Tourism: can Europe save its summer?

Blanca del Rey sits in front of the stage where she danced for John Lennon until dawn, in the flamenco venue where her late husband once stopped Salvador Dalí from entering with his pet ocelot.

Now all is dark as she waits for the tourists, for months barred by the pandemic, to return. Ms del Rey’s hopes of reviving her flamenco tablao — one of the most illustrious in Madrid — are entwined with the fate of European tourism, an €800bn industry in the fight of its life: to retrieve as much business as it can from the rest of the year. 

“The only way we can reopen is when tourism returns to its normal levels,” says Ms del Rey’s son Armando, surveying the tiny stage, normally packed with musicians and dancers twice a night. “We have more than 70 staff and we mount the best productions we can. We [will] need close to 100 per cent occupancy, or we won’t make it.”

Flamenco artist Blanca del Rey’s hopes of reviving her venue in Madrid are entwined with the fate of European tourism © Pablo Cuadra/Getty

“We live thanks to foreign tourism,” says a masked Ms del Rey. “People often don’t value the beauty around them, so we need people from outside who can look at us with virgin eyes.”

Flamenco is a fundamental part of Spanish culture but visitors from outside Spain account for 95 per cent of receipts in the country’s estimated 100 tablaos. And in the Madrid of early summer 2020 there are almost no foreign tourists.

Whether, when and how they return is a massive issue for Madrid, for Spain and for Europe, the world’s number one tourist destination

Chart showing how European tourism has ground to a halt

Tourism accounts for 12 per cent of gross domestic product in Spain — perhaps the rich nation worst hit by the economic effects of the coronavirus crisis, which pushed the death rates up to among the highest in Europe and threatens to leave a fifth of people out of work until the end of 2021. As much as 10 per cent of European economic activity depends on tourism so the complete loss of this year’s season is a price no government can easily pay.

There are two overarching questions: how much of the summer season can be salvaged, and will efforts to rescue it undermine the push to keep the pandemic under control? As they open up countries may risk importing coronavirus cases from states with much higher levels of incidence.

“This is not a normal year. All we’re doing is looking at mitigation of losses,” says Tom Jenkins, chief executive of the European Tourism Association, the trade body for travel companies across Europe. “For the tourism industry itself, it’s worth risking a second wave just to get some revenues.”

In Venice, authorities are encouraging tourists to stay for longer and engage in ‘slow tourism’ . . . © Andrea Pattaro/AFP/Getty
. . . as lockdown restrictions are gradually eased and foreign tourists begin to trickle back © Andrea Pattaro/AFP/Getty

Rush to reopen

Governments and companies strongly reject the idea that they are risking people’s lives. But the industry is hurting badly, having already lost half of the peak season after coronavirus lockdowns wiped out the Easter and May holidays.

Countries are now rushing to reopen. On June 21, the day its harsh lockdown came to an end, Spain scrapped restrictions for the Schengen free travel zone and the UK. On Tuesday, the EU agreed a list of 15 countries that it recommends exempting from its coronavirus entry ban. The US was not included and Chinese visitors will only be allowed in once there is reciprocal access for Europeans. The UK is set to unveil its own proposals on Thursday for “air corridors” — routes to and from Britain for which 14-day quarantine rules will not apply.

All these moves are designed to bring tourism back from the dead and keep alive companies ranging from Corral de la Morería, Ms Del Rey’s Michelin-starred flamenco venue, to airlines with incomes that normally reach into the hundreds of millions of euros.

Measuring international travel restrictions. Oxford Covid-19 government response stringency index for international travel with selected European countries

Many groups are in desperate straits. Tui, Europe’s largest tour operator, has had to take on a €1.8bn loan from the German government to make it through the crisis. Smaller businesses such as the UK-based Specialist Leisure Group, which ran bus and river tours across Europe, have already gone into administration.

The collapse in tourism has also deepened the woes of the aviation sector, now enduring the worst year in its century-long existence. In April, global air travel plummeted 95 per cent from 2019 levels. According to Iata, an industry trade body, every day this year airlines have lost an average of $230m, taking the industry towards an expected year end loss of more than $80bn. 

Carriers such as Ryanair, easyJet and British Airways are cutting thousands of jobs, the first steps in a restructuring that experts say is likely to lead to smaller airlines, serving fewer and less frequent routes. 

EasyJet plans to fly only 30% of its normal capacity until September . . .  © Anthony Devlin/Bloomberg
. . . even as tour operators report jumps in bookings for locations such as Majorca © Jaime Reina/AFP/Getty

Hence the urgency to reopen for business, with countries inviting tourists back almost as soon as internal travel restrictions came to an end. But governments are acutely aware of the challenge — and of the risks.

“This season is going to be very difficult for Spain and all the tourist [destination] countries,” says Isabel María Oliver, the Spanish state secretary for tourism. Acknowledging that long-haul tourists are unlikely to come in numbers this summer, she declines to give a target for this year — in 2019 the country welcomed 84m visitors. “Our goal is to welcome foreign and domestic tourists safely — and for it to be safe for residents and industry workers as well.”

Charts shows % of GDP* (2019) showing travel and tourism account for large share of some European economies

Safety is the priority

Around the Mediterranean coastline, hotels have doubled down on cleaning regimes that involve medical grade hygiene products and wiping areas such as lift buttons, reception desks and door handles, in some cases every two hours.

In Venice, authorities have been encouraging tourists to stay for longer and engage in “slow tourism”: rather than a frenetic tour around the city’s major sites, they are asking visitors to take more time and explore lesser known areas. 

Greek hotels now include plexiglas barriers at reception desks, sunloungers placed at least 3m apart on the beach, and a ban on breakfast buffets. “Safety is our overriding priority, we have to make sure tourists feel secure wherever they are in Greece so they can relax and enjoy themselves,” says Haris Theocharis, the country’s tourism minister. “This is a bigger concern for us than projections of numbers of arrivals.”

Indeed the early indications are that, although people’s appetite for travel is returning, it remains far below the levels of last year.

On Santorini, normally Greece’s most-visited island, 50 per cent of hotels were still closed last Sunday. Direct flights from Germany are due to start on Wednesday. Bookings for July are about 80 per cent lower than last year, mainly due to the EU’s existing ban on travellers from the US, China and Russia, the island’s three most important markets, according to Antonis Iliopoulos, president of the Santorini hoteliers’ association.

On Santorini, normally Greece’s most-visited island, 50% of hotels still remain closed © Aris Messinis/AFP/Getty

“This season isn’t about making a profit,” he adds, “it’s about protecting our brand.”

Some in the industry remain relatively optimistic. “There is so much demand, [that] prices explode,” says Friedrich Joussen, Tui’s chief executive, who points to jumps in bookings for locations such as Majorca and Portugal, which staged limited reopenings in June. “We started with [booking] vacations overland in Germany at the beginning of June around the islands in the North Sea and what we saw was more or less 24 hours later we were booked.”

He acknowledges that Tui, which reported earnings of €893m on turnover of €18.9bn last year, will achieve around half of what it makes in a normal year. Usually the group’s summer offerings are 70 per cent booked at this time of year, but at present it is not even half that figure. 

An existing EU ban blocks visitors from the US, China and Russia . . . © Aris Messinis/AFP/Getty
. . . three of Greece’s most important summer tourist markets © Aris Messinis/AFP/Getty

Many airlines remain cautious. Ryanair plans to operate about 40 per cent of its flight capacity in July, before increasing it to about 60 to 70 per cent by September. EasyJet, Europe’s other leading low-cost carrier, plans to fly about 30 per cent of its normal capacity until September. It believes passenger demand will not return to 2019 levels until at least 2023. 

Prices are also being crunched. The UK-based price comparison website TravelSupermarket has reported falls of between 22 and 37 per cent for southern European package holidays since the lockdown began, while noting a 52 per cent increase in bookings for such vacations last week after the government outlined plans to ease the lockdown, compared to two weeks earlier. 

Chart shows occupation rate of open hotels, rolling seven-day average (%) showing Europe’s tourism industry lags behind other regions

Reimporting the virus

Many countries have launched drives to encourage people to holiday at home. But in Mediterranean states such as Italy, Spain and France, such domestic tourism can hardly substitute for international demand and will rarely include the big-ticket items, such as high-end hotels, beloved by some foreigners. With the US absent from the EU’s list of approved countries for travel, the American tourists who help bankroll Madrid’s flamenco tablaos are, for now, out of the picture.

Axel Hefer, chief executive of the online travel company Trivago, says Germany — which has not suffered as much as other countries from the pandemic — is now Europe’s biggest driver of tourist demand. But among German consumers car holidays are more popular than any involving a flight.

Having been told to stay at home for more than three months many potential tourists are deterred by the idea of flying out of their own countries and sharing facilities with others when there is still no coronavirus vaccine or treatment.

“You have to accept an element of risk, coming to Greece at a time like this,” says Michael Schmidt, a software engineer from Austria strolling through Plaka, an Athens neighbourhood of shops and cafés. “But I’m surprised — given its good record on keeping down the virus — that so few people [both locals and tourists] are wearing masks and so many are not observing social distancing.”

Some hotels, such as the Catalonia Ronda in southern Spain, have reopened . . . © Jon Nazca/Reuters
. . . with guests and staff required to respect new safety measures to prevent further outbreaks of the virus © Jon Nazca/Reuters

Despite fears over reimporting the virus the Spanish government has decided unilaterally to waive restrictions for travellers from the UK, even though Spain reports far fewer infections — below 300 a day, compared with more than 800 in Britain.

Greece faces an even starker dilemma: it has contained the spread of coronavirus so successfully that fewer than 20 cases in total have been reported on the Aegean Islands, the country’s main hub for tourism. To assuage islanders’ fears that tourists infected with the virus will cause outbreaks in places that have so far escaped Covid-19, the government has rented hotels to serve as quarantine centres and hired 200 extra doctors.

Nikos Hardalias, deputy minister for civil protection, says a network of fast coastguard boats and a helicopter service will be able to ferry Covid-19 patients to an intensive care unit from any island in less than three hours. In a sign of possible concerns, however, Greece on Monday delayed the opening up of tourist flights from the UK until mid-July.

The resurgence of the pandemic in the US highlights the risk of returning to economic activity too quickly.

In cities with big-ticket attractions such as Paris, domestic tourism cannot substitute international demand © Kiran Ridley/Getty

In a recent interview, Salvador Illa, Spain’s health minister, said Madrid hoped to use improved testing and targeted restrictions to deal with inevitable new outbreaks, but acknowledged he could not rule out another general shutdown.

That would be the nightmare scenario for the European tourism sector and the region as a whole. Many international forecasts list two sets of projections for this year, and next, a record contraction if there is no second wave; an even grimmer outlook if there is.

“More than the fear that the tourists might have,” says Armando del Rey at Corral de Morería, “it is the uncertainty that makes things so hard to manage”.

From this month, the EU will allow non-essential travel from a ‘safe list’ of 15 countries . . .  © Guglielmo Mangiapane/Reuters
. . . with some airports introducing on-spot Covid-19 testing for travellers © Thomas Lohnes/Getty

Even as pressure builds to open up again, governments and companies are conscious that health risks taken for the sake of business could sink the economy and, most of all, the tourism sector. It is significant that EU member states have backed only the relatively limited list of 15 countries for resumed travel, despite the hit that represents for the tourist industry.

Some industry figures consider that ultimately the sector may be able to pull in half of 2019’s receipts this year, but that still implies a loss of hundreds of billions of euros across Europe. That’s the view of José Luis Yzuel, head of Hostelería de España, an organisation which represents more than 270,000 bars and restaurants. He thinks there may be a limited return to Spain’s coasts and islands but not much more than that. 

“This season is gone,” Mr Yzuel says. “If the tourism industry can recover 50 per cent of last year’s sales that will be a triumph — but then if you compare something with complete annihilation, anything looks good.”