Paris attacks : limited economic impact

Paris terror attacks that have occurred last 13 November and that had left 130 people died and over 350 wounded are likely to have a limited impact on France’s GDP in the fourth quarter of 2015.

After the French Tresaury direction had estimated to 0.1% GDP the cost of Paris attacks for the French economy, the Banque de France has reviewed last week its forecast for France’s GDP in Q4 2015 to 0.3% from 0.4%.

The institution has stressed a slowdown in services activity (hotel industry, restaurants, leisure) but  still anticipates a 1.2% rise of France’s GDP for 2015.

Romain Burnand, co-director of Moneta Asset Management and manager of the Moneta Micro Entreprises and Moneta Multi Caps funds, tells InvestmentEurope that “the impact of Paris terror attacks on our French equities funds has been sporadic.

“The market acknowledges the real impact remains limited. The French economy will not be really jolted, he adds.

Among sectors that have been impacted, the French tourism industry, especially in Paris, has been dramatically hit just after the attacks.

In an interview to French magazine Paris Match, Gérard Brémond, founder of French listed resort group Pierre & Vacances, has assessed Paris is suffering more than the rest of France from the terror attacks. He explained Adagio resorts the group jointly manages with Accor, have faced a 5% decrease of their attendance rate compared to end November 2014.

The whole sector has been impacted but SMEs have been more knocked than large groups, he said.

Brémond added that terrorism will impact the behaviours of tourists all over the world on a long term. About the French tourism industry, Brémond said it could return to a normal level of activity within two or three months if no further terror attacks occur.

Ten days after the attacks, the Paris Convention and Visitors Bureau made a first review of Paris tourism activity. Relying on figures provided by consultant MKG Hospitality, it said “the 13 November attacks have had a bigger impact than those in January of this year.”

“In the week that followed the events, daily occupancy rates in Paris hotels fell by an average of 24 points (compared with a daily average rise of 2.4 points in the week preceding the attacks). This drop reflects notably the cancellation of major events due to take place in Paris last week, such as the conference and trade show for Mayors,” the Paris Convention and Visitors Bureau underlined.

Another figure provided by ForwardKeys showed there were 21% more cancellations for the week after the attacks than for the same week last year.

The organisation has however stressed a reversal trend as from the weekend of 21-22 November.  The Paris Convention and Visitors Bureau has noted the demand for airline bookings targeting the Christmas period has” plateaued since 13 November” and slightly dropped in comparison to end November 2014.

It said that bookings were down 2% before the attacks of 13 November and fell to -13% after the attacks, talking of “a relatively limited drop given the circumstances.”

The attacks have also been highlighted at the end of last week in a roundtable on tourism trends in France held by French public investment bank Bpi France and property manager Extendam.

Vanguelis Panayotis from MKG Group has noticed the attendance rate and the revenue per available room (RevPAR) in Paris hotels have dropped by 11% in the aftermath of the attacks. He said the fall of the RevPAR has been limited by the 3.3% increase of average room prices with the start of the Cop 21.

“Terrorism is considered as a natural risk for tourism and the airline industry. So are health and politic risks. Tourism has declined in Morocco and Tunisia in the aftermath of the Arab spring. The impact in those areas has lasted longer than what we usually stress in developed countries after terror attacks,” Burnand comments.

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