Tourism is 10% of GDP in France, 13% in Italy, 15% in Spain. And Now it’s in Free Fall

Tourism is 10% of GDP in France, 13% in Italy, 15% in Spain. And Now it’s in Free Fall

“If the situation of generalized panic continues, thousands of businesses, especially small ones, will first enter a liquidity crisis, then close their doors.”

By Nick Corbishley, for WOLF STREET:

This is all happening just weeks before high season is about to get under way. But with millions and millions of tourists voting with their feet by staying at home, one of Europe’s most important and (until four weeks ago) fastest growing industries is taking a hammering.

The world right now is full of places that should be teeming with people but are not, including many iconic tourist landmarks and attractions. In Italy, home to Europe’s third biggest tourism industry, large parts of the country are on lock down after being hit by the biggest outbreak of the COVID-19 outside of Asia. Many of the most famous tourist attractions have been closed and big international events, including the Venice Carnival, have been cancelled.

The impact on the country’s tourism industry has been brutal, prompting panicked representatives to warn that a “generalized panic” over coronavirus could “sink” the sector. “There is a risk that Italy will drop off the international tourism map altogether,” said Carlo Sangalli, president of Milan’s Chamber of Commerce. “The wave of contagions over the past week is causing huge financial losses that will be difficult to recoup.”

Even by late February, when the outbreak was still in its infancy, €200 million worth of travel and accommodation bookings in March had already been cancelled, reported Italian tourism association Assoturismo Confesercenti. That figure, based on data provided by Italy’s hotels, B&Bs and travel agencies, doesn’t include lost tourist revenue for transport, tour guides, bars, restaurants and shops. Bookings are also “sharply down” until June.

In the three most affected regions — Lombardy, Veneto and Emilia-Romagna (in descending order) — cancellation rates on bookings of hotels, flights and apartments have reached as high as 90%. These three regions also happen to be the main motor of Italy’s economy, accounting for 40% of Italy’s GDP. The country’s financial capital (and capital of Lombardy), Milan, is like a ghost town, with many of its most important landmarks, including the Teatro alla Scala opera house, closed to visitors.

“In recent history Italian tourism has never experienced a crisis like this,” Vittorio Messina, National President of Assoturismo, stated in a press release. “It is the darkest moment. Not even 9/11 affected it so heavily.”

The industry group Confturismo- Confcomercio has forecast that the sector, which accounts for 13% of Italian GDP, will suffer total losses of €7.4 billion in the second quarter. It’s the small businesses that are most at risk, warns Messina: “If the situation of generalized panic continues, thousands of businesses, especially small ones, will first enter a liquidity crisis, then close their doors. We urgently need to work towards normalization.”

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.