AFLYY Air France ADS (PK)

By Alexa Liautaud and Sam Schechner 

PARIS--A cascade of terrorist attacks in Europe is driving away tourists at the height of the summer rush, casting a pall over hotel chains, airline companies and luxury retailers that are already grappling with Britain's vote to leave the European Union.

Declines in airline and hotel bookings have spread into European cities and countries that hadn't suffered recent attacks, analysts and companies say. That raises the specter that the violence--combined with a sluggish economy--could have a broader economic impact, affecting companies like Air France-KLM, AccorHotels SA and InterContinental Hotel Group PLC when they report earnings in the next two weeks.

"Europe is not going to be doing them any favors," said C. Patrick Scholes, a managing director at SunTrust Robinson Humphrey Inc. "It's all about fear."

A confluence of negative factors is buffeting Europe's tourism business. Travelers appear more cautious following a spate of attacks-- most recently in Munich and in Nice, France. Economic growth in many European countries is weak, straining some consumers' pocketbooks. And the British pound is down 8.6% against the euro since the Brexit vote--boosting costs for the bloc's single largest source of international tourists after Germany.

"Europe has several, almost I guess, three strikes against it looking forward," Scott Kirby, president of American Airlines Group Inc., told analysts on Friday, adding that Europe was the only region where he expects to see sequential declines in the third quarter.

Those pressures have driven down stock prices of several Europe-focused tourism firms that report earnings in the next week. Shares in British travel agency Thomas Cook Group PLC, which reports fiscal third-quarter results on Thursday, have plunged 52% since the beginning of the year. Ryanair Holdings PLC, which reports fiscal first-quarter results on Monday, is down 23%. Shares in British Airways parent International Consolidated Airlines Group SA, which reports first-half results on Friday, have fallen 34%.

Early data on hotel occupancy rates following the Bastille Day attack in Nice, which killed 84 people, shows the impact stretched well beyond the French Riviera. While occupancy at Paris hotels was already depressed, and it fell precipitously in Nice, preliminary data showed occupancy in London and Amsterdam dropped 2.7% and 8.3%, respectively, compared with a year earlier, by the Sunday after the attack.

Airline bookings appear to have declined, too. German airline Deutsche Lufthansa AG issued a profit warning on Wednesday, stating revenue in the second half of the year would fall between 8% and 9% because economic uncertainty and "repeated terrorist attacks in Europe" had driven down bookings of long-haul flights to Europe. On Thursday, EasyJet PLC said terrorism threats and the May crash of an Egyptair jet were among factors that reduced demand for the summer months.

"These events, which are tragic and very, very significant, each take a small but noticeable bite out of demand," said David Katz, a managing director at Telsey Advisory Group.

Luxury retail, which typically sees revenue from international tourists visiting Paris, is hurting as well. Hermès International SCA reported a sharp slowdown in first-half sales growth on Thursday, citing terrorist attacks in Europe and currency fluctuations as primary causes of the downturn.

"We do not see any improvement in tourist traffic in France," Chief Executive Axel Dumas said Thursday. "We will not see one while we are in a state of emergency which prevents customers from coming."

Luxury giant LVMH Moët Hennessy Louis Vuitton SE reports first-half earnings on Tuesday. Kering SA reports on Thursday.

European travel businesses had already been girding for a difficult tourist season. Despite the promise of the quadrennial European soccer championships, Europe was the only region of the world to receive fewer international bookings for the summer as of May 31, with a decline of 2.1% from last summer, according to ForwardKeys, a data provider that compiles flight-ticket information.

While those figures showed the number of international bookings for Spain and Ireland rising in the summer period, those increases were more than offset by an 11% decline in bookings to France, 23% decline to Belgium, and 31% decline to Turkey, ForwardKeys said.

Other regions of the world are benefiting from the downturn in Europe, which could soften the blow for some firms. The number of international bookings for destinations this summer in the Asia-Pacific region, which includes China and Australia, rose 7.8% from a year earlier, according to ForwardKeys.

Charlie Bateson, product and commercial director of the U.K. branch of luxury travel company Abercrombie & Kent, is also seeing a "big increase" in travel to India, China, Japan and South Africa. "I think we'll see, certainly from where we're sitting, an increase in demand for the more unusual, the more experiential," he said.

Write to Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

July 24, 2016 11:13 ET (15:13 GMT)

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