Second cruel summer awaits Europe’s ‘Club Med’ economies

It was not only Britons eyeing Boris Johnson’s reopening plans on Monday afternoon.

Many businesses and jobs across the “Club Med” economies hinge on tourists being able to hit beaches in the Algarve, Costa Brava and Greek islands again.

Hotspots reliant on Britons filling their bars and beaches will be waiting a little longer before finding out if a second summer can be saved from Covid, however.

In the UK, a review by the Global Travel Taskforce will be presented by April 12 with the Government then making a decision on whether international travel can return in mid-May at the earliest.

Vaccines boosted the prospect of a sizzling summer rebound for eurozone tourism in 2021 but new Covid variants threaten to throw a spanner in the works.

“I’m worried about Europe in general - this was the largest region of the world in travel and tourism,” says Gloria Guevara, head of the World Travel & Tourism Council. She is concerned about the region’s lack of a joined-up strategy for travel because vaccinating the whole of Europe is “going to take some time”.

Many countries, including the UK, have beefed up their travel restrictions in recent months amid fears that more transmissible Covid variants could make vaccines less effective. The UK has introduced mandatory hotel quarantine for arrivals from its “red list” including Portugal, South Africa and South America.

The tourist trap

Jennifer McKeown, economist at Capital Economics, warns there is a growing risk international travel restrictions will “remain in place for many months” with southern Europe, Thailand and north Africa the most exposed to prolonged travel curbs.

For less exposed countries, such as the US and UK, she says the loss of spending by tourists from overseas should be at least partly offset by domestic tourism: “There are significant downside risks to our forecasts for Turkey, Spain, Greece and Italy, particularly since Europe’s peak tourist season starts in a few months’ time.”

Recoveries for the likes of Thailand and Spain could be delayed while smaller tourism-reliant economies could face even bigger effects, McKeown adds.

Tourism is estimated to directly account for 3.3pc of global GDP but it makes up a far higher share in Mediterranean hotspots.

“Given that, especially in continental Europe the vaccination campaigns are lagging well behind that of the UK, it's going to be a late start to the season,” warns Florian Hense, economist at Berenberg.

“Greece, Portugal, and Spain are heavily impacted, more than anybody else … We're not going to be back to 100pc this year obviously. It should be significantly better than last year but that's from a very low starting point.”

Before Covid, the tourism sector accounted for 12pc of Spain’s output and about a fifth in Greece, Portugal and Cyprus. Direct losses from last year’s tourism hit was 4pc of annual GDP in Greece, 2pc in Portugal and 1.4pc in Spain, according to Capital Economics.

Spain was the hardest-hit developed economy in the world last year, suffering an 11pc plunge in GDP.

The Spanish economy’s reliance on so-called social consumption - such as spending in tapas bars and on football matches - and a large Covid outbreak were large drags.

But the dependency on tourism also proved crucial, particularly on its islands. Spending by Britons, the most important market for Spain's tourism industry, tumbled 82pc to €3.1bn in 2020, according to official figures.

All eyes on 2022

Travel experts remain optimistic that vaccine rollouts can stop a second summer from being lost, however.

“I'm very confident that things are going to open up safely probably faster than we think because of the remarkable vaccine effectiveness,” says Paul Charles at travel consultancy the PC Agency.

He believes a combination of vaccine passports and testing will allow for travel to return with tourism picking up more at the end of the summer season rather than the start. “I'd expect somewhere around 60pc to 80pc of 2019 levels to be travelling … 2022 will be boom time, I would say in terms of travel.”

Sun-worshippers could still tread with caution as vaccines are rolled out. A YouGov poll found that two in five Britons were not planning to take a UK or foreign holiday until they were vaccinated.

Younger people were more willing to jet out without having a jab but less than a tenth of over-55s plan to holiday in the UK and abroad even if they have not been vaccinated. However, under the Government's plans, all adults above 50 will have been offered their first dose before international travel restrictions could be lifted.

Pent-up demand is likely to be unleashed once most of the population has been vaccinated but some destinations will have the upper hand.

“For the rest of this year short-haul Europe and domestic will be the most popular... long haul will fully recover in 2022,” says Charles. He expects 2022 to be stronger than 2019 with a rebounding economy also helping demand.

Guevara also expects 2021 to “be much better than last year” but says the difference between an “excellent summer or an OK summer” will depend on countries’ travel restrictions: “People are tired of being in lockdown and now they want to travel.”