Can the Reemergence of European Travel Save Us From The Worst of the Recession?
As we're about to enter a recession, let's explore if the reopening of borders can help save Europe from the worst possible outcome.
Europe is on the verge of an economic crisis that hasn’t been seen for almost a century if forecasts from the EU’s Commission prove correct.
The anticipated decline of economic activity looks set to reach 7.5 percent due to the widespread chaos caused by COVID-19. Figures are set to fall further should the second wave of infections occur before the pandemic subsides.
Commissioner for the Economy, Paolo Gentiloni, called the coming recession “a shock without precedent since the Great Depression".
However, The arrival of news that the reemergence of international travel could resume by as early as July 1st, sent European stocks rebounding by as much as 7 percent. Elsewhere, shares in TUI rose by as much as 35 percent, while British Airways’ owners jumped 20 percent.
As a continent that’s built on a vibrant travel and tourism industry, could the reopening of borders help to save Europe from the worst of the inevitable global recession?
Quantifying the value of European tourism.
Europe is the continent that gains the most money from tourism across the world. With over 600 million tourists that were initially forecast to arrive on the continent in 2020, it’s perhaps no surprise that Spain’s foreign minister is battling to achieve a common EU policy on cross-border movement as the summer months arrive.
Spain has announced that tourists arriving from July 1st will be free to enjoy the country without facing enforced quarantine measures. Despite being something of a risky move considering the voracity of COVID-19 and the devastation it’s caused in the national capital of Madrid, Prime Minister, Pedro Sanchez has announced his desire that Spain opens reciprocal “safe corridors” between European countries that minimise the risk of Coronavirus flare-ups.
In 2019, tourism brought over EUR 9.4 billion to Spain - amounting to over 12 percent of the nation’s GDP. The importance of establishing an avenue for tourists to enjoy the country during the peak summer months of 2020 could be significant in saving the domestic economy from turmoil and providing a platform to grow from.
The announcement that Spain was planning to salvage its lucrative tourism season was leapt upon by global airlines, with Ryanair announcing that it was intending to run flights at up to 40 percent of its usual schedule in order to transport tourists to Spain and other European destinations.
Could a galvanised tourism industry bring European investment opportunities?
The reemergence of tourism in Europe, if successful, could bring levels of investment opportunities that had seemed long dead and buried during the height of the COVID-19 crisis.
Global work-from-home schemes and furlough initiatives have left a significant number of employees worldwide with an income that they’ve been unable to spend in social scenarios. While it’s reasonable to expect some citizens to be cautious about flying in confined spaces following months of lockdowns, it’s fair to expect huge volumes of tourism should their safety be guaranteed.
Growing confidence in European tourism has led to a 24 percent boost to the share price of Melia Hotels, Spain’s largest hotel operator, while International Consolidated Airlines Group, the parent company of Iberia Air and Vueling saw price increases of 10 percent.
To assess the respective value of European tourism markets and whether they’re likely to yield respectable returns, it’s important to come to terms with the risks associated.
While a vibrant return to tourism would benefit European markets ahead of other continents, it’s important to remember the severity of Coronavirus in its spread across the popular summer tourism destinations and cities. With Spain, Italy and the UK collectively suffering from the worst of outbreaks, a dash to accommodate tourism represents a huge risk that may never be taken.
The coming months will likely see further market optimism as more European nations declare their intentions for reviving their tourism industry in some form, ready for the hugely lucrative summer months, and investors could benefit from healthy returns should hotels and airlines successfully begin to accommodate guests from July onwards.
Could tourism save Europe from a deep recession?
It’s clear that the coming months and years will send Europe into a recession of unprecedented proportions, with much of the world following suit. The full scale of devastation will be dictated by consumer spending and governmental initiatives to stage a recovery.
Nations have turned their attentions towards opening their respective doors in time for the peak tourism season. If consumers are confident enough in their safety, and there are no further outbreaks, the spending of money on summer holidays will be a significant help in softening the initial impact of significant losses in productivity across the continent.
The loss of tourism across Europe in the summer of 2020 will be a huge blow to the wealth of a continent that largely hinges on welcoming huge numbers of visitors from around the world. While it’s clear that a vibrant peak holidaying season won’t prevent a significant recession, it will go some way in boosting the GDP of hard-hit countries and restore investor confidence in an industry that was reportedly facing widespread cutbacks owing to months of inactivity due to lockdown measures.
The future is undoubtedly difficult for a lot of international markets, and talks of a return to tourism could be dangerously premature, but ultimately travel could help to cushion the impact of an unprecedented economic downturn.
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