcher at the Dutch tourism agency NTCB, gets some comfort from the knowledge that the tourism industry always picks up very quickly when the economy at large does. "As soon as purchasing power goes up again, people will want to make up for the lost opportunities."