Southern Europe struggles with the changing face of tourism

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CORFU, Greece (Reuters) – It took a utility bill to dashed hopes of Dimitris Diavatis that his Greek summer resort could return to its pre-pandemic health this year, despite bookings pouring in.

The amount was more than double what it was this time last year, when the hotel wasn’t even open. After two sluggish summers, the irony hadn’t escaped his notice: “In a good year we don’t make a profit,” he said. “It’s being eaten up by inflation.”

Greece – like the other tourism-dependent economies on the Mediterranean fringes of the eurozone – is seeing signs of a much-needed recovery in visitor numbers in 2022 after two largely lost years. As in Spain, Portugal and Italy, the sector is a big employer and contributes to government revenues at.

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But across the region, the pandemic has changed the face of tourism. Hotels have already struggled with higher heating bills and inflation, made worse by a further rise in energy prices following the Russian invasion of Ukraine.

The dislocation in job markets caused by COVID-19 has led to pervasive staff shortages, while Italian tourism officials concede that pandemic-era vacations – with its emphasis on hygiene, cleanliness and space – pose a major challenge to its aging infrastructure.

Meanwhile, a market for more modest, small-scale holidays is emerging: in Spain and Portugal, the reluctance of many tourists to travel long distances is fueling the trend towards staying in rural areas in tents, campers or mobile homes. Industry and government officials in Greece forecast receipts to reach 80-90% of the record set in 2019, when 33 million tourists brought in €18 billion in revenue, a fifth of national production.

But a peak season will bring little relief to the struggling companies that emerged from a decades-long financial crisis in 2018, only to have global travel halted by the pandemic two years later.

The problem of rising heating oil, gas and electricity prices is so acute that the president of Greece’s tourism association SETE, Yiannis Retsos, wrote to ministers in January urging them to provide financial support, saying it was year-round “objectively impossible”. hotels to cover their costs, especially after the quieter winter months.

The heavily indebted countries of southern Europe were also waiting for the European Central Bank to withdraw the stimulus that has kept their borrowing costs low.

Though the Ukraine war has left interest rate prospects uncertain, the southern rim still badly needs its tourism sector to get back to work, given the economic fallout that the conflict is likely to bring.

A day after the invasion, which Russia calls a “special operation,” Greece’s Retsos said it was too early to gauge the impact on the tourism sector.

More than a week into the conflict, there has been no noticeable increase in cancellations across the region.

Russian tourists make up a very small part of the sector in southern Europe – 2% of revenue in Greece in 2019 and about 1% of nightly hotel bookings in Portugal. Turkey – outside the European Union – is a more popular destination.

But with European gas prices already at record highs and this likely to trigger global inflation, the concern in countries like Greece is that the conflict will only worsen an already bleak outlook, further eroding guest purchasing power and suppliers’ costs will increase.

COSTS WITHOUT END

Even hotels that have been closed for the winter fear they will not be able to shoulder the extra burden, having already agreed rates with tour operators last summer, said Babbis Voulgaris, chairman of the Corfu Hoteliers Association.

Resort owner Diavatis, who also owns a year-round boutique hotel and water park complex on the island, agreed.

“It’s going to be a real crisis for us,” he said. “I’m not going to say it’s worse than the pandemic because at least we’re open. But we didn’t lose any money back then. Now we are going down the path of losing money.”

The Greek government has spent over €42 billion on pandemic support measures to keep businesses and households afloat since 2020 and about €2 billion since September to subsidize electricity bills through March. The support does not go far enough for the hoteliers.

“In the summer when the air conditioners are on, the fridges, the kitchen, everything – I don’t know when that’s going to end,” said Costas Merianos, who owns a small family-run hotel on the Ionian coast of Corfu.

Across the sea in Italy, lockdowns and energy prices have forced many hotels to close for good, said Marina Lalli, president of industry association Federturismo.

And while Lalli hoped tourism this year could get closer to 2019 levels, Italy faces the additional problem of being “a mature destination with mature hotel structures that need refreshing,” she said.

“In the post-COVID era, tourists pay even more attention to quality, they want a guarantee of cleanliness and want to feel safe.”

SOMETHING ELSE

Greece said it will open its tourism season as early as March 1 this year to meet demand, but like Italy, Spain and Portugal, the season will not start in earnest until the April Easter holidays, a litmus test before the key summer months.

Both Greece and Italy are trying to fill job shortages as the pandemic forces workers abroad for better-paying jobs or into other sectors with less uncertain prospects.

In Greece, the tourism minister even appealed to refugees from Ukraine, offering them residence and work permits to fill 50,000 job vacancies in the hospitality industry.

According to industry association Exceltur vice-president Jose Luis Zoreda, demand for Spanish holidays has been very strong this year thanks to Spain’s high vaccination rates and the easing of pandemic restrictions in its major markets of Britain and Germany.

“There is a strong cumulative travel hunger in Europe,” Zoreda said, predicting an “explosion” in tourism from Easter but also lower profit margins due to inflation and energy prices.

However, Exceltur also found that tourists were looking for a different experience. In 2021, camping rents increased by 19.2%, apartment rents by 16% and country houses by 11%. Hotel usage fell by 8%, a decline also driven by reduced business travel.

According to the Spanish Association of Caravaning Industry and Trade (ASEICAR), sales of new motorhomes and campervans increased by 34.1% on an annualized basis in January.

“The all-in-one vacation model has been abandoned,” Yescapa, an online RV and RV rental company, told Reuters.

Nico Aro, who rents out a motorhome on the island of Tenerife, says he hasn’t been able to enjoy it himself since buying it in March last year, amid repeated requests from Italy, France and Belgium. His biggest problem is that he can’t buy others because they are in high demand.

“I have benefited from the pandemic,” he said.

The appetite for ‘slow’ tourism has also grown in Portugal, where the sector played a crucial role in the recovery from the 2010 debt crisis. Tourism accounted for about 15% of GDP in 2019 but fell to 8% in 2020.

“There are more and more people looking for places with fewer people,” said Helder Martins, president of the Algarve’s main hotel association. “I don’t think they just want sun and sand again.”

The centuries-old ‘slate villages’, built from the stone of a pine-clad mountain region, are coming back to life after being abandoned over the years by young Portuguese looking for work elsewhere.

“This summer is filling up fast,” said Sonia Cortes, who owns a small five-room hotel in the slate village of Janeiro de Cima, where construction workers are rebuilding traditional houses.

“The beginning of the pandemic was really difficult for those who made a living from tourism,” she said. “(But then) those in bigger cities looked for villages like this where they could feel safe.”

The number of overnight stays in slate villages increased by 30% from 2019 to 2020-21, said Bruno Ramos, who works for a tourism promotion agency there.

But back in Greece, Merianos, the hotel owner in Corfu, is more sober about the coming months.

“I’m happy if at the end of the season I don’t owe my employees anything, I don’t owe anything to the state, I don’t owe anything to the energy supplier – even if I still have 10 euros in my wallet,” he said.

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Additional reporting by Corina Rodriguez in MADRID, Catarina Demony in JANEIRO DE CIMA, Portugal, Giselda Vagnoni in ROM and Adonis Skordilis on CORFU, Greece; writing by Karolina Tagaris; Adaptation by Toby Chopra

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