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COVID-19 webinar summary: 5 key points on our Europe forecast webinar, 2 April

With many global markets close to or reaching the bottom, and China beginning to show early signs of recovery, what do 2020 and 2021 look like for hotel and tourism performance? This week’s Europe webinar focussed on projections for this year and beyond, as we were joined by David Goodger, Managing Director, Europe and Middle East – Tourism Economics.

The economic impact and likely recovery

The immediate economic impact in H1 2020 will be worse than at any point during the global financial crisis, but a rapid rebound is expected into Q3 and beyond—partly as a result of government support measures for industries.

As the image below shows, the rebound from the COVID-19 pandemic is expected to follow the path of historical short recessions, and we should see rapid growth once restrictions are lifted and economic activity returns. However, the damage to average incomes, wealth and employment provides reasons for caution—despite the support measures mentioned.

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Expected GDP recovering following COVID-19 pandemic

Domestic tourism expected to recover ahead of international

Understandably, Europe is projected to experience declines in international arrivals from all global regions in 2020 and produce a 39% drop in overall inbound arrivals. Domestic tourism is typically less volatile during downturns and expected to recover ahead of international spend from 2020-25. As the 2019 data below shows, many European markets receive a high proportion of tourism spend from domestic travellers. Given the travel restrictions that are currently and could still be in place as the year progresses, international trips could be replaced by domestic holidays in the short term.

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Domestic vs. international tourist spend in key European markets

The impact of COVID-19 on events and host markets; including Tokyo and the Summer Olympics

So far we’ve seen almost 400 events cancelled or postponed with the majority falling into the latter category. The Tokyo 2020 Summer Olympics is one such event, and zoning in on our forecast highlights the impact of moving events on markets. Tokyo has transitioned from projected growth to expected declines in the space of just four months.

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Impact on hotel performance forecast for Tokyo following Olympics postponement

Recovery forecast for European markets

Our forecast markets in both China and Asia Pacific (excluding China) are projected to perform better than European forecast markets and the total U.S., in terms of RevPAR declines. This is despite China being the epicenter of the COVID-19 outbreak and the Asia Pacific region producing significant declines. Lessons learned during the SARS recovery and the reliance on domestic tourism are key reasons for this, hence the expectation that China and the region as a whole will recover quicker.

In terms of European recovery, RevPAR is forecasted to decrease by almost 40% in 2020 before 2021 growth that will come from a low base. We are not expecting a return to 2019 levels until 2022.

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Long-term hotel RevPAR recovery forecast 2019-22

Europe’s most-affected forecast markets

Understandably, markets in Spain and Italy are expected to be among the most-affected markets, given the impact of COVID-19 in both countries. Barcelona’s reliance on international travel makes it the most affected market in our March 2020 Forecast, while Madrid and our Italian markets have a higher percentage of domestic demand and, therefore, expect less significant declines.

If you have any questions or are interested in the March 2020 Forecast, please email forecast@str.com or visit our Market Forecast product page, where you can purchase or download a sample report.

Please note, our March 2020 forecast is based on several assumptions that: factor in cancelled/postponed events, make no supply closure assumptions outside of China, push pipeline opening dates back by six months, expects eight months of negative impact, and use China and Italy as benchmarks to estimate performance for the coming months. This will be reviewed for the May update.

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