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Negative Effects of Terrorism on the Hotel Industry

Question:

Discuss about the Economic Effects Of Terrorism On The Hotel Industry.

Undeniably, there has been recent terrorist attacks globally.Recently, we had the Paris attack and the Brussels attack in 2015 and 2016 respectively.These attacks have prompted the importance of government intervention to counter terrorism due to its obligation to protect its citizens and its property, capacity to research and put in place the necessary counter-terrorist measures.The failure to counter terrorism in the hotel industry has resulted in reduced occupancy levels, reduces revenue for the government through taxation, reduced number of tourists, employment challenges and reduced consumer and investor confidence due to anxiety and fear instilled by terrorism.However, the involvement of government in counter-terrorism has also invaded confidentiality and privacy of individual citizens which isn’t agreeable for all stakeholders.

All in all, I think there s need for government intervention in counter-terrorism because the government upholds public, national and federal interests of a nation which benefits all citizens and foreigners and not just hotel industry owners and their employees.Following the recent terrorist attacks on the various hotel industries around the world, there s need for the respective government to incorporate national and federal measures to prevent terrorist attacks on the hotel industry globally. Noteworthy, hotel revenue fell significantly following the Brussels and Paris Terrorist attacks in 2016 and 2015 respectively. Specifically, the occupancy rates reduced from 82% from the night before the bombings to 25% thus resulting in drastic hotel revenue (Chow 2016).In addition, terrorist attack erodes consumer confidence and choice due to the uncertainty. Indirectly, terrorisms erode consumer and investor confidence in the sense that investors are likely to shun away from setting up hotels both at  local and foreign countries in areas previously attacked by terrorists or potential targets for terrorist attacks whereas consumers would rather postpone or cancel their occupancy at hotels previously attacked or likely to be targets of terrorist attacks(Picardo 2016).

Due to market uncertainty resulting from terrorist attacks economic activities slow down for a short period of time.Specifically, following the Paris Terrorist attack 2015, there was a huge reduction in hotel industry performance due to cancellations and early checkouts thereby reducing the occupancy levels 21.1 percent and 28.5 percent on Saturday and Sunday respectively following the attack.Also, in the long term, terrorism reduces productivity due to the additional investments into security measures, insurance, and counterterrorism measures and infrastructure by hotel industry players.However, terrorist attacks have temporary economic damages on the hotel industry. Typically, terrorist attacks negate investment and employment opportunities in the affected areas as opposed to a larger wider scale. To which effects, the government can offset through increased expenditure without negatively affecting aggregate hotel insurance industry growth levels.

Government Obligation to Protect Citizens and its Property

However, following the recent frequent occurrence of terrorist attacks on the hotel industry, there s remarkable insurance covers for hotel owners.Through insurance of terrorist attacks on hotels, employment opportunities are created in the insurance sector.However, the hotel owners are likely to encounter high premiums rates due to the high-cost nature of the insured risk which might lead to some hoteliers laying off part of their staff to comfortably pay premiums. In addition, not all insurance providers indemnify hoteliers in the event of terrorist attacks thus making it even riskier for investors both foreign and domestic to venture into the hotel industry(Ross  2016).Also, terrorist activities in the hotel industry can result in loss of human lives who contribute to the labor force in the economy. massive loss of lives due to terrorist attacks creates employment gaps due to lack of persons to fit in.

Also, hotel infrastructure may be destroyed during terrorist attacks thus additional reconstruction costs to the hotel owners and unemployment of hotel industry workers during reconstruction(Sandler and Elders 2005).Usually, terrorist attacks affect occupancy as opposed to industry growth rate as illustrated by the London Attacks 2002 which saw a 3.2 percent average growth rate in the hotel industry three months after the attack (Guest Contributor 2016).Moreover, terrorism slightly impacts on average daily rates for hotels which goes to imply that average daily rate(ADR) is not greatly distorted by a terrorist attack.   

Due to terrorist attacks, there s increased government expenditure in trying to offer some sort of insurance in terms of finances to help the affected hoteliers recover from their losses.For instance, in the United States of America, following the  September 2001 terrorist attacks, the United States government offered 5$bn in grants and $40bn emergency spending package.Also insurance-related policies are few and come with higher premiums which expose hoteliers to the negative effects of terrorist attacks on their investment thus deterring more hotel industry investments(O.E.C.D  n.d).it is imperative for governments to combat terrorist attacks in their economies this is because,the hotel industry is directly connected to the travel and tourism industry which contributes to the gross domestic product of most countries hence as a revenue source, it's in the interest of the government t to invest in security and deter terrorist attacks on the hotel industry.

Also, the involvement of government in combating terrorism help restores consumer and investor confidence after the terrorist attacks. This is because following the attacks, potential and existing investors might reconsider venturing into the hotel industry due to the fear of repeat attacks and the massive losses incurred. in the event that there s government support following the attacks, investments in the sector might expand and recover and the assurance of security measures by the government, will attract local and foreign tourists to the country thus boosting its revenue hence it is in the interest of government to eradicate  fear and anxiety caused by terrorism and boost friendly business operating environment(Nicolas 2017).There's need for restoration of consumer safety which is authoritative when done by the government.

Impact of Terrorist Attacks on the Hotel Industry

Predominantly, terrorist attacks are a retaliatory response to government action to which some persons are dissatisfied thus making it crucial for government involvement through negotiation and policies to prevent or minimize the occurrence of terrorist attacks(Koebler 2012).Predominantly, the security infrastructure needed to protect the hotel industry from terrorist attacks is massive and cannot be shouldered by individual hoteliers alone.due to the expansive nature of the security budget to counter and prevent terrorism,only the government can shoulder the capital Thu the need for government investment in antiterrorism measures for its various  economic industry players.Specifically, the Australian government has invested $1.2 bn in its counter-terrorism measures as a way of providing a business-friendly environment(Pash 2015).

Typically, it is the duty of all, if not the most government to protect the lives and property of its citizens thus the rationale for countering terrorism on their behalf.In the event that citizens lose their lives and property due to terrorist attacks both internal and external, that government is believed to have failed moral obligation to its citizens(Wellman 2013).Most governments have incorporated the bill of human rights which advocates for the protection of lives and property of citizens.Further research the evolving nature of terrorism there need for extensive research in counter-terrorism measures and the government has the necessary infrastructure to facilitate this as compared to hotel industry owners.For small hotel owners, they lack the capacity to venture into research and development in counter-terrorism thus making it imperative for governments to intervene in countering terrorism in the hotel industry(Wells 2017).

However, the invasion of user privacy through monitored communication of citizens as anti-terrorism countermeasures has raised the right to privacy of citizens as to their communication privacy and confidentiality.There are pro arguments for government invasion of citizen privacy on the ground that its in the wider public interest to keep everyone safe whereas advocators against argue it violates the right to privacy and confidentiality of information(Debate.Org n.d)

Conclusion

By and large, the effects of terrorism on the hotel industry are negative in nature.in the short term, the terrorist impacts on the economy are immediate and severe but in the long term, the effects are part of the past. Mainly terrorism destroys lives which is irreplaceable, property which can be rebuilt over time and reduced revenue for a short period of time.However, consumer and investor confidence is destroyed by the fear and anxiety of terrorist attacks but after some time, the same is restored.There's need for government intervention in countering terrorism as a matter of right and moral obligation.Usually, citizens are guaranteed the right to life, protection of property by their governments.Further, governments have the capacity to fund counter-terrorism facilities, measures, policy and conduct research and development in counter-terrorism as compared to private hotel stakeholders.

In as much as government should partake in counter-terrorism there need for individual hotel owners to instill their own personal counter-terrorism measures.there's need for counterterrorism partnership between private and public hotel industry stakeholders.

References

Chow, J. (2016). European Tourism Hit hard by Terrorist Attacks. Market Watch. Available at https://www.marketwatch.com/story/-tourism-hit-hard-by-terrorist-attacks-2016-03-28[Accessed 3 Oct 2017]

Debate .Org.(N.d).Should government continue to monitor  all cell phone activity as a domestic counterterrorism strategy.Debate.Org.Com.Available at https://www.debate.org/opinions/should-the-government-continue-to-monitor-all-cell-phones-as-a-domestic-counter-terrorism-strategy[Accessed 3 Oct 2017]

Guest Contributor.(2016).The impact of terrorism on Europe s hotel Industry.Ehotelier.Com.Available at https://ehotelier.com/global/2016/05/04/impact-terrorism-europes-hotel-industry/[Accessed 3 Oct 2017]

Koebler, J.(2012). Why governments should negotiate with Terrorists.U.S.News.Com.Available at https://www.usnews.com/news/articles/2012/07/31/why-governments-should-negotiate-with-terrorists[Accessed 3 Oct 2017]

Nicolas, D.B.(2017).Terror threats make it harder for PH to become Key Tourist Destination.Inquirer.Net.Available at https://business.inquirer.net/230330/terror-threats-make-harder-ph-become-key-tourist-destination[Accessed 3 Oct 2017]

O.E.C.D.(N.d).Economic Consequences of Terrorism. O.E.C.D. Org.Available at https://www.usnews.com/news/articles/2012/07/31/why-governments-should-negotiate-with-terroristshttps://www.oecd.org/eco/outlook/1935314.pdf[Accessed 3 Oct 2017]

Pash, C.(2015).The budget:$1.2 billion for counter-terrorism Measures.Business Insider.Com.Available at https://www.businessinsider.com.au/the-budget-1-2-billion-for-counter-terrorism-measures-2015-5[Accessed 3 Oct 2017]

Pickardo, E.(2016).Don’t Hide from the Reality of How Terrorism Affects the Economy. Investopedia. Available at https://www.investopedia.com/articles/investing/030215/how-terrorism-affects-markets-and-economy.asp[Accessed 3 Oct 2017]

Ross, S.(2016).Top 5 ways terrorism impacts the Economy. Investopedia.Available at https://www.investopedia.com/articles/markets/080216/top-5-ways-terrorism-impacts-economy.asp[Accessed 3 Oct 2017]

Sandler, T and Enders, W.(N.d).Economic Consequences of Terrorism in Developed and Developing Countries.Psu.Edu.Com.Available at https://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=224907E800A1228DF6FB19F3AC3A66BE?doi=10.1.1.129.1037&rep=rep1&type=pdf[Accessed 3 Oct 2017]

Wellman, Carl.(2013).Terrorism and Counterterrorism: A Moral Assessment.Books.Google.Co.Ke.Available at https://books.google.co.ke/books?id=eaxEAAAAQBAJ&pg=PA27&lpg=PA27&dq=duty+of+government+to+protect+citizens+and+their+property+from+terrorism&source=bl&ots=Sm-rwZCx8z&sig=fkNA7AlEiZuE2XOr4bfwFXkTMMU&hl=en&sa=X&redir_esc=y#v=onepage&q=duty%20of%20government%20to%20protect%20citizens%20and%20their%20property%20from%20terrorism&f=false[Accessed 3 Oct 2017]

Wells, I.(2017).Government offers   2m for Scientific  Research into Counter-terrorism. The Guardian.Com.Avaiable at https://www.theguardian.com/uk-news/2017/jul/17/government-offers-2m-for-scientific-research-into-counter-terrorism[Accessed 3 Oct 2017]

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