European Summer Getaways May Have to Wait Until 2022
(Bloomberg Opinion) -- That European summer holiday you booked a month ago is looking like wishful thinking.
After U.K. Prime Minister Boris Johnson raised post-Covid hopes with his roadmap for exiting lockdown, the government has warned that a ban on foreign holidays could be extended beyond its May 17 end date. Germany is also considering a temporary curb on holidays abroad, after citizens rushed to book Easter breaks on the Spanish island of Mallorca. These follow recent setbacks in fighting the virus on the continent, with a lumbering vaccine roll-out and increased restrictions in Italy and France amid fears of a third wave.
This is a big blow to all those who were betting on a vaccine rebound in international travel, including airlines, tour operators such as TUI AG and countries that depend on tourism such as Spain, Greece, Italy and Turkey. The timing is particularly unhelpful, as Easter is the second biggest period for holiday sales after January.
However, some in the travel market remain convinced that a summer of fun will happen. It just might look different from what those of us in the U.K. and Europe had been imagining.
Michael O’Leary, chief executive officer of Ryanair Holdings Plc, said on Wednesday that high vaccination rates by the peak months of July, August and September in both the U.K. and Europe would enable trips to popular getaways. Sebastien Bazin, CEO of the French hotel group Accor SA, said he had seen a rebound in bookings in the past two to three weeks, while TUI, the world’s biggest package tour operator, said there was huge pent up demand in the U.K. and Germany, its biggest markets.
They may have a point. Vaccination passports, or any system that documents whether travelers are inoculated or test negative of the virus, offer one way forward. Greece will welcome back visitors starting on May 14, as long as they have had a vaccination, recovered from the virus or tested negative before flying out. The U.K. is considering a traffic-light system, where passengers could travel quarantine-free to “green light” low-risk countries, while tougher restrictions would apply to “amber” and “red light” regions with more cases.
Of course, European governments may still conclude that the danger of new vaccine-resistant variants is too great to allow holidays abroad. Leaders will vividly remember that last autumn’s second virus wave followed the brief window allowing citizens to hit the beach. It’s easier to continue supporting one sector — travel and tourism — than having to lock down the whole economy.
Some holidaymakers are already cancelling or delaying the foreign trips they booked just a few weeks ago. Although the majority of sales at TUI U.K. were for July onwards, some are postponing them further — until September, October or even next May. Up until now, the company has been able to count on travelers booking from Germany, but now that market is in doubt too.
Consequently, the world’s biggest tour operator said on Thursday that it would trim capacity in the peak summer season from 80% of 2019’s level to 75%. Its shares fell 5%. Meanwhile, it’s burning through the cash it received from three bailouts backed by the German government. The company has been burdened by 7.2 billion euros ($8.5 billion) of net debt from the support.
And despite Accor’s optimism, hotel groups look poised to suffer too. Deloitte found that 71% of European lodging executives surveyed this month expected disruption to last beyond 2021. U.S. executives may be more upbeat. As my Bloomberg Opinion colleague Sarah Halzack has noted, Americans are ready to travel again, which is good news for groups such as InterContinental Hotels Group Plc.
Yet there will be a silver lining from restrictions on international travel: A rise in staycations will boost domestic economies. One potential winner may be the U.K’s hotel and restaurant company Whitbread Plc. The vast majority of visitors to its Premier Inn chain in the U.K. and Germany are domestic travelers. Accor also generates up to two-thirds of its business from domestic tourism in the U.K., Germany and France.
It’s worth noting though that there might not be enough lodging to accommodate all the staycationers, according to analysts at Bernstein. Lack of space and soaring prices could be a real problem for Brits forced to stay home. Other big exporters of sun-seekers like Germany and Sweden could have a similar issue. But if day trips get a boost, venues like restaurants and amusement parks could still benefit — so long as they can reopen.
None of this will make up for another year’s loss of sunny summer holidays, but at this point many of us will take whatever small comforts we can.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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