Extreme Heat: The Threat to Existing and Ambitious, New Wellness Destinations

By Thierry Malleret, economist

Last month, extreme heat caused the deaths of more than 1,300 pilgrims in Mecca (Saudi Arabia), where temperatures exceeded 120°F. Deadly heat also roasted several countries renowned for their tourism industry and wellness resorts (like Greece), making it unbearable to stay outside or inside without air conditioning – and causing several deaths as well. If sweltering temperatures render certain countries and wellness destinations not only unpleasant, but also perilous, what will happen? In those countries fast expanding their high-end wellness tourism offering (like Saudi Arabia and Oman), climate change could (in an extreme case) bring the process to an end, or at the very least, make it much more expensive. In the Middle East, as elsewhere, more heat means more energy, more water, and more electricity (for cooling, including outside, as in Qatar). Therefore, extreme heat imposes the equivalent of a long-term tax on doing business and may curb many countries’ appetite to develop their travel and wellness tourism industries.

EXTREME HEAT: BAD FOR ECONOMIC GROWTH.
2023 was the planet’s warmest year on record in the last 100,000 years, and 2024 is set to be even hotter. A few weeks ago, 1,400 high temperature records were registered around the world. Extreme heat is now routine, with heat waves getting hotter, longer, deadlier and costlier. Its effects on industries like agriculture (lower yields) or tourism (displacement to cooler destinations) are well understood, but its broad, pernicious economic repercussions on growth much less so. A plethora of new research shows that extreme heat reduces labor productivity and increases operational costs for firms. Most notably, a correlation exists between extreme heat and increased delinquency rates amongst companies, particularly small to medium enterprises (SMEs).

BAD FOR MANY EXISTING AND AMBITIOUS NEW WELLNESS DESTINATIONS.
Last month, extreme heat was blamed for the deaths of more than 1,300 pilgrims in Mecca (Saudi Arabia), where temperatures exceeded 120°F (49°C). Deadly heat also roasted several countries renowned for their tourism industry and wellness sanctuaries (like Greece), making it unbearable to stay outside or inside without air conditioning – and causing several deaths as well. If sweltering temperatures render these places and countries not only unpleasant, but also perilous, what will happen?

Already Southern European countries are beginning to fall victim to a displacement effect, with a rising number of tourists moving in summer to northern latitudes. In those countries that are expanding their tourism and high-end wellness offering (like the Kingdom of Saudi Arabia and Oman), climate change could (in an extreme case) bring the process to an end, or at the very least, make it much more expensive.

In the Middle East, as elsewhere, more heat means more energy, more water and more electricity (for cooling, including outside like in Qatar). Therefore, extreme heat imposes the equivalent of a long-term tax on doing business and may curb many countries’ appetite to develop their travel and wellness industries. Investors beware: the trend of hotter and longer summers will inevitably accelerate in the coming decades, making some countries, places and resorts uninhabitable, or the cost of running them prohibitive.