Pent-up demand promises record tourist season for southern EuropeThe shift towards holidays becoming a greater consumer priority comes in spite of travel industry strikes and extreme weather events.
After three years of pandemic travel restrictions and rocketing energy costs, tourism is back with a vengeance to boost the economies of southern Europe as sun-seekers make up for lost time.
Early bookings suggest Italy, Spain, Greece, and Portugal could receive record tourism revenues this year, helping replenish state coffers depleted by rising debt interest payments and the cost-of-living crisis.
What's more, there appears to be growing demand for the luxury end of the spectrum.
"Today in Italy, we have this boom in terms of tourism that is unbelievable," Carlo Messina, CEO of Italy's biggest bank Intesa Sanpaolo, told investment analysts in a call.
"It is impossible to find a place in a five-star hotel if you want to make a vacation."
Tourism is vital to southern Europe's economies.
The travel industry was worth €100 billion ($110.08 billion) or 6.2% of Italian output in 2019 before the COVID-19 pandemic brought the sector to its knees. Add the wider income generated by tourist-related business and the figure more than doubles to 13%.
In Greece, tourism accounts for no less than one-fifth of gross domestic product.
The number of foreign tourists visiting Italy was up 70.5% in the first two months of the year compared with the same period in 2022, according to the national statistics agency. It added that if the trend continues, Italy could match or surpass pre-pandemic levels.
In April, Greek Tourism Minister Vassilis Kikilias said summer bookings already pointed to a new record.
Portugal registered more than 2.8 million foreign visitors from January to March, the best first quarter on record, according to official data.
In Spain, the flow of international tourists in the first quarter increased by 41.2% over the same period in 2022 and exceeded 13.7 million visitors, albeit still 3.5% below the same quarter in 2019.
The tourist industry is already benefiting. Airlines such as Lufthansa, easyJet, and Ryanair have confirmed robust summer bookings while Ryanair, in anticipation of strong demand, has just ordered 150 new 737 Max-10s and optioned another 150.
German travel firm TUI expects strong revenue and higher profit in 2023. Italian travel and tourism company Alpitour forecasts turnover 30% higher this year.
"We already see a very strong demand to book Christmas holidays in 2023. We do 30 to 35,000 quotations a day, numbers never seen before," Alpitour CEO Gabriele Burgio said.
Against a background of stubbornly high inflation and interest rate hikes from the European Central Bank, the tourism boom could not come at a better time.
While manufacturers are seeing demand decline, in Italy and Spain the service sectors grew, respectively, for the fourth and sixth months running in April, driven also by tourism, HCOB Global's Purchasing Managers' Index (PMI) showed.
Fitch cited the "strong rebound" in tourism last week as it maintained its credit rating on Italy.
Portugal's central bank meanwhile raised its 2023 economic growth forecast to 1.8% from 1.5% mainly due to expected "favourable developments" in the tourism sector and despite a near-stagnation in private consumption expected this year.
The Bank of Greece predicts the local economy will grow by 2.2% in 2023 — far above the euro area average — backed by the "favourable" tourism outlook.
Making up for lost time
The boost in tourism comes despite headwinds ranging from strikes that have disrupted travel to concern about extreme weather events, such as last year's heatwave in southwest Europe and the current flooding in parts of Italy.
"Travel is the only discretionary expense people are prepared to maintain or increase," easyJet CEO Johan Lundgren said last month.
Consumers who had little choice but to buy goods rather than services during the pandemic are now keen to catch up on lost time, some in the industry say.
"There seems to be a significant shift in consumer behaviour, with holidays taking centre stage in consumption priorities, surpassing traditional purchases such as cars, mobile phones, and watches," Alpitour's Burgio told a hotel trade event in Milan.
As China lifts restrictions on travel, about 6 million Chinese tourists are expected to head to Europe by the end of the year, according to projections by the China Outbound Tourism Research Institute released by the European Travel Commission.
Moreover, Italian tourist agency ENIT is confident that a new, younger profile of Chinese tourist is emerging who wants "in-depth travel experiences" that go beyond the quick tour of urban cultural centres.
"The Chinese are now looking at previously overlooked destinations such as Sicily, the Cinque Terre [Italian Riviera], and seaside destinations that were previously neglected," it said.