Could The Surge In Terror Attacks Be Self-Defeating?

Convershaken Staff
March 3, 2017

The spike in terror attacks last year discouraged many from travelling, hammering companies such as Merlin Entertainments. But Nick Varney, CEO of the attractions giant, thinks further incidents could have a smaller impact as vacationers increasingly view them as another risk of travel.

If the recent uplift in terrorism continues, "I think it will become the new norm", Varney said during a recent earnings call. "I don't believe in the long run it will impede long-term growth in tourism, because people decide that they're going to travel and they're going to experience, and they are going to visit."

Varney has plenty of experience in dealing with terrorism, lending some credence to his theory. "I'm 27 years into this business, terrorism has been a factor all the way back to the days of IRA, Al Qaeda," he said. Several of Merlin's attractions - including LEGOLAND Florida and SEA LIFE Paris - are located close to the sites of recent terror attacks (see map above), which had "quite a big impact" on the company. Merlin has also suffered spillover effects: London wasn't hit last year, but the bombing of Brussels Airport in Belgium meant Merlin "lost a lot of bookings particularly from language schools, so there is always an impact by association".

Merlin's boss attempted to show the diminishing impact of terror attacks using the chart shown below. The company's SEA LIFE Munich attraction experienced a sharp drop in revenues last summer after a nearby shooting, but recovered in five or six months, which is typical in Varney's experience. Soon after, the attack on a Christmas market in Berlin, Germany, sent sales tumbling again. But the decline wasn't as pronounced or long-lasting as the one in summer, suggesting fewer visitors were deterred.

Of course, most people would expect a terrorist attack across the street to have a greater impact on attendance than one in a different city. But if Varney is right and the impact of terror attacks does fall as frequency increases - in economic terms, if it's subject to diminishing marginal returns - that has major implications for terrorists.

Most people hugely overestimate the risk of being involved in a terror attack, due to the 'availability heuristic' - as they can reel off a list of incidents with little thought, they assume terrorism is extremely commonplace. Excessive media coverage exacerbates the problem, making people think terrorist attacks are rife (US President Donald Trump has accused media outlets of ignoring or under-covering terrorist attacks, either because he's aware of this phenomenon and wants to capitalise on it to further his agenda, or he's fallen victim to it himself).

The goal of terrorism is to spark an outsized reaction. Injuring or killing a few civilians is an effective way to incite worldwide fear and amplify the perceived threat of a small group. It's welcome news if Varney is correct that tourism to terror-struck cities recovers within months, and the fallout lessens with each attack. The normalisation of terror is deeply undesirable, but it has a silver lining: if people become accustomed to terrorism, it loses much of its power to foment fear and panic.