Italy in Crisis as Tourism Demand Collapses Amid Coronavirus Pandemic

This article is part of a series on COVID-19 focusing on how the outbreak is affecting industries.

Italy has found itself at the epicentre of the second-largest coronavirus (COVID-19) outbreak after China. As the fifth most popular tourist destination worldwide, Italy was expected to receive 65 million arrivals in 2020 and see 65 million domestic trips on top of that. However, facing a pandemic, the Italian Government has placed the whole country in lockdown until 3 April, after initially starting with the north, including the Veneto and Lombardy regions, home to Venice and Milan, respectively, where the virus outbreak has been most intense.

According to Euromonitor International’s Travel Forecast Model, the impact of an extreme epidemic on inbound arrivals could lead to a decline of eight million arrivals to Italy compared to the baseline.

Source: Euromonitor International

Country in lockdown

All but essential travel is taking place internally. Passengers are being temperature tested at railway stations, flights have been cancelled by multiple airlines, including British Airways, Ryanair, easyJet, Air France and Norwegian, while ports have been closed to stop cruise ships docking. Flag carrier, Italia, has cancelled flights from Milan Malpensa Airport and reduced capacity from Venice and Rome airports.

As with many airlines, it is trying to be more customer-centric during the crisis by providing flexibility, offering refunds for cancellations and allowing trips to be postponed. However, there is still a lot of confusion for travellers due to the different measures being taken by different public and private stakeholders.

In response to the shutdown, the UK has advised against all non-essential travel to Italy and asked people to isolate for 14 days upon return from Italy, while Australia has imposed a travel ban on Italy and stopped all non-essential travel. The European Union has closed its borders for 30 days and banned all non-essential travel from 16 March in an attempt to stem the spread of the virus which will affect air and land transportation.

A major blow for the travel industry came when the US administration imposed a travel ban from midnight on 13 March 2020 on the whole of mainland Europe travelling to the US, and shortly afterwards updated to include the UK and Ireland, with US citizens being exempt. This is going to have a massive impact, not just on travel but also on trade, as there were 200,000 flights and 46 million passengers travelling between the two regions in 2019, according to IATA.

The US is the second-largest source of inbound tourism receipts for Italy after Germany so the US travel ban is going to cause much hurt to the hundreds and thousands of SME businesses that depend on travel and tourism directly or indirectly.

Source: Euromonitor International

It could take up to three years for tourism in Italy to recover

According to Euromonitor International’s Travel Forecast Model, the impact of an extreme epidemic on inbound arrivals could lead to a drop of 11.2% from the baseline forecast for 2020, leading to a decline of eight million arrivals and USD5.7 billion receipts, with an expected recovery time of three years. Clearly, closing borders, flight cancellations and the US travel ban will take their toll on the leading source markets to Italy, i.e. Germany, France, the UK, Austria and the US, in descending order of importance in volume terms.

Italy Arrivals in an Extreme Epidemic Scenario 2020

Source: Euromonitor International – Travel Forecast Model

Popular visitor attractions and activities are suspended

Ski resorts in Italy have been closed, whilst attractions and activities that are popular with visitors have been suspended, such as museums and art galleries, with limited opening times for cafés, bars and restaurants. In 2019, 98 million visitors were recorded at culture, heritage and museum sites, while the activities and experiences including shopping by international visitors was worth USD14 billion to the local economy. Restaurants and shops that are open, such as grocery stores and chemists, are also limiting the number of people who can be there, with at least one metre between people required to avoid the spread of the disease.

Source: Euromonitor International

Unprecedented times for Italian hotel occupancy

Many of Italy’s 32,965 hotels are lying empty, with many experiencing zero % occupancy. HotelNewNow has reported that up to 80% of hotels and restaurants may close temporarily and seek crisis assistance from the Italian Government and EU. Italy is not alone. All around the world, travel and tourism businesses are calling out for government assistance to help alleviate the millions of SMEs that depend on the industry but need help in the short term with cash flow and tax relief to protect jobs over the long term.

The recovery period for overcrowded tourist hot spots

One area that may benefit from the hiatus of visitors is destinations that tend to suffer from overcrowding, such as Venice and Cinque Terre. When the shutdown is lifted, it may be a chance for destinations to focus more on their management challenges to build resilience and long-term sustainability.