Tourism, Security and Safety From Theory to Practice

Figure 3
Difference between (i) predicted foreign bed nights and (ii) simulated foreign bed
nights in a terror-neutral environment (TER = 0), as a function of terror index.
1.5
1.0
0.5
0
−
0.5
−
1.0
−
1.5
−
2.0
Dollars per night
−
6
8
6
4
2
0
−
4
−
2
Terror index 
Figure 4
Difference between (i) predicted price to foreign tourists and (ii) simulated price to
foreign tourists in a terror-neutral environment (TER = 0), as a function of the terror index.
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price declines in the foreign market, such effects would be supply induced, namely
management’s attempts to fill the rooms vacated by foreign cancellations. Figure 6
shows, however, that increases in terror severity reduce equilibrium Israeli prices by
negligible amounts, reflecting the small size of parameter (
∂
PL
s
/
∂
QF = 0.013 in
Table 1. Thus, although the difference between predicted and terror-neutral Israeli
hotel stays does rise as terror grows (Figure 5; i.e., Israelis show a small tendency to
patronize hotels more during high-terror periods), the buffer to foreign cancellations
Tourism Security and Safety: From Theory to Practice
60
0.5
0.4
0.3
0.2
0.1
0
−
0.1
−
0.2
−
0.3
Thousand bed nights per month
−
0.4
−
6
8
6
4
2
0
−
4
−
2
Terror index 
Figure 5
Difference between (i) predicted local bed nights and (ii) simulated Israeli bed nights
in a terror-neutral environment (TER = 0), as a function of the terror index.
0.15
0.10
0.05
0.00
−
0.5
−
0.10
Dollars per night
−
0.15
−
6
8
6
4
2
0
−
4
−
2
Terror index 
Figure 6
Difference between (i) predicted price to local tourists and (ii) simulated price to
Israeli tourists in terror-neutral environment (TER = 0), as a function of the terror index.
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is small. While foreign demand (Figure 3) falls 34,084 bed nights for every four-unit
increase in terror, local demand (Figure 5) rises by a negligible 264 bed nights.
Why do local prices fail to decline sufficiently to fill many empty rooms in the
wake of a terror incident? The same question applies in more general form to most
countries’ lodging industries, where excess capacity is at least seasonally evident.
Table 4 shows the difference between predicted hotel revenue and that which
would have been earned had the terror index been neutral (TER = 0), for each year
between 1992 and 1998 and for both the foreign and local market. Only in 1993,
the year a peace accord was signed with the Palestinians, was the terror index on
average negative—indicating a better-than-neutral atmosphere—so only in that
year did foreign revenues exceed the terror-neutral standard. Revenue shortfalls
were greatest in 1996, a year of Middle East unrest.
Terror affects foreign revenue by first shifting the foreign demand function
given in equation (2) leftward, reducing the number of bed nights demanded.
War, Terror, and the Tourism Market in Israel
61