The world is stunned as the conflict between Russia and Ukraine continues. Many Ukrainians are fleeing the country, leaving their homes behind to safeguard themselves and their families from Russian shelling and soldiers. Many innocent citizens have been killed amidst the bombarding of Ukrainian airports and cities. Man hospitals, schools, and residential buildings have been destroyed in Ukraine as a part of the Russian invasion.
Many sectors are suffering as a result of this invasion. The war came when the travel industry was anticipating demand recovery for both business and leisure travel. The vacation rental industry, which was hopeful about 2022 after the successful Q3 and Q4 for Airbnb, now stands uncertain about its future this year.
Let’s look at how this war is affecting the travel and hospitality industry and what it means for the vacation rental industry.
Impact on Air travel
Closing down of Air Spaces leading to longer routes
In 2014, Malaysia Airlines Flight 17 was shot down over eastern Ukraine airspace. The tragedy stands as a precautionary tale for commercial aircraft taking no risk in flying over conflict zones. Russian carriers like Aeroflot have been banned from British Airspace, and British carriers have been banned by Russia. Most European airspace has restricted Russian planes from flying over them and vice versa.
Restricted airspaces would mean travel to several destinations in Asia and Europe will get longer and circuitous from certain parts of the world.
Fuel prices Rising
The violent invasion of Ukraine and sanctions on Russia have caused the price of Brent Crude (the international benchmark for oil) to rise to $100 a barrel. This has happened for the first time since 2014. Experts are predicting it to rise up to $130 a barrel by May 2022.
The increasing fuel price could cause airlines to increase the costs of their tickets. Especially, since longer routes would mean more usage of jet fuel.
Higher airfares could discourage budget travelers from making any travel plans in the coming months. However, this could also mean that people will prepone their travel plans. This is to avoid paying higher airfare or needing to cancel them later as the conflict intensifies.
Impact on Tourism of Countries
The Ukraine central military command reported on Feb 24, 2022, that Russia had bombed several Ukrainian airports. These include the ones in Kyiv Boryspil, Mykolaiv, Kramatorsk, and Kherson. As mentioned previously, commercial flights are avoiding Ukrainian airspace and have been barred from Russian airspace.
Over ten flights from the United States stopped flying there since the warnings of attack by Russian forces on Ukraine. More countries, including India, Germany, Canada, France, and Britain, have suspended all flights to Ukraine as a precautionary measure. In addition, Russia has closed its airspace to retaliate against various sanctions levied against the country and protect civil aviation from conflict.
Additionally, several online booking platforms have seized their operations in Russia to show their solidarity with Ukraine. With no flights and booking platforms not facilitating any bookings for Russia, tourism has come to a standstill in the two countries.
However, this does not mean that the vacation rental industry has ultimately halted in Ukraine. On the contrary, many Americans are booking Airbnbs in Ukraine to provide funds to Ukrainians directly. Airbnb supports this effort by “temporarily waiving guest and Host fees on bookings in Ukraine at this time.”
UK Foreign Office doesn’t suggest against traveling to most of Ukraine’s neighboring countries in the west as of now. This implies that traveling to Poland, Slovakia, Hungary, and Romania is not assessed as high risk. However, these countries will witness a huge influx of refugees escaping the conflict. The overcrowded streets and the efforts of the government and Airbnb to provide lodgings to these refugees may cause travelers to avoid these countries for now.
Moldova and Lithuania declared a state of emergency in their countries. They also mandated the carrying of photo ID at all times. The UK Foreign Office is advising against travel to these two countries. The office is also advising against traveling to Belarus. These countries will witness low inbound international travel; however, domestic traveling might not see any significant change.
Turkey’s tourism sector will be heavily affected by the Russia-Ukraine conflict. This is because most of the tourism revenue generated by the country is from Ukraine and Russia. In 2021, out of 24.7 million tourists visiting Turkey, 2.06 million were Ukrainian tourists, and 4.7 million belonged to Russia.
In the past three years, Turkey has hosted 20 million tourists from the two countries and was anticipating more tourists in 2022. The invasion will create a significant dent in Turkey’s tourism, and in turn, the vacation rental industry in the country may suffer.
South Africa hasn’t seen any change in the influx of foreign travelers to the country. People still want to travel to the continent after being cooped up in their houses because of the recent Omicron wave.
The Omicron wave significantly affected tourism to the country. However, it has been recovering, and Russia’s invasion of Ukraine hasn’t changed that yet.
Presently, not much change has been witnessed in travel trends to other countries. However, this may change as the war intensifies.
World history shows that people cancel travel plans to countries far away from the affected regions in times of crisis. For example, the 1990-91 Gulf War caused a significant decline in the tourism of the Middle East and Europe. Likewise, the Ebola virus epidemic in three West African countries in 2014-16 decreased visitors to East African countries. This is despite parts of Europe being nearer to the outbreak.
It is yet to be seen which parts of the world will be more adversely affected by the conflict regarding vacation rental industries.
Impact on investment in Vacation Rentals
The real-estate sector will see an impact of the conflict on both the demand and the supply sides. The increased cost of raw materials by 20-30 percent has compelled developers to raise the prices of their projects marginally. As a result, the mortgage rate may also increase.
The successful Q3 and Q4 of Airbnb may have generated new investors’ interest in the vacation rental industry. However, the raised cost of real estate and uncertainty surrounding the tourism industry may discourage new players from entering the market just yet.
Airbnb’s stance on the refugee crisis
Since the beginning of the Russian attack, about 400,000 Ukrainians have fled to the European Union and the United States. Nearly half of them have reached Poland, according to the Warsaw government.
Airbnb has committed to offering free short-term stays to up to 100,000 people fleeing Russia’sRussia’s invasion of Ukraine.
Airbnb’s Help Ukraine initiative has generated a lot of contacts from hosts and vacation and short-term rental companies offering to help.
Host refugees in Europe, especially near the Ukrainian border, can list their place for the initiative. Following that, on-the-ground non-government organizations will vet refugee requests which the hosts can review. They can then offer it for free or for a reduced price.
What does it mean for the Vacation Rental Industry?
Most people are ready to travel to destinations unaffected by the ongoing crises. Traveling to European countries that don’t directly share a border with Ukraine hasn’t seen any noticeable impact. As a result, vacation rentals in most countries will continue to grow at a steady rate that was anticipated at the beginning of the year.
People looking forward to their travel plans after being quarantined for months during the Omicron wave might continue to stick to their plans. However, they should keep a close eye on the situation as they make travel decisions.
Veteran travelers are aware of the opportunities that come with a crisis. It can mean lower airfares to affected areas, cheaper hotel rooms, and no crowds. More adventurous travelers may still choose to fly out to high-risk countries to leverage the more affordable travel costs. This also means that vacation rentals in affected and high-risk areas would need to decrease their booking rates to attract these travelers.
For countries that share a border with Ukraine and Russia, tourism might be slow overall, and the vacation rental industry may suffer. In addition, the change in airfare and longer routes may further discourage travelers from making any traveler plans in the coming months.
The real impact of the Russian-Ukraine war on the vacation rental industry is yet to be seen. The current trends don’t suggest any significant effect on the industry’s growth in countries other than Ukraine, Russia, and their immediate neighbors. However, it doesn’t take long for trends to change in the face of changing world dynamics,