SIM Report: Southern Europe, Issue 5

REGIONAL: A deep-dive into the impact of COVID-19 on tourism and long-term implications for international travel

The impact of the coronavirus (COVID-19) pandemic has had a significant impact on Europe’s tourism industry. As governments are struggling to convince citizens that national outbreaks have come under control, the outlook for international travel remains bleak.

According to data from the World Tourism Organization (UNWTO), there was a 98 per cent fall in international tourist numbers in May compared to the same period last year. This essentially equates to a drop of around 300 million tourists and a revenue loss of approximately USD320 billion, globally. The EU tourism industry employs around 13 million people, and an estimated EUR1 bn per month is being lost. In Italy, the Italian tourism federation estimates that around 60 per cent of tourists will be lost this year. Globally, 75 million jobs could be lost, including 6.4 million in the EU, according to the World Travel and Tourism Council (WTTC). A series of major sporting and cultural events, including the UEFA Euro 2020, usually a magnet for overseas tourists, have also been cancelled or postponed to 2021.


A key obstacle to the resumption of normal tourism flows is the current border situation in Europe. For instance, Hungary announced in late August that from 1 September it would shut borders to foreign nationals, essentially marking a return to the travel restrictions imposed to cope with the first wave of coronavirus. The ban will remain in place for at least one month, and Hungarian citizens have been urged to avoid non-essential travel to other countries. This makes Hungary the first Schengen Area member to re-introduce a ban, while most other EU countries have opted to avoid similar action. More broadly, it signifies that there remains scope for divergence in approaches from EU countries despite an incohesive and inconsistent approach in the early stages of the pandemic. Indeed, travel has become an increasingly complex undertaking, with passengers required to complete multiple forms in addition to completing COVID-19 tests before departure. Another key concern for tourists is the requirement for arrivals to undergo a two-week quarantine.



Given the severe sectoral impact of the pandemic, the EU has sought to alleviate some economic pressure on the tourism industry. Unprecedented levels of economic uncertainty will mean less disposable income for leisure travel. The majority of EU member states have announced plans to introduce economic assistance packages, including tax moratoriums and wage subsidies, that will also cover the tourism sector. In the wake of the pandemic, state intervention in private markets will become the norm. This has already been seen through the full acquisition of Alitalia by the Italian state and the partial nationalisation of railways in the UK.

The lack of a vaccine or effective treatment will continue to present longer term challenges for the sector’s recovery. For companies with staff travelling regularly for business purposes, operational resilience plans will have to adapt to new realities. Business travellers for instance should ensure they travel with all the necessary documentation and ensure they carry a ‘COVID kit’, which will comprise of hand sanitiser, face masks, and disposable gloves. Effective planning can be helped by travel risk teams proactively monitoring communications for any new restrictions at destination or transit countries.

Ultimately, the traditional tourism model will undergo a profound shift. In the current context and the near future, a new important condition for tourists before beginning travel will likely be the performance of a government in dealing with national outbreaks. More travellers will pay closer attention to the quality and standard of healthcare in destinations. Countries that recorded comparatively high infection rates will likely suffer more than others with similar climates and tourism infrastructure. Rural destinations in normally less crowded areas will become increasingly popular, while short weekend trips to major cities probably will become a less appealing proposition. Some travellers will also prefer private accommodation rather than large, centrally-located hotels. Long-distance travel to countries such as the US and the wider Americas region will also be avoided, at least until the epidemiological picture there improves.

 


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