How strong is Spain’s tourism industry?
Spanish tourism has made a strong start to 2023. International tourist arrivals have returned to the levels of 2019 while records have been broken by international tourism expenditure. Domestic tourism has been growing since 2022 but with less momentum due to a combination of reduced purchasing power and greater outbound travel. Although tourism is currently one of the drivers of the Spanish economy, several headwinds are likely to appear in the coming quarters. The complicated macroeconomic outlook in the countries of origin of inbound tourists, the reactivation of more distant destinations for European and Spanish tourists, and competition from more economical destinations point to a slowdown in Spain’s tourism industry as we approach 2024.
In the first half of 2023, tourism strengthened its position as one of the drivers of the Spanish economy, beating the records set in 2019. Tourism has completed its recovery after a total standstill in 2020, insufficient improvement in 2021 and a revival in 2022. The activity indicators produced by the National Statistics Office show that, in 2023, real tourism demand (excluding the effect of prices) exceeded that of 2019, supported by a strong recovery in international tourism. Overnight stays in hotel and non-hotel accommodation in the first four months of 2023 exceeded the number recorded for the same period in 2019 by 2.2%. This excellent figure is further consolidated by the strength of domestic tourism, which was 7.3% above its 2019 figure, and by a strong recovery in international tourism, just 0.5% below its 2019 level.
Tourism demand indicators
Change over the same month in 2019
Expenditure by international and domestic tourists is performing even better. Significant price increases in 2022 and 2023 have pushed up tourism expenditure to record levels in 2023,1 posting figures 12% higher than in 2019 in the first five months of 2023. The main reason for this increase in tourism expenditure is the rise in prices which, according to CPI data for the services most closely linked to tourism, in May were 15% higher than the 2019 prices. The rise in accommodation prices has been particularly steep, accumulating an increase of 24% over the same period.
The trends in international tourist arrivals are considerably heterogeneous, however. There has been a spectacular recovery in tourism from the Americas which, in May 2023, was 32% above its May 2019 level, while a more modest recovery was recorded in the more traditional markets. In particular, tourism from the United Kingdom is showing signs of weakness and was still 7.4% below its 2019 level in the first five months of 2023.
- 1. See the article «The factors that lie behind tourism’s price rises» in this Report for more details on the increases.
Tourism from the United Kingdom is showing signs of weakness and was still 7.4% below its 2019 level in the first five months of 2023
The indicators regarding people’s interest in travelling to Spain reflect the complexity of the international macroeconomic situation at the moment. In June, interest in travelling to Spain fell sharply in the United Kingdom to 12.5% below its benchmark level. The country’s poor macroeconomic performance, sharply rising interest rates and the weakness of the pound sterling have all eroded the disposable income of the British people and, with it, the ability of households to spend on tourism. In addition, data from other competing destinations such as Turkey, Greece and Portugal suggest they’re becoming more competitive in attracting British demand, a factor that’s acting as an additional brake.
In contrast, EU tourists’ interest in travelling to Spain is holding up remarkably well and, in the first five months of 2023, was 4.6% above its benchmark. When we break down these EU figures by country, the Italians and Dutch appear to be particularly interested in travelling to Spain and are 3.3% and 15.2% above their benchmark rates, respectively. However, the indicators for France and especially Germany look weaker, reflecting a relatively more fragile macroeconomic situation.
Looking at tourists from the US, we can see that interest in travelling to Spain is still moving back towards its pre-pandemic level, suggesting very good arrival figures for the summer. The interest indicator also points to strong growth in Japanese interest in travelling to Spain, standing at 22.6% above its benchmark level. These data are consistent with the significant rise in tourism from the Americas and Asia observed in recent months.
Despite the strength of Spain’s tourism industry observed in the first few months of 2023, and which we expect to continue throughout the summer, there are some headwinds gathering on the horizon that will slow down this growth in tourism later on in the year and particularly in 2024.
The first factor of note is the competition from markets with lower prices than Spain. Using Eurocontrol data, we’ve observed a considerable rise in flights to Morocco and Turkey, two destinations with very competitive prices. The favourable trend in these competitors’ volumes of tourism is particularly understandable given Europe’s declining incomes in real terms in 2022 and 2023 due to inflation. In other words, falling European wages are a factor that will limit tourism growth in Spain in late 2023 and 2024. We should remember that, before the pandemic, Turkey, Tunisia, Egypt and Morocco were already beginning to emerge as major competitors for Spain’s tourism industry in the Mediterranean.2
In contrast to the data from Morocco and Turkey, we believe that the positive records posted by Greece and Portugal are moderately encouraging for Spanish tourism. Although Greece and Portugal are markets that compete with Spain, there is also a high correlation between them all (traditionally, when other EU destinations grow, so does Spain). Therefore the fact that demand in both countries is looking strong indicates good inertia for demand in the domestic market.
- 2. See the article «The fight for international tourism in the Mediterranean» in the Tourism Sector Report for the first half of 2020.
Another of the factors we’ve identified that limit growth is related to post-pandemic travel. As travel restrictions were lifted throughout 2021 and 2022, tourism recovered strongly but, in the first instance, there was a preference for relatively close destinations. However, foreign travel and long-haul destinations are now gaining in strength, a trend which could pose an additional risk for Spain’s domestic tourism as it might lose part of the demand it had gained, albeit under extraordinary circumstances due to the restrictions on international travel.
With the lifting of post-pandemic restrictions, tourism recovered strongly but, in the first instance, there was a preference for relatively close destinations
As we can see in the chart below, according to payments with CaixaBank cards abroad, tourism expenditure by Spaniards recorded a dramatic drop in 2020 (–61% in the cumulative period from April to December) and it has undergone a mixed and bumpy recovery since then. In 2023 there are signs of an almost total recovery in foreign travel to Europe. This contrasts with longer-haul destinations, such as Southeast Asia and Latin America, where we can see that expenditure in these destinations is still well below 2019 levels. Specifically, last May expenditure in these destinations was, respectively, 51% and 45% below the same month in 2019. Looking ahead to the coming months, we expect to see an upturn in this type of expenditure as international travel by Spaniards gets back to normal.
Despite these headwinds, a review of the industry’s key indicators still results in a relatively positive scenario for 2023, for which we predict considerable growth. We expect these headwinds to come into play mainly towards the end of 2023 and in 2024, when we believe that tourism GDP growth will still be positive but more moderate due to the complex macroeconomic outlook in two of Spain’s major tourist inbound countries (the UK and Germany), as well as greater price competition from other destinations in the Mediterranean and the risk of both domestic and European tourism returning to longer-haul destinations. Even so, two factors will support tourism towards the end of 2023 and in 2024: the recovery in real wages in Spain and Europe plus the proven resilience of tourism demand from Europe in combination with a recovery in demand from long-haul markets such as Asia.
Taking into account the current robust situation, the counteracting factors we’ve already noted and also the growth levers still in play, our forecast for tourism GDP is that, in real terms, year-on-year growth of 6.5% will be achieved in 2023, this being 4.1% above the 2019 level. For 2024 we predict more moderate growth of 1.5%, placing tourism GDP at 5.7% above its 2019 level.
By country of origin, we expect domestic demand to grow by 0.4% in 2023, posting a lower growth margin compared with 2022 when it had already regained its 2019 level. International arrivals are likely to grow by 11% and, for the first time after the onset of the pandemic, will regain their 2019 levels. Looking ahead to 2024, we expect international tourism to be the sector’s main driver of growth, supported by the recovery in long-haul tourism.
Notably, in nominal terms, the strong upturn seen in tourism’s prices in 2023 will bring nominal tourism GDP to a level 17% higher than in 2019. However, in 2024 we expect this growth in prices to slow down, as in the rest of the economy. We therefore predict 4.5% growth in tourism-related GDP in nominal terms.
Despite the complex macroeconomic situation, our belief is that the tourism industry will continue to grow and remain a key player in the Spanish economy and, in light of the particularly sharp rise in the sector’s revenue, an important contributor to the growth of the surplus in Spain’s balance of trade in goods and services.
