A united Europe made us love to travel, COVID-19 is making us fear it.
Travel is a pillar of our economy and not just an Instagram hashtag
Europe has begun its slow recovery from one of the most disrupting events in the past 70 years, the coronavirus pandemic. Striking a balance between a steady and fast economic recovery and granting public safety is a trivial task that the European Union must take care of.
As of today, the tourism sector has seen the worst impact since the 2008 sub-prime crisis, causing unprecedented economical damage.
It is paradoxical how travelling itself has been responsible for the spread of the virus that later has forced the entire continent to shut down every touristic activity. Without an available vaccine, it is hard to predict when we will be able to return to a sort of “normality“ regarding travelling. However, the current trials in the U.K. are raising the hope to go back to the pre-pandemic routine.
Something that is quite often forgotten is that travel is one of the main sources of income for many of the European countries. The EU 27 Nations are heavily dependent on tourism and almost 11% of the whole GDP of the Union comes from tourism. On the contrary, countries like the U.S. are only depending for 2.6% on touristic activities.
Clear examples can be cities like Paris or Rome with respectively almost 19 million and 10 million yearly international arrivals[1].
Yet, in Europe especially, tourism is a crucial component for economic stability. Data are important to understand the magnitude of the touristic flows in the EU.
In spring 2018, EU citizens have travelled more than 390 million times totalizing 34% of the yearly total. All over, the trips cumulated over €170 billion of spending input. The focus on the spring months highlights how the time span usually hold a fundamental economic inflow has been incredibly damaged by the necessary lockdown measures. (Tab 1)
So, what is the real potential damage to the European Union?
Currently, there are almost 20 million[2] workers employed in travel and leisure or in travel-related sectors. A new JRC[3] report estimates that between 6.6 and 11.7 million of these jobs could be impacted by the loss of revenue that hospitality-related structures will have in 2020.
The worst-case scenario is a possible second wave that could deeply affect the purchasing power of Europeans and their willingness to travel, this, together with probable new restrictive measures could lead to incalculable economic damages.
Austria, Croatia, Greece, Italia, Malta, Slovenia, and Spain that have the most at stake considering how dependent they are on tourism.
Overall, in the EU the revenue drop is expected to be at around 50% for HORECA[4] activities and 70% for travel agencies. The downturn could create a 3% decrease in GDP for Greece and Portugal according to the External Sector Report 2020 delivered by the International Monetary Forum. A scenario that could harden the socio-economic situation of countries already struggling with endemic problems.
Depending on the evolution of the pandemic, the report forecast a decrease in tourist arrivals between 38% and 68% in 2020. The possible reopening of the borders and the complex welfare measures could possibly mitigate the economic downturn, however, a sector like tourism, uncertainty-adverse could lose many players in the next few years.
However, it is important to consider the effect that the pandemic will have on the willingness to travel and spend in the next year, a factor that could irreparably change the world of hospitality as we know it.
Quantifying 2020 effects may be misleading since the aftermath will carry on for more than just a year, and industry experts estimate that 2023 will be the first “back-to-normal” year.
Possible policy responses and stimuli in the wake of COVID-19 pandemic
As usual in these cases, there is a necessity for a holistic approach capable of delivering results in the short, medium, and long time.
The JRC report highlights how a focus on health and trust is the basic recipe to deal with such a crisis. Moving to the medium term there is a need to restore the consumer demand and stimulate the purchasing power of the European citizens, macroeconomic expansive measures are the preferable policy tool to avoid a strong recession like the one of 2008.
In the long-term, it has been reaffirmed how this is the chance to reshape tourism as we know it. Exploiting the endless diversity and leveraging the sustainability of many European destinations could be the perfect recipe to change our perspective of tourism while creating a more sustainable and specialized industry.
What the EU has done thus far.
An interesting first step has been the “RE-OPEN EU” package delivering a new interactive way to strengthen internal tourism by providing safety guidelines and organizing European tours.
On a more macroeconomic side, the EU Commission’s Recovery plan has been the pillar that Ursula von der Leyen has chosen to deal with the economic impact of the pandemic. The plan includes funds for over €672.5 billion aiding companies and SMEs that are struggling to handle the pandemic effects, an exogenous stimulus deeply needed by a continent that has struggled in the past 10 months.
The whole package, however still present many holes, and the Eu Commission shall try to stress more on the creation of bilateral agreements trying to foster European solidarity in order to not anyone behind.
Being able to focus on a sector that brings international visibility beside cashflows shall be of great concern for the whole Union, it would be a pity to lose the international recognition that our cultural heritage has.
References
Anabela, M. S., Carmen, M., Karel, H., & Alessandro, R. (2020, July 02). Behavioural changes in tourism in times of Covid-19: Employment scenarios and policy options. Retrieved from https://publications.jrc.ec.europa.eu/repository/handle/JRC121262
COUNET, J. (2020, August 26). Tourism and employment: How the severity of future coronavirus waves could impact jobs. Retrieved from https://ec.europa.eu/jrc/en/news/tourism-and-employment-how-severity-future-coronavirus-waves-could-impact-jobs
Lock, P. B., & 25, N. (2020, November 25). Italy: Coronavirus impact on tourism revenues 2020. Retrieved from https://www.statista.com/statistics/1105157/impact-of-coronavirus-covid-19-on-tourism-revenues-in-italy-by-sector/
O’Hare, M. (2018, December 04). Most visited: World’s top cities for tourism. Retrieved from https://edition.cnn.com/travel/article/most-visited-cities-euromonitor-2018/index.html
2020 External Sector Report: Global Imbalances and the COVID-19 Crisis. (2020, August 01). Retrieved from https://www.imf.org/en/Publications/ESR/Issues/2020/07/28/2020-external-sector-report
This crisis is different — Comparing the coronavirus crisis with the financial crash. (2020, April 24). Retrieved from https://www.rolandberger.com/en/Point-of-View/Point-of-View-Details_65664.html
[1] https://edition.cnn.com/travel/article/most-visited-cities-euromonitor-2018/index.html
[2] https://ec.europa.eu/jrc/en/news/tourism-and-employment-how-severity-future-coronavirus-waves-could-impact-jobs
[3] https://publications.jrc.ec.europa.eu/repository/handle/JRC121262
[4] Hotel restaurant Cafe
