Tourism no quick fix for southern Europe
ESTORIL, Portugal - Tons of debt, but great beaches and warm weather. Can tourism help rescue Europe's financially troubled Mediterranean countries?
The economies of Spain, Portugal, Italy, Greece all depend heavily on tourism, and for good reason — sea, scenery and warmer weather for decades have lured euro-packing tourists from colder and richer Britain and Germany.
Tourism slumped last year at the height of the global economic crisis, and things are picking up a bit in 2010. But as the four-day Easter holiday April 2-5 approaches, prospects remain muted for a strong lift from the beaches and cafes.
Duarte Nobre Guedes, chief of tourism in the Portuguese seaside resort of Estoril, 25 kilometers (15 miles) west of the Portuguese capital Lisbon, shakes his head when he recalls last year's bleak business environment.
"It was a black year," he admits with a shrug. "We couldn't dodge the world crisis."
Even so, upscale Estoril, which gave a home to some of Europe's exiled 20th-century monarchs and still exudes genteel sophistication, fared better than others. The country's southern Algarve coastline, for example, recorded its worst summer tourist trade in 15 years.
Nobre Guedes said Tuesday the outlook is now "a lot more favorable" for what he terms one of Portugal's "vital" economic sectors.
But it turns out there's no quick fix, no matter how many islands or volcanic beaches they've got, for a couple of reasons.
For a start, the main countries sending them tourists, such as the United Kingdom, are enduring their own economic hardships. Leisure travel is a luxury that can be cut, prompting some to opt for a "staycation" — a stay-at-home holiday with occasional day trips.
Using the euro means these countries can't devalue their currency and become cheap destinations, and not only that, the British pound has fallen. So that mojito in a Greek island bar or a night in a beachfront hotel room could cost British tourists as much or even more than it did last year, as their own economy barely crawls out of recession and unemployment remains high.
Businesses and tourism officials in Portugal, Greece, Spain and Italy are hoping an improvement in visitor numbers can provide a tonic.
"(Tourism) is viewed by the government as one of the main strategic planks of the country's sustainable economic development," Portugal's tourism minister Jose Vieira da Silva said.
But, forecasts suggest, tourists are unlikely to deliver a quick fix for national economic woes until the global recovery picks up speed.
"There is growth and it will be a help for them, but it is just one part of what needs to be a broader recovery," said David Goodger, senior economist at Tourism Economics.
Greece, Spain, Italy and Portugal are in the world's top 20 holiday destinations. Together they draw around 130 million tourists each year — roughly the same as the sum of their own populations.
They are also, however, countries that have alarmed their European Union partners and financial markets by sliding deep into the red. Their heavy debts spawned a financial crisis and compelled them to enact emergency austerity measures, including tax hikes and pay freezes, which are hurting households and making politicians unpopular.
And the only way they can pay off those debts, long term, is more economic growth. But Greece's economy is forecast to shrink by at least a further 0.8 percent this year after contracting 2 percent last year. Spain is expected to post slender growth of 0.3 percent in 2010 after a 3.6 percent contraction, while Portugal estimates its economy contracted 2.7 percent last year but will grow 0.7 percent this year.
Europe is the world's most popular place for vacations. That has made the tourism sector one of the continent's top three service industries, accounting for about 11 percent of the bloc's gross domestic product when associated sectors are taken into account. Looking after holidaymakers provides work for some 24 million people.
As the wider European upturn gathers momentum, the tourism-slanted economies of southern Europe will benefit from a knock-on effect, according to Goodger.
"Tourism is going to be part of the story," Goodger said, particularly in Greece where other economic activity remains weak.
Europe was, along with the Middle East, the worst-hit tourism region in the world in 2009. Arrivals in its Mediterranean basin countries were down 5 percent, according to the U.N. World Tourism Organization.
The WTO predicts a "modest" upswing in Europe this year, though the rise may only be around 1 percent in terms of visitor numbers.
The southern European nations are encountering difficulties as they try to get some traction in the current economic mire.
In the 12 months to January, the number of British travelers to mainland Europe dropped 16 percent, according to the Association of British Travel Agents. British visitors to Portugal, where tourism generates 10 percent of economic output and jobs, plunged more than 21 percent last year.
Britons looking to travel abroad are fishing for the cheapest deal, which may not be in Europe where the fall in tourists from the U.K. could reach double digits, ABTA spokesman Sean Tipton says.
"I can tell you very quickly that everything to do with Europe, subtract 10 percent, and for Egypt and Turkey, add 25 percent," Tipton said.
And though the tourist industry brings in fresh cash, many of the jobs it creates are low-wage and seasonal.
Magda Antonioli, a tourism economist at Milan's Bocconi University, says governments need to diversify out of sun-and-sand summer vacations and quarry neglected areas.
"There needs to be more investment in the low season, which could bring notable growth," Antonioli said.
Tourism is Spain's prime industry, accounting for 11 percent of GDP and more than 8 percent of its total workforce. But arrival numbers plunged by almost 9 percent to 52.5 million there in 2009 because of the crisis, deepening the sense of national malaise. Revenue was down by 6.8 percent to €48 billion ($65.7 billion).
Tourism department chief Joan Mesquida says Spain expects arrivals to improve in 2010 but concedes it will be "a transitional year" on the country's path out of crisis.
Locals in downtown Madrid say tourists are for the moment keeping their hands in their pockets.
"People only come to look these days, they don't buy like before," said Jose Luis Gonzalez, who owns two souvenir shops in the city's elegant Plaza Mayor square. "Maybe a fridge magnet, a key ring but not T-shirts or more expensive products."