Hedging options for the tourism sector

Abstract

Climate change and financial crisis are affecting in a critical way to tourism companies. Both variables have been proved to be so much volatile and are impacting negatively the economic sector profits, especially in the Spanish case. This put forward the need to take advantage of any financial instruments available in order to face their risks (some of the random) to survive to this environment. Some of the financial assets suitable for this aim can be short positions in stock, futures and options in companies that are related with the risk sector and are quoted on the stock market, in order to face a general economic crisis or to avoid loses produced by weather uncertainly. In this paper, firstly, we are going to define the different business linked to the tourism sector in Spain. After that, we will put forward the specific risks and future costs that they have to deal with. Thirdly, we will show the different hedging options that financial markets offer in order to protect tourism related companies for some of those specific risks. Finally, we will carry out an empirical analysis where we will compare the evolution of the profits of some representative companies of the sector of both using and without using financial market hedging.