The rollout of a vaccine and land connections were both key to the recovery of travel and tourism in Southern Europe, according to a report from DBRS Morningstar.
The study found that countries with strong domestic tourism would fare better while the pickup of the vaccine was underway.
DBRS Morningstar noted that, even if production, distribution, and take-up of the vaccine ran smoothly, it could take many months “or far longer” until a sufficient level of immunity was reached.
It said: “Until a more permanent solution is found, in which sufficient immunological protection is reached globally, or at least at European level, containment measures, travel restrictions and recommendations will likely remain in place. In this case, the epidemiological situation both in tourist destinations and source markets, virus fears, and the imposition of quarantines and recommendations will remain central to explain the travel and tourism sector performance. In this environment, countries with relatively large domestic tourism markets, such as Italy and Spain, where domestic tourist spending represents 76% and 44% of the totals, respectively, could face a less severe downturn in the sector.”
The travel and tourism sector in Southern European countries suffered heavy losses due to the effects of the pandemic. International tourist arrivals dropped by 79% in Spain, 77% in Greece and Malta, 76% in Portugal and 84% in Cyprus during July to September 2020, compared with the same period in 2019.
While the start of the season allowed for a short-lived pick-up in international tourist flows, the resurgence of contagion across Europe halted the recovery. The collapse in international tourist arrivals was wide-spread for the Southern European countries.
Quarantine measures, mandatory testing requirements, and authorities' recommendation to avoid travelling to countries in certain regions with a worsening epidemiological situation affected tourist flows. The Spanish case is telling in this regard. During the Summer, the UK, Spain's largest source market imposed a 14-day quarantine rule on travellers arriving to or returning to the UK from Spain. As a result, the drop in tourist arrivals to Spain from the UK was more pronounced than the one for overall tourist arrivals into Spain (-88% year-on-year vs -79% year-on-year) during July- September 2020.
In contrast, UK arrivals to Greece, which was a country exempted from returning passenger quarantine in the UK dropped by a milder 54% for the August to September period.
Furthermore, the ban of travel from non-EU countries had also a severe impact on tourist arrivals this year. For example, arrivals from the US declined by 97% year-on-year in the case of Spain and 98% year-on-year in Greece for July to September 2020. Similarly, the Cypriot tourism market will be heavily hit this year from the loss of the Russian market, which accounted almost 20% of total tourist arrivals in 2019.
However, data for Italy indicated a more resilient performance for the sector, with a milder drop in international arrivals compared to other Southern European countries. This could reflect Italy's good land connections and proximity to some key central European tourist markets such as Germany, Switzerland, Austria, and France, combined with the good epidemiological situation during the Summer. Given these conditions, Italy might have also benefitted from tourist diversion (i.e., tourists that might otherwise have visited other countries).
Javier Rouillet, VP, DBRS Morningstar, said: “While the epidemiological situation remains largely unresolved, the travel and tourism sector in countries with relatively large domestic markets, less reliance on air transport, and better land connectivity might hold-up better.
“While pre-pandemic levels remain unlikely for the time being, progress on the Covid-19 vaccines could support the recovery in the travel and tourism sector.”
Spyridoula Tzima, assistant VP, DBRS Morningstar, added: “The vaccine development is providing a silver lining for the sector, as the improvement in the pandemic situation could potentially coincide with strong tourism demand peaks in Summer months for Southern Europe.”
Insight: “If you can't be with the one you love, love the one you're with”, as the song goes and this is certainly the theme of the pandemic, with many a hotel looking to those nearby to fill its beds, now that airports are nothing but storage centres for cut-price gin.
This was, Pandox posited, the time for local brands to seize the day and possibly drive the global brands to think hard thoughts about how flexible they needed to be. Could there be a chance for owners to have, well, some rights?
But away from owners rights, it appears that the theme for the coming months will continue to be ‘any guest is the right guest’, even the guest from down the road. And that’s great, or would be if they spent as much an international guests. Cutting your coat from a smaller cloth will continue until 2021.