A united Europe made us love to travel, COVID-19 is making us fear it.
By: Filippo Bertolini
Tags: Covid 19, European Union, Travel, Economics, Hospitality

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)

Eurostat Travel Data

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.