Empty beaches at Benidorm, Spain, last summer. After the worst year in tourism history, all eyes are on 2021 in recouping some of those losses.
PHOTO: JON NAZCA/REUTERS
Hotels, airlines and the rest of the industry in Europe have been betting on a strong rebound in demand this summer to jump-start activity in a segment of the economy that has been utterly devastated by the coronavirus pandemic. But the slow pace of the vaccination campaign and the spread of new, more contagious Covid-19 variants across the continent has started to erode these hopes.
The travel and tourism industry has been among the biggest casualties of the pandemic and related restrictions. In 2020, international tourist arrivals to Europe declined 70% from 2019, to the lowest level in more than three decades, data from the United Nations World Tourism Organization showed. European hotels suffered immensely from the collapse in overseas arrivals, reporting all-time low occupancy rates as well as a more than 60% plunge in revenue per room in 2020, according to hospitality research group STR.
Meanwhile, many airlines are in survival mode and have only a few months of liquidity left after global air traffic plunged 66% in 2020, according to the International Air Transport Association. In 2021, Europe is expected to be the hardest-hit region in terms of airline losses, estimated at $11.9 billion, IATA forecasts.
In the week ended Feb. 14, the total number of flights in Europe was 74% lower than in the same period of 2019, much worse than the 38% drop in the U.S. and the 58% fall in Asia-Pacific, Citi said.
The onset of winter saw infections rise rapidly, prompting many European countries to close their borders or further tighten travel restrictions. This reached a new peak in mid-January with almost 90% of flight routes across the European Union facing the wrath of restrictions, UBS said. At the beginning of February, this had fallen to 78%, according to the bank’s estimates.
While UBS expects this to continue to weigh heavily on airline traffic and hotel occupancy rates, it said this could also be an early indication of restrictions loosening. This “could then lead to volume recovery that would bode well for summer bookings,” it said.
“The European Commission should step up and say when border restrictions are likely to be lifted, and under what conditions,” European Tourism Association Chief Executive Tom Jenkins told The Wall Street Journal. For Mr. Jenkins, the main problem isn’t the delay in the rollout of vaccinations but the lack of confidence among tourists generated by the absence of a clear horizon for the reopening of borders.
The reopening of borders is crucial for summer 2021. Positive news on Covid-19 vaccine developments last November spurred hopes of saving the tourism season, and the base case–premised on priority groups being vaccinated at the start of 2021–envisaged that European governments could lift restrictions as early as the end of April.
Furthermore, many travelers rebooked cancelled 2020 trips for dates in the current year, so the tourism industry has been eagerly eyeing this opportunity for recovery once leisure travel is largely authorized again. A survey conducted by the European Tourism Association two weeks ago confirmed that expectations for the summer are high, with business owners optimistic that the season will be much better this year than the last.
“2020 was a terrible year for our sector, if restrictions continued over the summer of 2021, many companies just wouldn’t survive unless supported,” Mr. Jenkins warned. A bounceback in tourism is especially vital to the recovery of southern European economies due to their high dependence on this hard-hit sector. Travel and tourism are a chunky source of revenue and employment for these economies, accounting for a relatively large share of their gross domestic product: 14% in Spain, 13% in Italy and 21% in Greece, according to the World Travel and Tourism Council.
If the distribution of the Covid-19 vaccine was sufficiently advanced by May or June to allow international travel, a swift return to normality in the tourism sector would be possible, transforming the short-term economic outlook, Capital Economics economist Jessica Hinds told The Wall Street Journal back in November.
But almost three months after the coordinated start of the vaccination campaign in Europe, summer doesn’t look as bright. While Ms. Hinds now views it “plausible that visitor numbers and spending are largely back to 2019 levels by the peak months of July and August,” and could even jump higher in the autumn as tourists take holidays missed earlier in the year and in 2020, she cautions that the downside risks to this upbeat outlook are growing almost daily.
Other analysts share her view. “Without a meaningful acceleration in vaccinations, we worry that European governments will not have enough conviction to remove penalizing restrictions on air travel in time for summer travel,” Bernstein said in early February. The measures put in place by most governments are making air travel extremely difficult and the pace of vaccinations will be key to opening the sky to travelers again, the brokerage said.
A ray of hope came on Monday after U.K. Prime Minister Boris Johnson detailed a roadmap out of the lockdown for England and said international travel from there could potentially restart from May 17. European travel stocks traded higher Tuesday on optimism over the economy reopening, with Anglo-German tour operator TUI AG and British low-cost airline EasyJet reporting a surge in holiday bookings following Mr. Johnson’s announcement.
Write to Maria Martinez at maria.martinez@wsj.com