Feb 26, 2022 | Ibiza Blog | 0 comments

What Impact Will War Have On The Ibiza 2022 Season

Ibiza Blog | 0 comments

Written by Dan Kirwan

Just when you thought it was safe to get back into the warm Balearic waters of Ibiza, along comes a Russian shark named Putin striking fear into financial markets and commodity prices worldwide. In Spielberg’s famous movie version, the Amity Island Town Mayor and business interests kept the beaches open, and I expect the same response from the Ibicencos. It will be business as usual on the island this summer, but consumer confidence will significantly impact the success or failure of its season. Volatile markets will affect wealth and confidence, impacting investor and consumer sentiment.

Analysts predict that inflation in Western Europe could quickly rise to 10%, and crude oil could hit $120 a barrel, which would sharply increase prices at the pumps and airline depots. Roughly 2.2 million mortgages are linked to the Bank of England’s interest base rate, and Britain could see repayments rise, placing further pressure on household budgets.

The package tour operators recovering from the Pandemic are exposed to rising fuel costs and consumer confidence in the holiday market. While many will want to go on holiday, the unpredictability of the war will have a significant impact on their plans. While the holiday market in Ibiza is robust and diverse, thanks to its multipurpose offering, the sector most at risk is the mass market relying on middle and working-class singles and families. The professional classes, who like to party, rely on the global financial sector’s health, so I would guess their disposable income will be affected.

The crypto kids are also under pressure as confidence in proof of work currencies is eroded, with gold now rated a safer investment than bitcoin. The sector least impacted is the luxury market, with established wealth and assets. This market kept the island afloat during the last global recession in 2008; in fact, it was responsible for the high prices we witness today as investors, especially the Dutch, Saudis and Russians, began to buy up property on the island. There will be demand for holidays and weekends in Ibiza this summer, especially the opening and closing weekends, just how much the whole season will experience is the question.

For those who venture on holiday abroad this summer, value and price will be critical factors in their decision. Unfortunately, Ibiza has priced itself out of the middle to budget market in recent years and offers poor value compared to other sun holiday resorts in Spain. Airline tickets to Ibiza are already spiking and cancellations of routes from the UK to Ibiza have begun. This season, staffing is another massive issue as employers find it increasingly challenging to recruit service staff due to low wages and high accommodation costs. While bookings have been strong for the season ahead, fingers will be hovering over the refund button as people watch developments in Ukraine.

While we predicted a full-on summer before the outbreak of the war, that forecast is now firmly on hold.

Local Hoteliers estimated openings of around 42% in March and in April they forecasted that 85% of Hotels would open, with 691 open compared to 137 in April last year. The Balearic Hoteliers Association have recently issued warnings that the season ” “is likely to change at the expense of the consequences of Russia’s invasion of Ukraine, the repercussions on the geopolitical framework and the effects on the economic recovery that may determine the future of the coming months,”

The two big elephants in the room are America and China – their potential involvement will have a tsunami effect on global markets. China failed to condemn the invasion of Ukraine and America went all in to vilify Putin. There’s also potential for other variables, from fleeing Ukrainian refugees to a wave of Russian cyberattacks in retaliation for Western financial sanctions.

In conclusion, a war in Europe will surely hurt the Ibiza 2022 season. While we predicted a full-on summer before the outbreak of the war, that forecast is now firmly on hold. I would strongly advise a wait and see approach as anything could happen in the coming months. The clubbing sector faces another unpredictable year ahead, with many clubs releasing lineups and residencies in recent weeks. After two years of covid restrictions, the last thing they wanted was a new international crisis.

Sadly, a third barren season will sound the death knell for several businesses associated with the clubbing sector. Everything will depend on the length of the war; the longer it goes on, the higher the level of financial uncertainty, impacting consumer confidence. There is always the possibility of peace, and that diplomacy will win through, so let’s keep a hopeful outlook but once again a waiting brief for Ibiza 2022.

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