DBRS Morningstar released a commentary assessing the impact of the Coronavirus Disease (COVID-19) on the performance of the travel and tourism sector in Southern European countries during the Summer season in the northern hemisphere.
With the holiday season in Europe behind us, the recent data releases confirm that the travel and tourism sector in Southern European countries suffered heavy losses due to the effects of the pandemic. This sheds some light on our expectations for the performance of the travel and tourism sector for the rest of the year and in 2021. We expect that the pace of the recovery in travel and tourism in 2021 will depend on the speed with which mass vaccination is achieved globally as well as a variety of factors related to the seasonality of tourism demand, the share of domestic and international tourism, the reason for travel, and the mode of travel.
While the start of the season allowed for a short-lived pick-up in international tourist flows, the resurgence of contagion across Europe halted the recovery. The collapse in international tourist arrivals was wide-spread for the Southern European countries. However, data for Italy indicate a more resilient performance for the sector, with a milder drop in international arrivals compared to other Southern European countries. This could reflect Italy’s good land connections and proximity to some key central European tourist markets such as Germany, Switzerland, Austria, and France, combined with the good epidemiological situation during the Summer. Given these conditions, Italy might have also benefitted from tourist diversion (i.e., tourists that might otherwise have visited other countries).
“While the epidemiological situation remains largely unresolved, the travel and tourism sector in countries with relatively large domestic markets, less reliance on air transport, and better land connectivity might hold-up better”, says Javier Rouillet, Vice President at DBRS Morningstar. While pre-pandemic levels remain unlikely for the time being, progress on the COVID-19 vaccines could support the recovery in the travel and tourism sector. “The vaccine development is providing a silver lining for the sector, as the improvement in the pandemic situation could potentially coincide with strong tourism demand peaks in Summer months for Southern Europe”, says Spyridoula Tzima, Assistant Vice President at DBRS Morningstar.
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