Eurozone Tourism to Have Solid Year Despite High InflationTravel And Tour World
Published on: Friday, June 10, 2022
According to a new report from Oxford Economics, tourism continues to enjoy a strong year despite high inflation.
The Oxford Economics Tourism Tracker shows overnight stays reached pre-pandemic levels in May for the first time in two years.
Online search and booking data which leads the actual activity by around four weeks shows that the positive trend is expected to continue in peak season.
Despite grim predictions during pandemic restrictions on international travel, the tourism sector continues to rebound.
The Omicron wave limited tourism during the winter, but as infections plummeted in mid-February and governments lifted restrictions, tourism embarked on an upward trend. Overnight stays were 24% below pre-pandemic levels in the EU in February, the latest data point.
Overnight stays have since resumed, reaching pre-pandemic levels in May.
The positive trend should continue in the high season. Internet searches for tourism-related queries are about four weeks ahead of actual tourism activity and indicate strong demand in June.
Despite continued pressure on real incomes from inflation, pent-up demand for travel and leisure after years of pandemic restrictions is materializing and households are ready to spend on vacation.
Although households are not giving up holidays altogether, they can opt for more economical alternatives.
Continued consumer optimism may discourage households from tapping into excess savings to offset high inflation.
The tourism craze could come at the expense of a greater shift away from consumption of goods, leading to a small net increase in total consumption. And finally, pent-up demand will fade at some point. Inflation could slow towards the end of 2022.
According to Oxford Economics, although tourism recorded a strong rebound in 2021, 2022 will be even stronger. This is partly due to the normalization of travel habits.
While tourism in European hotspots had to rely on domestic visits during the pandemic, foreign arrivals are now close to pre-pandemic averages in most European tourism-driven economies.
The lifting of restrictions and associated costs (such as mandatory testing) should encourage more international demand.
Thefts are only 12% below pre-pandemic levels in the EU. The remaining gap is due to EU sanctions against Russian airlines and retaliatory action by Russia, as well as disruptions to travel to and from Ukraine and re-routing of flights outside Russian airspace.
Air travel is seeing the strongest recovery in Portugal, Italy and Spain, all 5% below 2019 levels, while Croatia, Cyprus and Malta (all generally see a higher proportion of Russian tourists).
All of Europe’s tourism-driven economies are enjoying a strong rebound. The Oxford Economics Tracker highlights Spain and Portugal as outperformers, with overnight stays returning to 2019 levels.
Italy is in the middle, at around 10% of pre-pandemic levels in May, but on a positive uptrend. Greece is at the other end of the pack, slightly behind.