Skift Take

Nobody would argue that the European Union is a perfect institution but not only has it helped foster a degree of unity between former enemies but it has also ushered in an era of unparalleled freedom for its citizens. Brexit has put all that under threat.

One week before the UK Prime Minister triggers her country’s departure from the European Union, and less than two weeks before our inaugural Skift Forum Europe, we’re launching a series of four stories devoted to Resetting Transatlantic Travel.

One of our 2017 Megatrends called this year one of reckoning for European tourism. With the departure of the UK from the EU, the growth of low-cost carriers like Norwegian Air, multiple violent acts in major European cities, and the rise of neo-isolationism in the United States and European countries, it’s indeed a year of large-scale shifts for the most popular region in the world for tourism.

Our first story looks at how the freedom of movement brought about by the EU radically changed how we think about borders, money, and transportation, and has defined how the current generation of travelers thinks about the essential building blocks of travel. 

When travel agent Bonnie Salt was selling vacations to Europe in the 1980s and ’90s things were very different to how they are now.

Each country still had its own visa system and there was also the issue of dealing with multiple currencies.

“It took a long time to do a booking and you had to make sure of course because of the liabilities that you documented everything. And so we would use these huge reservation envelopes and you’d write notes, and you’d write notes on the front, and then you’d write notes on these peoples’ itineraries,” she said

“We literally had a secretary in those days and we would dictate with a Dictaphone what we needed on the itinerary. And you’d have to put all of that on it because if you didn’t you’d get these calls from foreign countries saying ‘why didn’t you tell me about this?’”

It wasn’t as if this put people off going to Europe — in 1989 it welcomed 266 million people, 62 percent of the world’s total tourists — it was just that it made travel more complicated. If you wanted to visit say France, Germany, Belgium, and the Netherlands you’d need to manage four lots of currency and go through multiple border checks.

“People would hand me over their old change from whatever country they were in and I ended up with this huge pile of these old currencies sitting in my desk,” Salt remembers.

Anybody who has travelled within Europe over the last decade or so knows that things have changed.

The project of integrating the continent, firstly through a common economic interest and later through a shared political system, has brought down both literal and metaphorical barriers.

The travel industry has been one of the chief beneficiaries of these seismic changes. From easing the movement of people to liberalizing aviation laws, the EU has through deliberate policy and serendipity, helped maintain the growth in tourism across the continent.

The irony now is that this openness and liberalism, something that continues to make Europe so attractive to visitors and people living there, is under threat from within.

The Brexit vote and a rising tide of populism and nationalism has called into question the EU’s very existence.

Building a Union

The EU’s origins lay in the determination to bring stability to the continent following the end of World War Two.

Over the years it slowly morphed from a collection of central European states brought together over coal and steel to the loose political federation we have today.

France and Germany were for varying reasons the big initial drivers. The UK became a member in 1973 having had its first two applications rejected thanks to vetoes from the French President Charles De Gaulle, who insisted that it was too different to be able to fully participate in the project.

In 1985 things took a big step forward. Firstly Jacques Delors became President of the European Commission, the EU’s executive branch. He stayed in the role until 1994 and is widely regarded as the key driver in ensuring further integration.

The second was the signing of the Schengen Agreement. Named after a town in Luxembourg, it effectively abolished the external borders of (initially) France, West Germany, Belgium, Luxembourg and the Netherlands in favour of a larger communal one.

While freedom of movement has always been central to EU policy, Schengen took it up a notch. Alongside stopping checks for people crossing over from one country to another, the idea was also to harmonize the conditions of entry for short-stay visas.

“Borderless travel, particularly a single visa, has just been fantastic. Really, there is no doubt,” said Tom Jenkins, Chief Executive of the European Tour Operators Association (ETOA).

“[If] an Indonesian visitor wanted to come to Europe — and they want to come to Europe — they want to go to London, they want to go to Paris, they want to Amsterdam, they want to go down the Rhine, they want to see a bit of Switzerland, they want to see a bit of Italy,” he said.

“They would have to spend up to six months planning, handing in passports to various embassies, issuing reassurances to these embassies, receiving a visa and then going onto the next one: a bureaucratic nightmare, and Schengen did away with it,” Jenkins said.

Nationals from countries such as the U.S., Canada and Australia have it even easier as they don’t even need a visa to enter.

Gradually more and more countries joined the Schengen Area and as things stand 22 of the EU’s 28 member states are part of it as well as four other countries: Iceland, Liechtenstein, Norway, and Switzerland.

The UK has never been a part of it primarily because of a desire to exercise a greater degree of control over its own borders. This means that there are different visa requirements for, say, Indian tourists visiting the UK compared to the Schengen Area. At the same time there is nothing stopping someone from say Greece or Poland actually moving to the UK permanently.

Brexit breakdown

British Prime Minister Theresa May leaves the Commonwealth Service at Westminster Abbey, in London, Monday March 13, 2017. (Ben Stansall/Pool Photo via AP)

A tension over borders and in particular maintaining control over immigration was one of the main drivers in last summer’s Brexit vote. One researcher put it as the number two motivation for leave voters (behind sovereignty), while a study by Buzzfeed showed that immigration dominated the discussion online.

Although voters in 1975 overwhelmingly backed the UK’s membership of what was then the European Economic Community (EEC), the country has always had an uneasy relationship with the EU.

Certain parts of the media have been happy to fuel a mantra of “us versus them”, partly because of reasons to do with the UK’s geographical separation and partly because of a different history surrounding the Second World War.

There has been a lack of effort to explain how the EU works politically. Instead the most vocal parts of the British press have been keener to write about the over-reach of meddling Brussels bureaucrats with the myth of the bendy banana being a regular favorite.

“The press is always full of stories about overregulation from Europe, and how Europe is interfering in our everyday life…” said Malcolm Harbour, a former Conservative Member of the European Parliament (MEP).

“But the successes we’ve had for the British Economy… [in] areas, like, cars, aerospace, farming, food, tourism, all of these things. Nobody talked about those because they’ve taken them for granted.”

Regardless of how big a role immigration played in the vote, it has become a key plank of Prime Minister Theresa May’s thinking. The UK will formally give notice that it intends to leave on March 29 and what follows will be two years of discussions with various parts of the EU. Everyone expects the issue of immigration to play a central role.

Indefinite freedom of movement into and out of the UK for EU nationals is likely to come to an end. The UK will gain complete control over who it decides to let in and out of its country but at what cost?

Although the prospect of bringing in visas for short-terms visits for EU citizens seems remote (it was floated by one prominent leave campaigner before the vote), the likely move to curb free movement could still have a brutal impact on the tourism industry.

The British Hospitality Association, which represents 40,000 hotels, restaurants and others in the sector, estimates that a minimum of 15 percent of its workforce are EU migrants, which equates to around 700,000 jobs. Of this number, the Migration Observatory at the University of Oxford estimates around 96 percent would be ineligible to work in the UK under existing laws for non-EU nationals. “That’s the scary reality,” said BHA Chief Executive Ufi Ibrahim.

The problem for the BHA is not just the huge number of EU migrants employed in the industry it is the fact that they need to be replaced regularly.

“Just to stand still as a business, not even accommodating for growth, for example, just to stand still, thousands and thousands of people need to be replaced every single year by these businesses,” Ibrahim said.

“In the areas where they’re most active, London and the south-east, they’re reaching full employment in the UK. There are very few people available on the jobs market just to replace existing churn, let alone accommodating for growth. It’s not just about protecting the people that are powerful… it’s also about being able to find people depending on where you are in the country, to be able to replace the churn.”

In order to cope with the upheaval, the BHA wants a 10-year transitionary deal, where the industry is given time to adjust and can start training and recruiting more people from the UK to fill the vacant positions.

It will be one of the many issues that needs to be thrashed out over the next two years.

Trouble on the continent

Macedonian Army soldiers erect a second fence on the border line with Greece, near the southern Macedonia’s town of Gevgelija. (AP Photo/Boris Grdanoski)

The problem for Europe is that it isn’t just the British who are getting anxious. The Schengen Area, of which the UK was never a part of, is starting to fray.

Austria, Germany, Denmark, Sweden and Norway have all been allowed to extend the temporary imposition of border checks at certain crossings because of the problems with the external border of Greece and the possibility of migrants settling elsewhere.

“We have a kind of semi-permanent, ongoing reimposition of controls at some borders. It’s mostly land borders and its mostly people who are coming as migrants or refugees from South Europe. Most of those numbers have been reduced because the EU has controlled people coming into Greece and controlled people crossing the west Balkans,” said Steve Peers a professor of EU and Human Rights Law at the University of Essex.

The free movement of people has been a cornerstone of the EU’s policy almost since its very beginning and was explicitly mentioned when the EEC was established through the Treaty of Rome in 1957.

The problem for freedom of movement proponents is that their lofty goals have come up against more and more national resentment in places like the UK, where outsiders are easily blamed for the various ills. This resentment has only been magnified by impact of the global financial crisis on the poor.

Harbour believes that the likely outcome of the many disagreements over freedom of movement will be a modification of the existing rules.

“If you look at the European treaties, of course, the free movement there, was envisaged, very much, linked to some labor movement, and moving, to work, to take a job. I think that even within other European countries now there’s a movement back towards that way of thinking. In other words, there’s not necessarily a unilateral right to go and settle in another country, unless you have a job attached to it,” he said.

The future direction of the EU is tightly entwined with elections happening in key countries throughout 2017.

At the time of writing the march of right-wing nativism looks to have taken a hit in The Netherlands, where Geert Wilders was tipped to make an impact. Although his Party For Freedom increased its number of seats he is unlikely to get close to power.

While German Chancellor Angela Merkel is under threat from the former President of the European Parliament in elections this September, many people are looking to France for an indication of the state of European populism.

National Front leader Marine Le Pen is in with a genuine chance of reaching the Presidential run-off where she will likely face Centrist Emmanuel Macron this April. Should she win, Le Pen has said she would abandon the euro and look to abolish Schengen.

“If Le Pen wins that could be another game changer. I don’t think she’s going to win, I think she will make it to the second round but I think she will be beaten,” said John McCormick, Jean Monnet Professor of European Union Politics at Indiana University – Purdue University Indianapolis.

It’s not just Schengen and freedom of movement that is causing cracks to emerge, the single European currency has been blamed for many of the ills that have afflicted some of the EU’s poorest regions in recent years.

The creation of a “monetary union without a fiscal union” has meant that countries like Germany and Greece have experienced wildly different fortunes. High youth unemployment and no economic growth has led to led to resentment.

“The creation of the euro, economically [was] highly problematic, but from incoming business point of view is sensational. You used to have to come into Europe and have to change currency up to eight, twelve, fifteen times as you were traveling…” said Jenkins.

By the end of the year we’ll know a lot more about the future direction of the EU – and its relationship with the UK.

“I think given that there might be all sorts of problems with these negotiations, given the politics is very difficult, given the immigration issues are very difficult and they could easily be upset by one person committing a serious crime — there are lots of ways in which it could go wrong,” said Peers.

Cheap Flights for All

The establishment of the Schengen Area — and to some extent the introduction of the euro — are both examples of EU policies that have indirectly helped tourism by simply making it easier to move around.

The same is true of one of arguably the biggest driver of tourism growth in the region: airline liberalization.

The basic premise was similar to Schengen. A previously siloed market would gradually be transformed into a single one. Where before national flag carriers would have a monopoly on routes between cities, they were now opened up for competition. Old bilateral agreements between countries, which frequently only allowed one carrier from each to operate, were done away with.

In this new free market new entrants thrived. Ryanair may have been founded in 1985 but it wasn’t until Chief Executive Michael O’Leary took over in 1994 that it really found its feet. EasyJet came along in 1995 and together they have changed the idea of flying for European consumers, while making bucket loads of cash.

Prior to the emergence of low-cost carriers, flying was seen as a luxury. Now nobody would think twice about booking flight from London to Berlin for a city break especially if the cost is less than $100 return.

In the face of this low-cost competition (both in terms of fares as well as the actual costs themselves) the likes of Air France-KLM and Lufthansa have struggled. Ryanair and EasyJet are now the first and second biggest airlines in Europe.

“What the EU did — and one of the ironies about this story is that the UK was one of those governments which was really supportive of the EU — was to decide that the same logic that applied to the common market ought to apply to aviation and that basically means creating a multilateral area where any airline can fly where it wants within that territory,” said Hussein Kassim, a Professor in Politics at University of East Anglia.

Between 1995 and 2014 the number of passenger kilometres within the European Union for air transport increased by 74 percent, compared with an overall rise of 23 percent.

The most recently released stats show growth is continuing. Intra-EU international flights grew by 7.3 percent between 2014 and 15, while extra-EU flights rose by 2.1 percent.

“In aviation in particular, airlines didn’t have to compete on price. There were state allocated routes, often with fixed fares. For the first couple of decades, one of the EU’s key contributions was market deregulation. Without that, it’s unlikely we’d have seen the likes of EasyJet offering cheap fares and new routes for everyone,” said Jeremias Prassl, an associate Professor in law at the University of Oxford.

Accordingly, fares have come down as a result. A study published by the International Civil Aviation Organization in 2003 found that in real terms promotional fares between 1992 and 2000 in the European Economic Area fell by 30 percent.

Given the level of bureaucracy that existed before them, it is unlikely that low-cost carriers would have been able to flourish without the EU’s desire to create a single market for aviation.

Despite, having little love for the EU in general, even Ryanair agrees with this assessment. “Absolutely. The two go hand in hand,” said Chief Marketing Officer Kenny Jacobs.

The fact that the EU is still a huge market for airlines is why those based in the UK are so scared by Brexit.

The EU allows any airline to fly any route within its borders regardless of where it is based. So even though EasyJet is headquartered in Luton, England it can fly between Prague in Czechia and Venice, Italy. Similarly, Ryanair, which calls Dublin its home, can fly between Athens, Greece and Sofia, Bulgaria.

“The point to bear in mind about bilateral air service agreements is they have the status of as full foreign treaty. So we’re not talking about some trivial agreement between transport departments of country A and B, we’re talking about full-scale delegations with detailed calculations of the pros and cons of allowing particular frequencies or capacities between countries. It’s a really energy consuming activity and of course the UK hasn’t really done this for the last 20 years,” said Hussein.

With Britain leaving, EasyJet will have to establish another base in mainland Europe. There is also the question of the EU’s rules on ownership, which stipulate that non-EU nationals can only control a maximum of 49.9 percent of an airline. A further problem is what happens to agreements with other countries like the U.S. and Mexico?

Airlines like Ryanair might not love everything that comes out of the EU – especially the level of flight delay compensation they are now required to pay – but that doesn’t mean it wants out.

“I think the EU needs to be smaller. I think it needs to be more pro-consumer and less pro-regulation and bureaucracy and it needs a kick up the ass, it absolutely does but the free movement of people and the way all of us move around Europe, that’s a good thing. It’s still post-war Europe. That’s a very, very good thing,” said Jacobs.

“The sooner and quicker that the issues around travel can be resolved, and we can have some stability going forward, the better. I don’t know if there will be other industries, which, will say the same thing, but I think it’s important that travel pushes itself quite heavily to the front of the queue.”

“Then whatever happens with migration, whatever happens on everything else, banking, who knows, that at least you can still fly from London to Berlin and you’re not going into a different passport queue, you’re not paying for a visa and all those things, which I think would baffle all of us. We’d all be going, ‘what the fu*k is that?’ Nobody wants that.”

What’s Next

A reformed visa system, freedom of movement a common currency and cheap air frares have all helped ensure Europe has remained an attractive place to go an visit, even with the huge demographic developments that have taken place over the past 20 years.

These seismic shiftshave been accompanied by sector specific changes that in many cases have benefited consumers.

Roaming charges will be abolished later this year, meaning that those traveling on vacation or business can use their mobile phones as if they were in their home country. There’s also the infamous Regulation 261/2004, which governs flight delay claims and has helped deliver millions of pounds in compensation to consumers, much to the displeasure of the airline industry. Beaches across the continent are now cleaner, thanks to strict guidelines on bathing water. Soon those booking holidays across Europe will also have greater protection, thanks to new package travel regulations.

None of these are perfect but they have all benefited the consumer.

“When I worked on the consumer rights directive, the European Parliament included some very specific conditions about a transparent pricing for air travel, making it mandatory for travel fares of all kinds to include all taxes, because it was often quite misleading that things like airport taxes weren’t necessarily included in pricing offers that were made. So, I think, consumers have benefited from that, and it’s given consumers’ confidence and trust to buy products online,” said Harbour.

McCormick agrees: “I think it’s done a wonderful job at helping consumers. We’ve got a homogenization of laws across the 28 countries, which makes it much easier to do business, to travel.

“One small thing that people keep talking about is roaming charges have been done away with so you can travel around… and not get shafted by the telephone companies for example. Environmental law has been standardized across the EU and that’s really good for consumers, their water is cleaner, air is cleaner. There’s been more move to renewable sources of energy and its much easier for tourists to travel around the EU. The airline market has been opened up, it used to be a just a whole host of national monopolies and now there much more competition so that’s been good for consumers. Consumer safety law, a lot of that has come from the [EU]. It’s been terrific for consumers I think.”

New EU Member Year of Accession Percentage Growth Percentage Point Uplift Year After Accession
Romania 28.8 24.6
Lithuania 20.7 16.3
Hungary 10.9 13.1
Estonia 19.7 12.4
Czechia 18.4 11.4
Cyprus 2 6.8
Poland 4.2 6.1
Slovenia 9.2 3.7
Malta 2.6 3.2
Slovakia 1 1.9
Croatia 5.6 1.1
Latvia 11.1 -3.4
Bulgaria -0.1 -6.7
Average 6.9
Source: Euromonitor International

How then to decide whether the EU is good for tourism? One way is to look at arrival figures for countries joining the EU. Research by Euromonitor suggests that they benefit enormously from being part of the club.

A total of 13 countries — including Cyprus, Croatia and Hungary — joined the EU between 2004 and 2013. All but two saw their arrival numbers shoot up afterwards with the average increase being 6.9 percentage points (this is not the same as tourists but is useful nonetheless).

“There’s not always a direct connection but the majority of countries show growth for arrivals is stronger. It kind of makes sense because the whole of the premise in the travel industry is the freedom of movement of people,” said Caroline Bremner, Head of Travel Euromonitor International.

By 2030, the United Nations World Tourism Organization (UNWTO) is forecasting that Europe as a whole will remain the world’s favourite tourist destination. The problem for the EU and for those selling travel to the continent is that its total share is set to fall from 51.2 percent in 2015 to 41.1 percent. This is being driven mainly from growth in Asia. The EU is clearly aware of this threat and in 2010 the EU published its own action plan that it hopes will keep Europe in the top spot.

While undoubtedly important for many, tourism is just one small area of focus for the EU. With the UK leaving, it has a good excuse to completely re-evaluate its purpose and there have been some suggestions that further integration could be on the cards.

“I don’t think the EU can just stay exactly as it is. They need to make some changes. I think reform has always been on the list,” said McCormick.

Even though the EU has faced existential threats in the past, Brexit is something else entirely. The next two years will shape not just the UK’s future but that of the remaining 27 states as well.

This is the first in a series of stories called Resetting Transatlantic Travel. Articles include:

  • The European Union’s impact on travel (published)
  • The business of transatlantic flying
  • Terrorism and European travel habits
  • Neo-Isolationism and transatlantic tourism



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Tags: brexit, eu, politics, security, tourism, transatlantic travel series, unrest

Photo credit: Supporters wave European flags attending a rally of the Pulse of Europe movement in Frankfurt, Germany. Michael Probst / Associated Press

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