The concept of risk tolerance is commonly discussed in financial planning. It will help to determine your acceptance of situations where loss may occur, especially in investments. The same consideration can be applied to travel.
Risk is defined as “uncertainty about the implications of an activity you value often focusing on negative or undesirable consequences”. A risk is a chance of loss, or the potential that something bad could happen. Risk tolerance is therefore “the optimal level of risk that someone will take in the pursuit of a specific goal”. What then does this mean from a travel perspective?
Ken and I have booked cruises into the fall of 2023, a number in fact. In light of the current situation surrounding international travel that may seem like a big risk to take. Anxieties exist around losing our deposits, our plans being cancelled, price changes and the ongoing concerns around health and safety; all of which are valid and may be enough to dissuade many others from making a definitive plan for the future. But on top of having a high risk tolerance we also understand the risk/return trade-off in that the potential return rises with an increase in risk.
So what are the actual risks, or “chance of loss”, that exist with travel right now.
- That the price of cruises are going to increase as the demand increases.
There is a huge pent up demand for travel as the pandemic stretches out into the future. Cruise companies are trying to get numbers on the books and are doing so by offering sales. These prices are not as good as you would have seen pre-pandemic, but I strongly believe are better than they will be in the near future. In fact a recent news release from Cruise Industry News indicates that cruise lines are under pressure to “significantly” increase prices in light of the demand already demonstrated for future itineraries.
- That the itineraries will be limited.
Many countries are approaching the return of tourism differently. The pandemic allowed those destinations that have been over populated to catch their breath and many may not want the return to the crazy crowds of the past. We may not be able to reach our bucket list destinations for a while longer.
- That our vacation will be cancelled through no fault of our own and we will not get our deposits back.
As cruise lines continue to cancel well into the summer, and some even into the fall of this year, there is little confidence about the future of travel. A year ago when the world shut down many folks were unable to get refunds, even with cancellation insurance. It was frustrating enough when we thought it would last a few months, but we are now into more than a year. Many of us are still out money or have future credits from 2020 travel plans and are unsure if we will ever be able to use them, or are unsure if we want to yet.
- That we will not be able to travel safely and our health will be at risk.
Despite the assurances that cruise ships will be safe for all those on board until we actually have wide spread usage it is nothing more than a kiss and a promise. Reports about what little travel is happening right now is rife with negative feedback. Travel insurance is changing every day in response to the demand and the fluctuations in travel advisories across the globe.
If this seems overwhelming don’t despair. Despite knowing all of this we have chosen to move forward on our travel plans as our risk is manageable. Next week take the travel risk tolerance quiz and find out exactly what your tolerance level is.