PARIS — Chaos in Europe — from terrorist attacks to an attempted coup d’état to Brexit — is bound to severely impact the region’s economy, dashing any fragile hopes for a recovery in tourism and consumer spending this year.
Thursday’s attack on Bastille Day revelers in the southern city of Nice, France, that left at least 84 dead and about 20 in critical condition was the country’s third terrorist tragedy in 18 months and part of a series of assaults on ordinary people in public places and in cities worldwide, including Brussels, Baghdad and Dhaka.
In Istanbul and Ankara, Turkey’s capital, the failed attempt to overthrow the government on Friday that killed about 265 people, wounded 1,440 and saw more than 6,000 detained has plunged the country into further instability in a war-striven region.
Europe’s retailers have already been particularly hard-hit by geopolitical phenomena, with high-spending Chinese and other Asian tourists afraid to book visits, and local consumers increasingly reluctant to make purchases.
Observers agree the latest attack in Nice will exacerbate an already difficult moment, but believe the events in Turkey will be less impactful overall.
“After the Paris attack, luxury retail saw a sharp decline in store footfall, and while the most recent attack did not take place in a major luxury city hub, we expect increased vigilance of the French people,” said Mario Ortelli, luxury analyst at Bernstein in London.
“The effect will temper the benefit of the return of the European domestic consumer for the next few weeks,” he said, adding that foreigners will most likely shun France — and possibly other parts of Europe — in favor of different destinations.
No one wants foreign travelers to stay away.
“Visitors from overseas are key in European sales, representing between 25 percent and 50 percent of sales in Switzerland, the U.K., France and Italy,” said Luca Solca, managing director at Exane BNP Paribas. “I think that the most recent events in Nice will postpone the time it takes for tourist inflows to normalize in Europe. One could have hoped for a better [second half of the year] in terms of international spend. The events…in Nice suggest we may not yet see that, unfortunately. I think that from a luxury goods industry viewpoint we can ignore Turkey. Turkey is neither a domestic consumption market, nor a tourist spend market. Again, from the viewpoint of luxury goods. Nice is bad, though, that’s for sure.”
Italian investment bank Intermonte said while the negative impact on tourism is usually limited to two to three months following an atrocity, “we cannot help but notice that the escalation in terrorist events is continuing to weigh even at a distance of a couple of quarters.”
Armando Branchini, vice chairman of the luxury goods association Altagamma and deputy chairman of Milan consultancy InterCorporate, believes the attack in Nice will affect everyone. He called the city and the Cote d’Azur in general the “heart” of summertime holidays in Europe. The most recent attack “will have a negative psychological impact on French and European consumers.”
Forty-eight percent of the 4.4 million tourists visiting the Riviera hail from abroad, according to the region’s tourism committee statistics from 2014. Of these, 968,000 came from Italy; 929,000 from Great Britain and Ireland, and 467,000 from Germany.
Right after the Nice attack — whose dead included three Australians, two Chinese, two Americans, one British national and 10 children — foreigners reportedly began canceling their reservations to visit the Riviera. The region represents 1 percent of the world’s tourism, according to data from Protourisme, a consultancy specialized in the travel, leisure and hotel industry sectors. A host of concerts in the area were canceled directly after the attack, including the Nice Jazz Festival, an annual event since 1948, and Rihanna’s world tour stop.
Branchini believes the impact of events in Turkey, meanwhile, will “be limited in Europe.”
While Europe as a whole is suffering from a drop in tourism, there is no doubt that France has been hit particularly badly. Recent transport strikes and demonstrations against France’s socialist government’s proposed labor law haven’t exactly helped the country’s appeal to visitors.
Global Blue data for June showed that tourist spend dropped 13 percent globally and 16.8 percent in Europe. France saw a decline of 17.6 percent compared with May’s fall of 21.2 percent; Germany was down 18.2 percent, and Italy worsened, dropping 18.9 percent, compared with minus 4.5 percent in May. Switzerland was resilient, up slightly at 0.8 percent, while the U.K. retreated 17.1 percent after gaining 2.6 percent in May.
In the first quarter of this year in the Paris region, the number of Japanese tourists dropped by 56 percent; Italians, 24 percent, and Russians, 35 percent. In the same period, the amount of Chinese visitors decreased 13.9 percent, versus a 49 percent increase in full-year 2015. In late May, Paris’ regional tourism committee said a near-term uptick was not expected.
The City of Light has been working hard to restore its allure: A “Destination Paris” campaign kicked off in May, backed by the French Minister of Foreign Affairs and International Development Jean-Marc Ayrault, Paris Mayor Anne Hidalgo and Valérie Pécresse, president of the Paris region council.
Even if Paris — and the rest of France — can attract the tourists, retailers will still have to be on guard for other attacks.
Andrew Hall, an analyst at Verdict Research in London, said the events in France and recently in Bangladesh have meant that “security is front of mind for all businesses and the situation is certainly unstable. I imagine retailers will be reassessing their security measures over all their operations, including a look at how vulnerable they might be in different locations.”
There are those who believe that French and other European retailers have far bigger problems to worry about than terrorism.
George Wallace, chief executive officer of the retail consultancy MHE Retail Europe, said terrorism has become such a regular global phenomenon that the Nice attack will most likely not have a major impact. “What happened sends out a negative message to the U.S. and Asia, but it won’t have a negative impact on people living in Europe,” he said. “You cannot move for all of the visitors in the big cities like Paris, London and Prague. It sounds callous, but these events very quickly go out of people’s minds.”
Already in Paris by Sunday afternoon, neighborhoods like the Marais were teeming with sun seekers who lounged in cafés and visited local shops.
“I think the attempted coup in Turkey will reinforce the unease felt by both businesses and consumers regarding the geopolitical environment, but it is not a game changer. I think the direct impact will be largely domestic in Turkey, where things were pretty turbulent already,” Wallace continued.
He believes that the impact of Britain’s vote to leave the European Union “will have a much bigger impact on our world.”
“One microfactor for U.K. fashion retailers: I expect many were considering increasing sourcing from low-cost, non-dollar countries following the post-Brexit dive in sterling,” Wallace said. “Turkey would be a prime candidate for that, especially for fabrics and denim manufacture, so further instability there will be most unwelcome. For the Turkish government it will be a further, and possibly fatal, blow to their ambitions for EU membership.”
Last week, Moody’s Analytics slashed the economic growth outlook for the U.K. and the EU due to the result of the Brexit referendum. “Although we still expect the euro zone economy to expand, we have cut the growth estimates to 1.3 percent for this year and to 1.1 percent for next year, from the 1.6 percent and 1.8 percent expected before the U.K. exit,” its report said. “Growth in the euro zone already cooled in the three months to June. The second-quarter growth was the weakest since the end of 2014, signaling the euro zone’s recovery lost momentum even before the U.K. referendum on EU membership.”
Although Brexit might well make a bigger impact in the long term, France and Turkey need now to pick up the pieces after events there of the past few days.
In Nice, the attack was carried out by a 31-year-old man of Franco-Tunisian origin, Mohamed Lahouaiej Bouhlel, who was already known to police for violence and petty theft, according to media reports. He fired shots before being killed by police on Thursday night. ISIS, or the Islamic State, subsequently said on Saturday that Bouhlel was a “soldier” of the movement and his attack had been inspired by it, although it remained unclear whether he was an actual follower.
The Vigipirate antiterror alert was raised to the highest level “alerte attentat” (or “alert attack”) for the department of Nice. For France, the state of emergency put into effect since the November 2015 attacks that killed 130 people was extended again right after the Nice incident for another three months. Nice’s beachfront Promenade des Anglais, which is peppered primarily with hotels and residences, where the attack took place remained closed to the public after the incident. France declared three days of national mourning beginning on Saturday and extending through today during what should have been a celebratory summer weekend.
On Friday, Galeries Lafayette in Nice was open and none of its employees harmed, said a spokeswoman for the department store, whose branch is located not far from the promenade. In nearby Cagnes-sur-Mer, the Printemps department store in the Polygone Riviera shopping center was trading as usual. Meanwhile, the Louis Vuitton boutique in Nice remained shuttered and was scheduled to reopen today. Chanel exceptionally closed its fashion store and stand in Galeries Lafayette for fragrance and beauty. The brand’s local team was safe, a company spokeswoman said.
“Regarding security measures, we are extremely vigilant and strictly follow the authorities’ recommendations and guidelines,” she added.
The Nicetoile shopping center was doing business, although 80 percent of the stores it contains, including Pandora, Adidas and Sephora, were closed on Friday. Hennes and Mauritz’s three doors were shuttered.
“We think it’s important to evaluate the situation serenely, reinforce our security measures for the reopening of our stores,” a company spokesman said, adding that H&M will pay close attention to government decisions on that score and act accordingly.
The Nice attack followed the January 2015 attacks on satirical newspaper Charlie Hebdo and a kosher grocery store in Paris, and the November 2015 incident at the city’s Bataclan concert hall.
The coup attempt in Turkey was made by a faction within the Turkish military. The following day, the government of President Recep Tayyip Erdogan detained 2,838 military personnel, while 29 colonels and five generals were relieved of their duties and around 200 unarmed soldiers surrendered to police, according to senior government officials. At least 104 of the dead were coup plotters, a senior army official said.
U.S. airline carriers were prohibited from flying to or from Istanbul and Ankara airports, while all airline carriers, regardless of country of registry, were prohibited from flying into the U.S. from Turkey either directly or via a third country. Although the government said it successfully foiled Friday’s coup attempt, the U.S. Embassy in Ankara informed its citizens that security at Istanbul’s Atatürk airport was significantly diminished and U.S. government employees have been instructed not to attempt to travel to or from Atatürk airport. It added that there were still reports of sporadic gunfire early Saturday.
Such travel restrictions, uncertainties surrounding the plot and steps that the government was likely to take to curb the opposition are expected to hurt tourism and retail — important pillars of the Turkish economy.
The Turkish lira plummeted against the U.S. dollar and the euro after the events of late Friday, but the real impact isn’t likely to be seen until the markets open today, analysts said.
Representatives of leading Turkish apparel retailers underlined the strength of the country’s democracy and urged for calm so the nation can quickly return to normal.
“At hard times like this, we have to contribute to the normalization of life and make sure that our people fill the streets without fear or concerns,” said Sami Kariyo, the deputy chairman of the Turkish Clothing Manufacturers Association and the United Brands Association in Turkey. “Our brands will be opening their doors wherever security and transportation would allow,” he added. “We see it as a citizenship obligation to contribute to the normal flow of life at such hard times.”