The entire world is reeling from the financial crisis that originated in the United States in the fall of 2008. What started as a U.S. crisis only has spread thorough the developed world and has began hitting emerging markets. The economic slowdown in the richer countries has made it very difficult for less developed countries to keep growing through exports.
Bulgaria is one example. Bulgaria exports more than half of its production, mostly to European Union countries. The decline in activity of the German, U.K., Italian and other economies in the region has had an immediate impact on the Bulgarian economy. Beyond the trade in goods and services, however, a major negative impact is expected to come through the tourism industry. The holiday industry contributes about a tenth of Bulgaria’s output but it has helped many other sectors gain momentum. The construction industry was mobilized to build thousands of new hotels and apartment buildings in the reports. Various other professionals including architects and attorneys were busy with the real estate boom. Much of the boom in the finance industry came from credits extended to build the resorts and then to finance the purchase of villas and apartments.
All of this is poised to come to a halt in the next few months. In fact, much of the activity has already stopped. There are few purchases of real estate in the resorts by domestic or international investors. The construction industry has stopped the massive projects and banks have all but pulled out from lending. The impact has spread through the entire economy with devastating effects on employment in all economic sectors. In that environment, any glimmer of hope is highly appreciated. For some time Bulgarians have been banking on growth in their tourism industry. Even this pillar of the economy has experienced difficulties despite spectacular performance for several years in a row. How real is the danger?
Starting in the fall of 2008, many touroperators reported a drastic fall in inquiries and bookings, by as much as 40-50 percent compared to last year. Such a drastic decline in bookings would definitely lead to massive bankruptcies of hotels and other tourism establishments. The countries in the region, including Greece and Turkey, are aggressively promoting their tourism destinations with state subsidies and lower prices, putting extra pressure on Bulgaria’s competitiveness.
Looking more closely at developments, however, gives a more nuanced picture. Judging by the ski season which ended this month, early bookings were indeed extremely low contributing to the anxiety of touroperators and hotel owners. However, they rebounded in the last minute to get to the same level as last year. It seems that tourists have not given up on holidays. Instead, because of the uncertain times, they wait until the season has almost started before arranging their vacations. This way they face less uncertainty about whether they can actually afford a holiday. They can also take advantage of last minute deals. It seems that international tourism is not dead, yet.
