perspectives on european tourism recovery

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company

is strictly prohibited

June 2021

Perspectives on European Tourism Recovery

McKinsey & Company 2

FRANCE


In France, domestic market has been the most resilient during the COVID-19 pandemic

In France, the domestic market has been the most resilient during the COVID-19 pandemic.

Impacted by the COVID-19 pandemic, the French tourism market has dropped by nearly 60% between 2019

and 2020, and it is not expected to return to its pre-crisis level until 2024 (close to European average).

In terms of value, the market has lost more than half of its value in one year and more than 700 000 direct

jobs have been affected.

Domestic expenditures have been the most resilient, even though this has declined by nearly 50%: it is the

business segment that has been most affected, and at this stage do not expect it return to its pre-crisis level

until 2027 (2024 for the leisure segment).

Outbound expenditures (i.e. French traveling abroad) dropped by approximately 70% between 2019 and 2020

(the business segment suffered the most with a drop in expenditures of about 80%).

However, France is in the top 3 in terms of total outbound spend (22 value in USD bn) only behind Germany

and UK.


France tourism market dropped by almost 60% in 2020, market recovery is expected for 2024Tourism expenditure1,USD bn

Source: McKinsey tourism recovery model, McKinsey Global institute; Globaldata for historical values

Current as of June, 2021

Scenario A1

85 85 91 99 103

5370 84 98 109 110 112 114 116 117 119

67 6370

78 74

21

35

47

6275 82 86 88 90 92 94

2015 16 2120

176

17 18

160162

19 20302922 2423

205

26 27 28

152 149

177

75

104

130

184192 198

209202213

25

Peak-trough

drop of ~ 58%

Loss of ~$266 vs. pre-

COVID-19 predictions

Recovery in

2024

1. Inbound and domestic trips, including expenditure for transport, accommodation, entertainment, food and beverages, activities, retail & others

Domestic Inbound


GERMANY


German tourism market to recover in 2023, faster than most other European markets

The German tourism market dropped by nearly 38% between 2019 and 2020, and it is not expected to

return to its pre-crisis level until 2023 (earlier than other European countries such as UK, Italy, France or

Spain, than will do so around 2024). Around 1 million direct jobs have been affected.

Domestic expenditures have been the most resilient compared to other European countries, even

though they has declined by 33% due to the less rigid COVID-19 travel restrictions. Both the business

and leisure segment should recover fast comparing to the European average of recovery and return to

its pre-crisis level in 2022 (faster than Spain, France, Italy or UK).

Outbound expenditures dropped significantly by 71% between 2019 and 2020. We do no anticipate both

business and leisure outbound travel from Germany to recover to pre-crisis levels until 2024.

For Germany, the inbound business segment looks to be the slowest to recover and won’t do so until

2026.

In terms of outbound spend, Germany occupies the first position in Europe (40 value in USD bn) and the

second position in terms of average trip expenditure for international trips (1481 value in USD bn) only

behind Finland.


German domestic tourism market is likely to recover in 2022, while inbound tourism will recover later in 2024Tourism expenditure1,USD bn



Scenario A1

262 282 310 340 351

236302

367 371 375 382 389 396 403 410 418

5052

5561 60 49 60 67 71 74 76 78 80

19

401

242015 1716 18

17

31227

435

21

37

469

22

404

2320

479

26 2827 29 2030

334364

460

411 420

254

329

449488 497

25

Peak-trough

drop of ~ 38%

Loss of ~S315 vs. pre-


Recovery in

2023


Domestic Inbound


SPAIN


COVID-19 puts 4.4 million jobs at risk and 250,000 million euros in the Spanish tourism sector

• Domestic tourism may not recover pre-COVID levels until 2024 and international tourism until 2025.

• Domestic tourism in Spain may not return to pre-crisis levels until 2024, and inbound would need one

more year (2025).

• The sector must reinvent itself, redesigning its business model and implementing measures with a

view to return on investment (ROI), taking into account the direct economic return, induced and indirect

effects, and the sustainability of the jobs created.

• More creative recovery levers will be needed to identify new segments of tourism demand and create

products that serve them. For this, it will be essential to increase the competitiveness of the sector,

innovative for collaboration ideas both between companies in the sector and from other sectors, as

well as greater public-private collaboration for a more active management of tourism.


Domestic recovery in Spain is likely in 2023, while inbound recovery will be in 2024Tourism expenditure1,USD bn



Scenario A1

60 62 67 73 76

39 52 66 77 81 82 84 86 88 90 92

67 7281

87 85

24

38

52

6985 93 96 98 100 101 103

20

187

18 19

148

16

184180

134

2015 17 2821 22 2523

146

24 26 27 29 2030

127

161 161

63

90

117

166175

191 195

Peak-trough

drop of ~ 61%

Loss of ~$260 vs. pre-


Recovery in

2024


Domestic Inbound


ITALY


Italy domestic market to recover faster than most other European markets

Impacted by the COVID-19 pandemic, the Italian tourism market has dropped by nearly 55% between

2019 and 2020, and it is not expected to return to its pre-crisis level until 2024 (close to European

average).

In terms of value, the market has lost more than half of its value in one year.

In detail, domestic expenditures has been the most resilient, even though it has declined by 42%:

however both business and leisure segment should return to its pre-crisis level in 2023 (faster than other

countries such as Spain, France or UK).

Due to a health situation that prevented travellers from moving from one country to another for many

months, the inbound and outbound segments were more affected. Outbound expenditures dropped

significantly between 2019 and 2020 and we will have to wait until 2024 to see the leisure segment

recover pre-crisis levels. The business segment won’t recover until 2027. Inbound market trends are

about the same than outbound.


Inbound tourism in Italy will not recover until 2025, while domestic tourism is like to reach pre-COVID levels in 2023Tourism expenditure1,USD bn



Scenario A1

74 76 80 86 87

5165

77 89 90 91 92 93 93 94 95

53 5560

66 64

18

28

38

5164 70 72 74 76 78 79

16 182015

68

17 19 20 21 2723 24 2925

131

2622 28 2030

169

127140

151152

93

115

140154

161 167 172 175164Peak-trough

drop of ~ 55%

Loss of ~215 vs. pre-


Recovery in

2024


Domestic Inbound


PORTUGAL


COVID-19 puts 600.000 jobs at risk and €52 billion in the tourism sector in Portugal

• McKinsey estimates that between 2020 and 2023 Portugal could lose €52 billion of GDP (equivalent to

26% of GDP levels in 2019), considering both direct and indirect and induced effects. Additionally, up

to 600,000 jobs could be affected, some of which may not be recovered in the future.

• Domestic tourism may not recover pre-COVID levels until 2023, and international tourism (which is

about four times larger than domestic tourism) until 2024.

• Given that business travel will take longer to recover, Portuguese cities and destinations that are more

dependent on these travels would be more seriously affected in the medium term. However, Portugal

scores well in this dimension, as business travel represents only 7% of domestic travel expenses,

which is much lower than in many other countries like the neighbor Spain, for example, where this

segment represents a 17% of domestic travel expenditure.


Portugal was strongly hit by COVID-19; market recovery is likely in 2024 for inbound and in 2023 for domestic tourism Tourism expenditure1,USD bn


Domestic InboundScenario A1

5 5 6 6 6 4 5 6 6 6 7 7 7 7 7 7

16 1721

23 24

6

1115

2025 27 27 28 28 29 29

31

2015 2416 2118 2717 2220

21

2523

36

2619 28 29 2030

23

262729

10

16

21

33 34 35 3537

31

Recovery

in 2024Peak-trough

drop of ~ 68%

Loss of ~ 12 vs. pre-





UNITED KINGDOM


UK – Domestic and International Tourism expected to recover to pre-crisis levels in 2024 and 2025 respectively.

As one of the sectors acutely impacted by the COVID-19 pandemic, UK tourism dropped by 52%

between 2019 and 2020 (or by a value of 66.5 GBP bn) and it is not expected to return to its pre-crisis

level until 2024 (for domestic tourism) and 2025 (inbound).

At a general level, UK has been less affected than countries like France (drop of 60%) or Italy (55%) but

more than others like Germany (38%).

Outbound expenditures dropped by approximately 75% between 2019 and 2020 (the business segment

suffered more than the leisure segment with a drop in expenditures of about 78% and a 73%

respectively). However, UK occupies the second position regarding total outbound spend only behind

Germany. In terms of average trip expenditure for international trips, UK is not among the ‘big spenders’

and countries such as Finland, Germany and Switzerland are above UK.

Inbound market trends are quite similar and don’t differ significantly from outbound market ones, with a

73% of drop in expenditures in total (combining business and leisure) and a recovery horizon of 2027 for

business segment and 2024 for leisure.


UK inbound and domestic market are likely to recover from COVID-19 impacts in 2025 and 2024 respectively Tourism expenditure1,USD bn



Scenario A1

135 126 130 138 140

7596

118139 151 153 154 156 158 160 162

3935 37 36 37

22

2937 42 44 46 47 49 50

2015 17 19 20302418

10

20

16

21 22 23

174

2925

85

16 27

202

161

28

167 174 177

112

140

199

168187 194

206 209 212

26

Peak-trough

drop of ~ 52%

Loss of ~235 vs. pre-


Recovery in

2024


Domestic Inbound


METHODOLOGY


A potential method for forecasting COVID-19 recovery combines economic and tourism specific outlooks

A. Macroeconomic

forecasts

B. Country-specific

pandemic recovery scores

As COVID-19 creates travel specific

challenges, we also assessed non-

economic factors

5 key levers, backed by series of

quantitative KPIs score countries

on their expected ability to weather

and recover from the crisis

Levers are tailored to differentiate

between domestic and outbound

travel, and business and leisure trips

GDP and disposable income

forecasts, based on projections

from the McKinsey Global Institute

(MGI), help assess the impact of an

economic slowdown on tourism


B: 5 drivers are used to develop a perspective on tourist behavior in-light of the COVID-19 pandemic

Drivers hindering

travel spend growth

Domestic Outbound

Segment

LeisureBusiness

Rationale Impact

Source: McKinsey

Attractiveness of

domestic destinations

1 Intrinsic attractiveness of

domestic destinations is a core

driver for sustaining domestic

travel, and substituting

outbound trips

Nr. of tier A cities

Rank on international arrivals

Biodiversity

UNESCO cultural heritage

Materiality of air

transport

2 Tourisms’ dependence on air

travel is expected to have a

strong effect due to health

concerns and potential

supply reductions

Air share of domestic trips

Share of long haul outbound travel

Availability of land based transportation

options and infrastructure

Health and hygiene

factors

3 Health standards in destination

countries (domestic or

international), and insurance

policies will increasingly impact

traveler decision making

Physician Density & hospital beds

Oxford Lockdown Government Stringency

Index

COVID-19 cases and fatality ratio

Importance of

business travel

4 Impact on business travel is

typically more pronounced than

leisure segments, and is

dependent on local dynamics

Share of MICE outbound trips

Regional disparity (difference region

highest/lowest GDP per capita)

Ability to implement remote working at scale

Environmentalism5 High awareness of environmental

impact is likely to impact travel

decisions in the next normal

Environmental Performance Index

perspectives on european tourism recovery

Documents