May 13, 2020 / 2:59 PM / 17 days ago

Breakingviews - Saving the summer holiday will require creativity

A woman wearing a protective mask sunbathes at Naxos beach, usually a tourist hotspot in Sicily, as Italy begins to ease some of the restrictions of the coronavirus disease (COVID-19) lockdown, in Taormina, Italy, May 12, 2020.

MILAN (Reuters Breakingviews) - The race to save the summer holiday is on. Quarantines and travel curbs to contain the pandemic will constrain holidaymakers and hurt the $1.6 trillion tourism industry. With some creative thinking, however, the season could be partly saved.

The gradual lifting of lockdowns across Europe and Asia offer some hope of an end to what Hyatt Hotels on Tuesday called a “historic” drop in travel demand. Low-cost airline Ryanair wants to resume 40% of flights in July. Fosun-owned tour operator Club Med reopened resorts in China in April. And Marriott reported nearly 50% occupancy at U.S. beach retreats. 

The industry’s fortunes will however depend on governments lifting travel controls and 14-day quarantines for arrivals from abroad. Mindful that tourism brings in 10% of the European Union’s annual GDP, the European Commission on Wednesday proposed a gradual relaxation of border checks and safety guidelines for travellers.

Long-haul journeys will probably be out of the question: Europe and the United States will have to cope without Asian tourists. But vacationing nearer to home should be possible. 

One option, as the commission suggested, is to restart travel between EU regions that have contained the virus. Greece and Croatia, which depend on tourism for more than a fifth of economic output and have reported few Covid-19 cases, should be able to welcome tourists from areas identified as low-risk. This would be cheaper and more practical than requiring travellers to test for Covid-19. 

However, countries like Italy and Spain, which suffered high virus death rates, will hesitate to open their borders. And even if they do, fewer visitors will risk the trip. 

One option is to encourage locals to fill the gap. Italy is mulling subsidies including a 500 euro voucher to encourage lower-income families to marvel at Venetian canals or Roman monuments. Assuming half of Italy’s nearly 17 million families grab the offer, the scheme would cost the indebted nation 4 billion euros, according to Breakingviews calculations. Even that wouldn’t come close to making up for the absence of 63 million annual foreign arrivals.

If borders reopen, job insecurity and fear of contagion may still keep travellers at home. However, the lure of less-crowded beaches may yet partly save the summer holiday.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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