European Tourism Blues

A COVID-19 Second Wave in Europe?

August 10, 2020 -By all accounts, 2020 has not been a normal year. As COVID-19 lockdowns swept the globe, activities like working from home, remote learning, and social distancing became the ‘new normal’.  So it’s not a surprise the summer holiday season was also thrown up in the air. International travel restrictions meant holidays abroad were put on hold and replaced by ‘stay-cations’.  Caution by travelers meant more trips by car instead of by plane or rail.

In Europe, as the number of coronavirus cases fell through June there was hope that summer holidays were back on the agenda. But July brought a resurgence of cases in areas of Spain and parts of France and Germany. This uptick in COVID-19 activity is much more localized than the ‘second wave’ outbreak occurring in the U.S.  However with fears  over conditions deteriorating rapidly, there is a rising risk of restrictive new policy measures being introduced. And as travel across the continent increases, the chances of new outbreaks emerging in other countries increases.

The impact of international travel limitations, either due to imposed restrictions, fear, or more limited transport availability, is uneven across European countries as tourism accounts for very different shares of GDP. In addition, whether tourism expenditures in a country are primarily inbound or domestic has a big effect. Strongly tourist-oriented like Greece, Croatia, and Portugal rely on inbound spending for a significant amount of their tourism spending. These countries may not be able to make up the loss of non-resident spending. Countries like Italy and Spain have an above-average share of tourism in their GDP, but resident tourists account for an important part of overall tourism expenditure. Some economies could see an uptick in tourist spending as residents opt to stay local.