This week’s Europe webinar by STR focused on projections for this year and beyond, in which joined David Goodger, Managing Director, Europe and Middle East – Tourism Economics.
The economic impact and likely recovery
The immediate economic impact in H1 2020 will be worse than at any point during the global financial crisis, but a rapid rebound is expected into Q3 and beyond—partly as a result of government support measures for industries.
As the image below shows, the rebound from the COVID-19 pandemic is expected to follow the path of historical short recessions, and we should see rapid growth once restrictions are lifted and economic activity returns. However, the damage to average incomes, wealth and employment provides reasons for caution—despite the support measures mentioned.
Domestic tourism expected to recover ahead of international
Understandably, Europe is projected to experience declines in international arrivals from all global regions in 2020 and produce a 39% drop in overall inbound arrivals. Domestic tourism is typically less volatile during downturns and expected to recover ahead of international spend from 2020-25. As the 2019 data below shows, many European markets receive a high proportion of tourism spend from domestic travellers. Given the travel restrictions that are currently and could still be in place as the year progresses, international trips could be replaced by domestic holidays in the short term.
The impact of COVID-19 on events and host markets; including Tokyo and the Summer Olympics
So far we’ve seen almost 400 events cancelled or postponed with the majority falling into the latter category. The Tokyo 2020 Summer Olympics is one such event, and zoning in on the forecast highlights the impact of moving events on markets. Tokyo has transitioned from projected growth to expected declines in the space of just four months.
Recovery forecast for European markets
China and Asia Pacific (excluding China) are projected to perform better than European forecast markets and the total U.S., in terms of RevPAR declines. This is despite China being the epicenter of the COVID-19 outbreak and the Asia Pacific region producing significant declines. Lessons learned during the SARS recovery and the reliance on domestic tourism are key reasons for this, hence the expectation that China and the region as a whole will recover quicker.
In terms of European recovery, RevPAR is forecasted to decrease by almost 40% in 2020 before 2021 growth that will come from a low base. A return to 2019 levels until 2022 is not to be expected.
Europe’s most-affected forecast markets
Understandably, markets in Spain and Italy are expected to be among the most-affected markets, given the impact of COVID-19 in both countries. Barcelona’s reliance on international travel makes it the most affected market in our March 2020 Forecast, while Madrid and Italian markets have a higher percentage of domestic demand and, therefore, expect less significant declines.
