Recovery beyond the latest COVID wave

After the strong recovery undergone by the tourism sector last summer, the activity indicators published up to December showed no signs of slowing down. Demand, supply and prices all maintained the good performance observed in the summer and even continued to improve, further closing the gap with their pre-COVID levels. However, this positive trend has had to contend with another wave of COVID infections.

The current scenario has been affected by a large amount of uncertainty. The emergence of the Omicron variant, the increased pressure on hospitals and, as a result, the reimposition of some restrictions on travel and commerce point to a complex start to the year. Nevertheless, we expect the current shock to be less intense and shorter than in pre-vaccine waves, thanks to the fact that we now have solutions that were not available a year ago: the large proportion of the population that has been vaccinated, extensive testing and the booster vaccination campaign. Consequently, in the coming months we believe the pandemic will stabilise, enabling us to regain the level of domestic travel and upward trend in international travel recorded prior to the COVID-19 wave.

Our forecast scenario for 2022 remains relatively positive. We expect the pandemic situation to improve significantly, allowing the level of domestic and international travel to pick up and reinstating the upward trends observed prior to the COVID-19 wave. All in all, our forecasts for 2022 are that tourism GDP will perform at a level of 82% compared with 2019 (a similar figure to 2016), pointing to annual growth of 51%.

We also believe the Next Generation EU (NGEU) funds will play a fundamental role in 2022, not only in terms of boosting growth but also to underpin the sector’s long-term growth potential, covering investments in digitalisation, sustainability and improvements in infrastructure which the badly hit tourism industry can hardly afford at present. This Report provides a detailed analysis of the extent of the tourism sector’s sustainability and digitalisation to understand the growth potential that improvements in both areas can offer and, therefore, the impact the NGEU funds may have on the sector.

In conclusion, the latest wave of COVID-19 has made the beginning of the year more complex and has also intensified medium-term risks. Nevertheless, 2022 as a whole still looks like being a promising year with growth expected to remain high, bringing the industry average to profitable levels of activity and with the NGEU funds providing a great opportunity to bolster the industry’s competitiveness in the longer term.