Covid-19 Impact on Italy Tourism
In order to contain the expansion of COVID-19, many necessary actions were taken all over Italy during February 2020. This limited/restricted various activities in certain areas of the country like creation of red zones at Regional and Province level in North Italy, closing off of direct flights with China, and prohibition of sport events and big gatherings.
On 11 March, 2020, the Italian Government issued a Law Decree that provided for a shutdown of several activities and many limitations to other activities across the entire Italian province. The lockdown that was to expire on 3 April, had been extended until 3 May 2020. The only activities that were permitted were essentially the ones considered for basic human necessity like food production and distribution, healthcare, pharma, and many more similar to these.
After all this happened, there were still discussions that underwent a phased reopening, after 3 May, this time, with a selective and granular approach at regional level. This was based on the type of areas, business and safety measures that were put in place by each company. Indication under preliminary guidelines stated that factories and building sites will be the first to reopen. At the start of it, people will only be allowed to move around their own regions and that too for limited reasons; personal services, bars and restaurants, and retail shops reopened between 18 May and 1 June, and schools restarted classes in September. Upon this effect, social distancing measures continued on for months.
Italy couldn’t reach a very high level of economic reactivation during the month of May 2020 as it did not meet the criteria that were considered pre-requisites for a prudent reopening. This involved the capacity of testing and tracking affected people on a massive scale (social distancing follow-up and full availability of safety tools).
It remains questionable for some sectors and activities whether the economy will rebound in the immediately-following months. This was because they were expected to keep long term limitations until a full solution for the sanitary emergency could be devised. It was within this scenario that the IMF had reviewed the forecast of Italian GDP growth coming down to –9.1% for the year 2020, the worst ever expected performance after World War II. This was followed by a projected recovery rate of +4%/5% in 2021.
Tourism Sector in Italy
The tourism sector in Italy appears to be among the ones paying the highest toll in terms of the ongoing economic downturn and sanitary emergency associated with the measures taken at national and international levels.
Around 13% of the Italian gross domestic product is represented by the tourism industry. This includes approximately 128 million total tourist arrivals and 429 million overnights. While Italy is known as one of the main European destinations worldwide, it accommodates all kinds of tourist facilities. At the same time, about 75% of all arrivals refers to hotel accommodation specifically. There is balanced revenue generated between International and domestic arrivals in Italy. Over the last ten years there has been significant growth in the international share.
Although the leisure demand of Italian tourism predominantly supports the economy, more than 50% of the demand is directed to coastal areas. In the data generated over the last few years, it is found that business arrivals are experiencing some turbulence with a share of about 15% on total overnights. About 60% of international arrivals are from mainland Europe.
The outbound travel (2019) in Italy is measured at about 24.3 million trips, which represents 34% of total trips of Italian residents. This involves an average stay of over 5 to 7 days that potentially generates 138 million visitors overnights.
In regards to the “COVID-19 restrictions” at country level, all hotels and accommodation facilities are allowed to operate (excluding the region of Lombardy). Even though this is the case, there many limitations in place regarding the business and the behavior of clientele. It does not make any sense to keep operating anymore. For example, to stop all restaurant and bar activities, public and private events, restrict travel to and from Italy, and leave the place of residence for Italians.
In today’s date, more than 95% of the hotels are closed in Italy. The only exception are hotels that are hosting certain activities such as hotels temporarily used as health centers, doctors/sanitary staff functions, and crew members. All these facts considered, there is no clarity yet about when and how the tourist business will boom again or arrive at normalcy level nationally.
The Magnitude of the COVID-19 Impact
There was a preliminary estimate that was made by Confturismo-Confcommercio (Tourism and Commerce Association), which was that there will be a cumulative loss of 30 to 45 million tourists in the accommodation facilities across Italy, for the period 1 March and 31 May. This will either translate to over 8% to 10% of the total annual overnights or €7.4 billion less revenue for the tourism sector. There was a projection of a cumulative revenue loss under the same scenario that the emergency could last until the end of September 2020. This was for accommodation, transportation, and catering services at around €40 billion. Out of this amount, €22.5 billion represents accommodation and transportation, that concurred a reduction rate of 23% in the national GDP. Forecasts have also been held by other sources that generates figures of an even higher impact of the Covid-19 crisis on the sector.
