Given the situation the planet is going through at the moment, if there is one sector that has been affected by the situation – and this is the conclusion of all the economists so far – it has been the tourism sector. Faced with a virus that showed a high rate of infection, the measures of social distancing applied by governments forced citizens, in all those places where the virus was present and active, to paralyse all possible economic activity. An activity in which the tourist sector is obviously present, as well as all those subsectors and auxiliary services that complement it.
Thus, the tourism sector is facing a tough situation after the pandemic. For, in addition to capital, its reactivation requires a confidence that, for the time being and in view of the high rate of contagion mentioned, has been lost in a large part of the world. In view of the recommendations made by governments and the impossibility of preventing contagion in complete safety, tourists have stopped all their movements, waiting for the virus to be contained in the best possible way, so that any possibility of contagion, however remote, will be completely extinguished.
In this sense, the tourism sector, as shown by the main international organizations, foresees global losses of more than 450,000 million dollars. Well, we must not only count on the losses that the sector has been carrying since the beginning of the year, but we must also take into account all the losses that, given the situation and the inability to guarantee that there will be no resurgence when everything returns to normal, are expected for the rest of the year. In the case of Spain, these losses could reach 92,000 million euros, according to the figures provided by the tourism industry.
Therefore, for a country like Spain, these losses represent a large decapitalization of the sector. For the country, tourism represents one of the fundamental pillars of the economy. With more than 13% of the gross domestic product (GDP), tourism is positioned as one of the essential sectors of the Spanish economy. Moreover, if we take into account all the auxiliary services, as well as any indirect contribution of the sector to the GDP, the 13% mentioned above would shoot up to 25%. In other words, one fifth of the Spanish economy is represented by this sector. If we add to this the contribution to employment (14.7%), we are talking, as we said, about a strategic pillar for the country.
Since the Government’s intention is to try to contain the losses for a fundamental sector for the economy, the official statements so far have issued messages that try to convince and encourage the Spanish population so that, in view of the situation the sector is going through and the difficulties it presents to recover all the income lost during the year, they choose to spend their holidays this summer without leaving the country. In this way, being their intention that all the capital that goes abroad through consumption in trips and outings abroad, for this year stay in the country. In this way, being the Spanish tourism entrepreneurs those who benefit from that capital, trying to compensate the losses caused by the virus.
However, to what extent can this compensate the situation for the tourism sector?
Well; to begin with, it should be noted that in Spain -although the President continues to insist that Spaniards should spend their holidays in the country-, of the citizens who travel during the year, as recorded in the official data for 2018, 90.2% of them chose the country as their main destination. That is, of the more than 197 million trips made in the year 2018, 177.3 million were made to and from Spain. Therefore, we are talking about the fact that only 9.8% of the trips abroad were made during the aforementioned year.
Thus, domestic tourism, or as this type of national tourism is called, according to the Tourist Board, generated 32,000 million euros by 2019. However, if we take this figure and put it in contrast to foreign tourism, we would be talking about representing 45% of the income derived from it, which is estimated at 71,000 million euros. In this sense, we are talking about a situation in which, in the first place and as shown, the greatest income flow that the tourist sector receives in our country, according to the statistics, comes from foreign tourism. Well, we are not only talking about greater trafficking in people, but also about a higher level of expenditure.
However, on the other hand, and leaving aside foreign tourism, we must take into account relevant aspects such as the fact that 90.2% of the trips made by Spanish citizens have Spain as their destination; that is, domestic tourism. Therefore, if we try to approximate the results of the hypothesis raised by the Government of Spain for this year, taking into account that 100% of Spanish tourists spend their holidays – as the Government expects them to do – and make their trips, as well as their expenses, in the country, the figure could represent, in revenue for the sector, about 35,000 million euros. In this sense, we would be talking about a variation rate that would be around 9%, in contrast to the income of the previous year. An income in which it is assumed that the past income is maintained, in addition to the aggregate that would mean that 100% of Spanish citizens choose domestic tourism as an option.
But this is another problem that the Government faces, because we have always taken into account that the people who traveled last year, during this year will do it again. However, taking into account that the Coronavirus has a greater impact on the elderly, as well as the fact that 25% of domestic tourism last year was for people over 55, we can draw new conclusions. In other words, 8,000 million euros is the amount equivalent to the benefit generated by this vulnerable group, which, in the best of cases, could end up representing for this year an estimated income of around 50% of that generated last year. Thus, leaving an amount equivalent to 4,000 million euros.
Furthermore, if we add to this the situation of families, as well as all the problems that the paralysis of economic activity has caused in terms of income levels, we can estimate that, for this year, many of those people who travelled last year, given the new economic situation, will decide not to do so this year for economic reasons. To this end, we estimate a drop in income due to the decline in income levels and consumer confidence that could lead to a drop in income of 10 billion euros. This amount, as we said, is due to the economic situation that Spanish families are going through at the moment.
Therefore, if we take into account that the total income from domestic tourism in Spain, while adding the income from this increase in domestic tourism at the request of the Government, we could be talking about an income that could be around 35,000 million. Now, if we make the difference, based on the 18,000 million euros less than we projected, by discounting the people in adulthood, as well as the decreases in income levels, we would be talking about an income that could reach 17,000 million euros. In this sense, a decrease with respect to the previous year of -46%; in the same way that, in contrast to the income from foreign tourism, we would be talking about 23% of the income.
In conclusion, despite the good intentions of the Government, the request it makes does not compensate, far from it, for the losses that the tourism sector already foresees during this year. In this sense, we are talking about a more formal than technical request, since, if subjected to evaluation, it does not represent any relief for a sector that, in addition to being fundamental for growth and employment, is shown to be the most deteriorated sector of all.
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Francisco Coll MoralesEconomist
