What are the prospects for tourism

tourismCapital explains: what's next for the tourism industry?

In our seriesCapital explainswe give a condensed overview of current economic topics. This time: The tourism industry in the Corona crisis - with editor Claus Hecking,the at Capital writes on EU politics, environmental issues and tourism, among other things.

Many European countries have been loosening their corona measures for weeks. That wakes them up People hope to still be able to vacation in the south. How are the chances?

At the moment things are looking pretty good: for a vacation in Europe. Many inner-European borders will likely be reopened on June 15th. These and other relaxations are of course subject to the proviso that the number of corona cases and new infections remain low. This will make it possible to go on vacation in Spain, Italy, Austria or Greece - if you want that. In contrast, I consider long-distance travel to be extremely unlikely. While the pandemic is largely leveling off in Europe, the situation is very different in other parts of the world, such as Brazil or India. The federal government will probably extend the travel warning for countries outside Europe until August 31.

The tourism businesses in Europe lack income, in Italy, for example, an industry association is calculating with 70 to 80 percent less sales this year. How hard does it hit German companies?

Of course, the German industry was also hit hard, no question about it. The entire Easter business fell away due to the lockdown, as did long weekends, for example on May 1st. But the industry has been picking up speed again since the most recent easing, the Whitsun business, for example, was already going pretty well again.

Summer business could save a lot

There are two opposing trends. On the one hand, more Germans than usual say in surveys that they don't want to go on vacation this year: because of the fear of the virus and because of the economic crisis. On the other hand, many more Germans than usual want to forego traveling abroad this year - and instead switch to the German coasts and holiday regions. It is not yet clear which of these trends is stronger. However, it is becoming apparent that the tendency to stay at home has been declining for a few weeks now. This is likely to be due to the ongoing relaxation, which convey a certain everyday normality. Overall, the tourism business will certainly not be outstanding this year. It's going to be a bad year. But the summer business could save a lot.

The Federal Association of the German Tourism Industry (BTW) calls for government aidto support the industry and its three million employees and thousands of mostly medium-sized companies. Is this a realistic requirement?

It depends on. Travel agencies have suffered massively. They often also have liquidity bottlenecks. They had to reimburse customers for their money, but for their part did not get reimbursements from airlines and hoteliers so quickly. They are also dependent on the tour operator's commissions. In turn, they often only pay when the customer starts the trip. Bookings for 2021 will therefore only generate income for travel agencies next year. Many of these companies applied - and received - short-time work for their employees as well as help from the state at the beginning of the crisis.

There are very different cases among hoteliers and accommodation owners. Those who rent holiday homes, for example, have to accept few restrictions and could do a good deal this summer, because such accommodations are likely to be popular. On the other hand, operators of youth hostels or mountain huts, for example, have massive problems, because in a dormitory or a mattress dormitory there are likely to be restrictions on keeping your distance, it is hardly conceivable that strangers sleep by the dozen close together in one room. Many guests will avoid such overnight accommodations altogether. In its economic stimulus package from the beginning of June, the federal government promised to help these operators. In economic terms, the damage in the tourism industry is not as serious for Germany as it is for the Mediterranean countries. In countries such as Italy, Spain, Greece or Croatia, millions of people live from tourism; the share of economic output is between 12 and 20 percent. In Germany it is lower.

Many people are insecure

Despite the easing, there will be some protective measures such as distance regulations, mask requirements or closed clubs. Will that put tourists off?

These measures will certainly have a deterrent effect on many people - also because they are always shown on vacation that they can become infected. After all, ideas like plexiglass boxes on the beach to separate vacationers from one another are unlikely to be put into practice. Luckily, scientific studies suggest that infection with the Sars-Cov-2 virus is not nearly as likely in the fresh air as it is in closed rooms.

Some holiday regions advertise with subsidies for airfare or hotel accommodation, and Lufthansa also advertises with the “home-coming guarantee”. Are these just good PR measures?

Many people are insecure - because they are afraid of being infected far away and getting stuck there in the event of a renewed lockdown. The offers of the organizers should take away these fears. Federal Foreign Minister Heiko Maas keeps saying that you cannot bring a quarter of a million tourists back to Germany. The risk of getting stranded is not exactly an incentive to book a flight. But when Lufthansa promises that its customers are guaranteed to come back home, it gives customers a feeling of security.

Austria advertises with extensive Sars-CoV-2 tests of employees in the catering and hotel sector. That is also a good idea: especially after the scandal in Ischgl, where tourism company employees presumably infected hundreds of German holidaymakers. These tests can instill confidence and make guests feel safe here.

Damage caused will hit the global economy

How long will it take the tourism industry to recover from the corona crisis?

That depends on several factors: Firstly, how long the pandemic will last and how the number of cases and thus the protective measures develop. Second, it depends on when there will be a vaccine or effective medication for the disease. And finally, of course, of the overall economic situation.

Tourism here in Germany is mostly national. In many places, Germans in particular go on holiday. Since many Germans are now choosing to go on holiday in Germany or at least on weekend trips, hoteliers and restaurant owners in holiday regions could perhaps do a very good deal in the summer.

It looks very different worldwide. The Italian, Spanish, French and Turkish tourism industries are facing massive problems. All of the spring business has been dropped, and whether they will do good business in the summer is still in the stars. It may look a little better in Portugal and Greece because there was less infection there and perhaps more tourists come to these countries. But even here business has been very poor so far. And don't forget: due to distance regulations, hoteliers often cannot rent out the full capacity. In metropolises such as London or New York, tourism is currently falling completely, as well as in countries such as Egypt, Brazil or India, some of which are still at an earlier stage of the pandemic.

The damage the pandemic has done to tourism will hit the global economy. Around 10 percent of global economic output or around 6,600 billion euros depend on the travel sector in normal years. That is roughly twice as much as the entire German gross domestic product. In 2020 sales will plummet dramatically. But that's not the end of days. Once there is a vaccination against COVID19, effective drugs or at least effective protective measures that prevent mass infections, tourism will come back on a broad front. Many people have an unbroken desire to travel - especially after the lockdowns.