Tourist arrivals in Spain reach 90% of pre-pandemic levels

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(MENAFN- ING) Nine million customers visited Spain in July, close to pre-Covid levels

Despite a gloomy economic outlook and an uncertain geopolitical situation, the Spanish tourism sector is recovering rapidly from the pandemic. In July, Spain welcomed 9.1 million international tourists, 92% of its pre-pandemic level. In July, most Spanish visitors came from the UK, accounting for 21% of all international tourists visiting the country. France is the second country of origin with 16% of total tourist arrivals. Since the beginning of the year, the gap in international arrivals with its pre-Covid levels is rapidly closing. In January we were at 59% of the 2019 level while in July it had risen to 92%. Total tourism spending, adjusted for inflation, also reached 88% of pre-pandemic levels in July. Although inbound tourism continues to close the gap with 2019, it will likely take another year to return to pre-pandemic levels.

Fig 1. International tourist arrivals in absolute levels and as % of its pre-pandemic levels

The Canary Islands and Madrid have reached pre-Covid levels

In July, the Balearic Islands (2.3 million arrivals) were the main destination chosen by international tourists, representing one in four incoming tourists, followed by Catalonia (around 2 million) and the Valencian Community (1. 1 million). The Canary Islands and Madrid received the same number of international tourists as in July 2019. Illes Balears almost reached pre-pandemic figures with a recovery of 97% compared to July 2019. In contrast, the number of international tourists in Catalonia and Andalusia is still significantly behind July 2019 levels.

Fig 2. Number of tourists by region in July compared to pre-Covid levels

Domestic tourism compensates for the fall in the number of international visitors

The number of hotel guests exceeded pre-pandemic levels for the first time in July, mainly thanks to a strong rebound in domestic tourism, which recovered even faster than foreign tourism. The number of domestic hotel guests was already above pre-pandemic levels in April 2022, while the number of foreign hotel guests still lagged 3% in July. Thus, the strong recovery of domestic tourism compensated for the drop in the number of international visitors. However, economic headwinds will hamper domestic tourism in the coming months. In July, Spanish consumer confidence fell below the Covid-19 pandemic low, showing that Spaniards are increasingly concerned about high inflation. Although it improved slightly in August, it still remains historically low. Consumer confidence in Spain is also significantly below the eurozone average. As half of hotel stays are booked domestically, this will hamper domestic tourism.

Tourism employment accounted for half of all new jobs in 2Q

The tourism sector represents 13.3% of the total number of registered workers in the country and is one of the sectors that contributes the most to job creation. According to data from Turespaña, Spain’s national tourism body, the employment rate in the tourism sector already reached its pre-pandemic level in April. Between April and June, tourism-related activities accounted for half of all new jobs created in the country, and employment was 0.8% higher than in the same period of 2019.

The Spanish hospitality sector has been hit hard by the pandemic and the rapid recovery of the sector has led to an increase in demand for new employees. However, the sector – which typically employs one in eight workers – is struggling with staff shortages. As the sector recovers further in the summer months, a labor shortage could intensify, which could hamper the recovery. The World Travel and Tourism Council estimates that the tourism sector could face a shortage of around 137,000 workers in the third quarter, which corresponds to one in eight vacancies unfilled.

Tourism’s contribution to Spain’s economic growth is expected to decline

With tourism being a key economic sector in Spain, accounting for 14% of total GDP in 2019 according to the World Travel & Tourism Council, a continued recovery is an important factor supporting economic growth. Uncertainty related to the war in Ukraine, rising inflation and high energy prices continue to pose a risk to the tourism recovery. So far, the industry has shown a high degree of passing on higher costs to consumers. The sharp rise in hotel prices (+16.4% over one year) did not deter tourists from booking overnight stays. However, the sharp drop in consumer confidence shows that consumers are increasingly concerned about high inflation and may start to cut tourism spending. It will also weigh on international tourist arrivals, as one in three incoming tourists come from the United Kingdom and Germany, two countries that have been hit very hard by the energy shock. Tourism’s contribution to Spain’s economic growth is expected to decline over the coming months as the Eurozone heads into recession. Even in 2023, the unfavorable economic environment will continue to weigh on the Spanish tourism sector.

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