María Antonia Llull’s Mallorca-based hotel chain is losing at least € 1.5 million a month, but she hopes this summer will be her rescue.
The coronavirus pandemic has closed nearly all of its 30 hotels for months and the group, Hipotels, has put almost all of its 3,000 staff on leave. Only the Cancún branch – the only hotel outside Spain – is open.
Llull isn’t alone: Southern Europe’s tourism industry – much of the region’s economy – has been left in the dark as the slow roll-out of vaccinations and the latest increase in cases make a second lost summer increasingly likely.
Easter can bring some relief to Llull as it brings plane loads of German tourists to Mallorca, but it’s the summer season that will be crucial.
“The Easter season is like coming up for air before the water sucks you back in,” said Llull, who hopes to open eight hotels in Mallorca before the holiday. “What we need is the summer, because with another summer lost, many companies will disappear.”
Last year’s decline in tourism has devastated the Spanish economy. Foreign tourist revenues during the peak season from July to September last year were 78 percent lower than in the same three months in 2019, according to Bank of Spain estimates released this week.
In normal times, tourism contributes about 12 percent of Spain’s gross domestic product, so the collapse contributed to an 11 percent contraction in economic output last year – deeper than any other EU country.
Although Spain is the center of the crisis, the sector accounts for 11 percent of Southern European economic output and one in six jobs in Southern European countries, including France.
Already hit harder than those in the north by the effects of the pandemic, these countries had higher debt, limiting their capacity to support troubled businesses and jobs, said Nadia Gharbi, senior economist at Pictet Wealth Management.
“The risk of another lost summer will only exacerbate these problems and put further pressure on policy,” she warned.
Jacob Nell, Morgan Stanley’s chief of European economics, said vaccination programs were not progressing quickly enough: [European countries] have been so slow with vaccinations that they lose another summer, threatening southern Europe to continue [economic] disconnection from the north. “
The Bank of Spain’s baseline scenario is that the economy will grow 6 percent this year, aided by foreign tourist revenues reaching 56 percent of their levels in 2019. While the central bank said that tourism and the economy could significantly exceed these expectations, the central bank also proposed a “severe scenario” in which Spain manages only 3 percent growth and tourism slows even below 2020, to just 14 percent of the country. level of 2019.
There is early evidence that the recovery will be slow. Although Lufthansa’s flights from Germany to Mallorca are almost fully booked at Easter, it expects total bookings to reach only 40 to 50 percent of pre-pandemic levels this year.
Other European countries are also bracing for continued economic damage. According to the Greek Tourism Confederation, revenue from tourism, which supports one in five Greek jobs, fell 77 percent last year.
This year has turned out to be just as grim so far: Greek hotel bookings fell 74 percent year-on-year in February and Internet searches for rooms dropped 63 percent, according to data released this week. Harry Theoharis, the Greek Tourism Minister, recently expressed optimism for “a better year than last year”, but admitted “bookings are depressing”.
According to Allianz analysts, sales in the European independent hotel sector halved last year and will recover only a quarter of that decline this summer.
Goldman Sachs predicts a sharp revival in tourism, adding 1.4 percent to Spain’s total output and 1 percent to Greek production this year – but that assumes most of the restrictions lifted in June. It warned of a downward scenario with restrictions throughout the summer, slowing growth in southern Europe by 1.3 percent.
The key is vaccination, which will help stop infections in both source and destination countries and increase governments’ willingness to let people travel.
The EU aims to vaccinate 70 percent of adults by the end of the summer, although the tourism industry was alarmed by the comment by European Commission President Ursula von der Leyen that the summer will last until September 21. By then the main holiday period will be all but over. .
Alan French, CEO of Thomas Cook, said that while he had “no doubt that the holiday is likely to take place this summer, the time and criteria they will have is what we are speculating about”.
“We need to inspire confidence by the start of the summer to get the season back,” said José Luis Zoreda, vice president of Exceltur, a Spanish tourism industry group. “If that confidence doesn’t return until October, that might be okay from a health perspective, but it’s a disaster for our industry. There are companies that have closed since October 2019. Which industry can survive two years without income? “
At the moment, however, the industry is facing more stumbling blocks. Germany ordered Lufthansa to stop adding flights at Easter and is considering a temporary ban on holidays abroad after alarms over the number of Germans flying to the Balearic Islands.
Britain – Spain’s biggest source of tourists – is increasingly restricting travel abroad. Most UK travel companies expect it to reuse last year’s traffic light system, which designated the destinations ‘green’ or ‘red’, depending on the number of infections.
And Spanish authorities are facing domestic criticism for trying to welcome EU tourists while imposing internal travel restrictions on Spanish residents.
“Most importantly, the industry needs to get back on track and be sustainable,” says Zoreda. “Now if we need more restrictions to do that, okay, but what we’re asking is for vaccinations to be speeded up.”
Meanwhile, the Spanish and Greek governments have reached out to the UK in an attempt to negotiate bilateral travel deals if an EU-wide vaccination document is not put in place in time.
“We must do everything we can to save the summer season,” said Llull. “If I only got half of the sales we had in 2019, I would say, ‘Where do I sign?’ ”