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SEAT 2B | By Joe Brancatelli

Tourism and Terrorism

The unpleasant reality is that targeting travel is effective.

Police patrol Nusa Dua Beach as tourists relax on their banana lounges last October in Nusa Dua, Indonesia. Tourism continues in Bali despite the Australian government issuing warnings on travel in the region.
Police patrol Nusa Dua Beach as tourists relax on their banana lounges last October in Nusa Dua, Indonesia. Tourism continues in Bali despite the Australian government issuing warnings on travel in the region. (Quinn Rooney - Getty Images)
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By Joe Brancatelli
Portfolio.com: Business Travel
Tuesday, December 9, 2008; 10:23 AM

Put aside your fear and loathing for a moment, because we need to discuss the business of travel terrorism. Like it or not, acts of terror aimed at travelers and the places they frequent are very good business tactics indeed.

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Consider last month's seizure of the airports in Bangkok, a development understandably overshadowed by the much more violent terrorist acts in Mumbai. While the world focused on India, anti-government mobs in the Thai capital shut down both Bangkok's relatively new international airport and its older domestic facility. When the airports finally reopened over the weekend, the 10-day occupation had accomplished its goal: The prime minister was ousted, his party banned, and most of his top functionaries banished from politics.

The coup was technically accomplished via court action, but the legal verdict came only after the demonstrators began the airports blockade and a bombing killed one of the protesters. A three-month-long siege of the prime minister's office had been fruitless. In fact, halfway through the airports crisis, protesters abandoned the prime minister's office and moved in with the mobs occupying Suvarnabhumi International and Don Muang airports.

Why did a week-and-a-half-long airport shutdown effect political change when a three-month-long occupation of the putative seat of Thai political power had failed? The power of the purse. By shutting down Bangkok's airports, demonstrators essentially shut down the Thai economy.

Tourism, which accounts for as much as 12 percent of Thailand's G.D.P., ground to a halt. Depending on who was counting, between 100,000 and 300,000 travelers were stranded: In-country visitors were stuck at Thai resorts, outsiders couldn't get in and business fliers, who use Bangkok as a hub for South Asia travel, scrambled for alternatives. Mail stopped flowing and critical supplies stopped moving, hobbling other Thai businesses. Billions of dollars of imports and exports, many of them perishable goods like food and flowers, stalled in the global pipeline.

The long-term effect may be even more dramatic. Edward Carter, a former businessman and hotelier who is now a professor of hospitality at Bangkok University, thinks tourist arrivals will sink by 40 percent in the next year. "The impact on five-star vacation properties will be twice as bad," he predicts. "Bigger-ticket travelers have much greater choice" and they will opt to spend their money in countries they perceive to be less risky and less chaotic.

Chaos is what the terrorists who killed nearly 200 in Mumbai last month were hoping to cause, of course. And about half of their targets were travel-oriented: They attacked the city's main rail station and a restaurant favored by international visitors. They also struck at the iconic Taj and Oberoi hotels, the two pre-eminent names in Indian hospitality.

"Anyone who was thinking about a holiday in India will now think twice and many will cancel," a marketing executive for a hotel chain that has been expanding in India told me. "Terrorists know the game. They know if they frighten travelers away, they scare off the companies that cater to travelers. If we decide not to proceed with more hotels in India that decision ripples throughout the economy. It's not just that there'll be no new jobs for maids or waiters or bellmen. Construction companies lose, lawyers lose, architects lose. And the people who feed and clothe and sell to the lawyers, architects, and construction workers lose."

The developments in Bangkok and Mumbai are already seeping through the cities' economies. In Bangkok, hotels have slashed room rates by as much as 80 percent in an attempt to lure local traffic until international visitors return. And in Mumbai, the city's best hotels have decided to cancel or tone down their traditionally lavish New Year's parties. That'll cost the economy hundreds of thousands of dollars immediately and millions down the line.

But we needn't theorize about the financial impact of terrorism aimed at tourism. We know terrorism is good business (so to speak) by even the most cursory glance at tourism in Bali and Israel, two places that depend on travel spending.

Tourism is the largest industry on the Indonesian island of Bali. Besides agriculture, in fact, it's virtually the only industry. But terrorism attacks in 2002 and 2005 ravaged the island's tourism. After the 2002 incident -- suicide bombers targeted two clubs favored by tourists and killed 202 people -- the number of visitors dropped by about 25 percent in 2003. The island's tourist arrivals had finally returned to 2002 levels when suicide bombers struck again and killed 20 people late in 2005. Tourism declined by 20 percent during the first five months of 2006.

And Israel's tourism is still recovering from the so-called Second Palestinian Intifada, launched in September 2000. About 2.4 million travelers had visited in 2000, but that number was cut in half the following year. Tourist traffic fell below a million visitors in 2002. In fact, the visitor count didn't return to the 2000 level until last year.

The Fine Print . . .

Stopping terrorism against travelers also has a cost. Egypt's tourism industry, which accounts for about 20 percent of its foreign-exchange earnings, was devastated by a wave of terrorist attacks in the 1990s. After a 1997 massacre, when 63 travelers were gunned down in Luxor, the Egyptian government cracked down hard. The visitor count has topped the 10 million mark in recent years, but human-rights groups claim Egypt is now ruled by one of the world's most repressive governments.

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To contact Joe, visit his Contributor's page on Portfolio.com.


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