The Lasting Effects of Terrorism on Hotel Performance: Evidence from Jihadist Attacks in Europe

Abstract

Despite extant research on how terrorism impacts tourism demand, we still know little about its long-lasting effects and how long it takes for the hospitality industry to bounce back. Moreover, while terrorism deters demand, the effect on prices and revenues is still poorly understood. Rooted on microeconomic and Prospect Theory, this work investigates the causal effects of Jihadist attacks in Europe on five measures of hotel performance: rooms sold, average daily rates, occupancy rates, revenues and revenues per available room. Using monthly panel data from January 2010 to December 2019 for 29 cities, we employ staggered difference-in-differences to uncover the dynamic causal effects of the attacks on hotel performance. Our results reveal that all metrics significantly worsen within the first 6 months after terrorist attacks and require nearly 4 years to recover fully.

Keywords

terrorism hotel performance difference-in-differences Jihadist attacks dynamic effects

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