'According to a preliminary estimate made by the Tourism and Commerce Association for the period 1 March and 31 May, there will be a cumulative loss of between 30-45 million tourists in the accommodation facilities across Italy, translating to more than 8-10% of total annual overnights or more than €7 billion less revenue for the sector.'

After the initial actions taken during February 2020 to contain the expansion of COVID-19, which provided limitations and restrictions only to certain activities and areas of the country (closing direct flights with China, prohibition of big gatherings and sport events, creation of red zones at Province and Regional level in North Italy), the Italian Government issued a Law Decree on 11 March providing for a shutdown of many activities and several limitations to other activities across the entire Italian territory.

The shutdown – initially expiring on 3 April – has been extended until 3 May 2020. Activities actually permitted are essentially the ones considered for basic necessity (agriculture, food production and distribution, health care, pharmacy, plus few other activities strictly connected with these).

Discussions are ongoing about a phased reopening, after 3 May, with a selective and granular approach at regional level and based on type of business, areas, and safety measures put in place by each company. Preliminary guidelines indicate that factories and building sites will be the first to reopen, initially people will be allowed to move only around their own regions and for limited reasons; various types of retail shops, personal services, bar and restaurants should reopen between 18 May and 1 June; schools will restart classes in September. Social distancing measures will remain effective for months.

Because the capacity of testing and tracking people massively are considered pre-requisites for a prudent reopening (together with social distancing and full availability of safety tools), it appears unlikely that Italy will reach a very high level of economic reactivation during May.

The possibility of economic rebound in the immediately-following months also remains questionable for some sectors and activities, as they are expected to keep long term limitations until a full solution of the sanitary emergency is found. Within this scenario, the IMF has reviewed the forecast of Italian GDP growth to –9.1% for 2020, the worst expected performance after the World War II, with a projected recovery of +4%/5% in 2021. Recent forecast by the Italian Government for the first 6 months 2020 indicates a possible drop of GDP by 15%.

Tourism

The tourism sector appears among the ones paying the highest toll of the sanitary emergency and the ongoing economic downturn associated with the measures taken at national and international level.

Tourism represents roughly 13% of the Italian gross domestic product and with approximately 128 million total tourist arrivals and 429 million overnights in 2018, Italy is one of the main European destinations worldwide. While this number represents visitation at all types of tourist accommodation facilities, 75% of all arrivals refers specifically to hotel accommodation.

International and domestic arrivals are almost equally split, although over the last ten years there has been a significant growth of the international share. More than 50% of the demand is directed to coastal areas and, predominantly, it is the leisure demand that supports the Italian tourism, while the trend shows that business arrivals are experiencing some turbulence in the last few years with a share of about 15% on total overnights. Finally, about 60% of international arrivals come from mainland Europe.

Italians’ outbound travel (2019) is measured at about 24.3 million trips (representing about 34% of total trips of Italian residents) with an average stay of over 5.7 days, potentially generating 138 million overnights.

Under the “COVID-19 restrictions” at country level, hotels and other accommodation facilities are allowed to operate (except for the region of Lombardy), but there are so many limitations and restrictions in place regarding the business itself and the behaviour of clientele that it does not make any sense to keep operating (for example: stop to all public and private events and to all restaurant and bar activities, including those within hotels; restrictions for travel to and from Italy; restrictions to leave place of residence for Italians, etc).

It is estimated that more than 95% of the hotels are now closed and the only exception is represented by hotels hosting certain categories or activities such as doctors/sanitary staff, staff serving at the same hotel, crew members, and hotels temporarily used as health centres. Considering all these facts, there is not yet clarity about when and how the tourist business will come back to some kind of normalcy at a national level.

What will be the magnitude of the COVID-19 impact?

According to a preliminary estimate made by Confturismo-Confcommercio (Tourism and Commerce Association) for the period 1 March and 31 May, there will be a cumulative loss of between 30-45 million tourists in the accommodation facilities across Italy, translating to more than 8-10% of total annual overnights or €7.4 billion less revenue for the sector.

The same institution, under the scenario that the emergency could last until the end of September 2020, projected a cumulative revenue loss for catering, transportation, and accommodation services at around €40 billion, out of which €22.5 billion representing transportation and accommodation (i.e. a reduction of 23% in the direct contribution of the sector to the national GDP). Other sources forecast an even higher impact of the crisis on the sector.

What is the outlook and recovery perspectives for hotels in the main Italian cities?

Assuming that international travel and visitation will be affected for a longer period by measures taken to face the emergency, the cities that should react faster to the crisis are supposed to be the ones relying more on internal demand and a more balanced mix between business and leisure travel.

At the same time, the level of growth shown in the past could also represent a sign of dynamism and capacity of the local system to recover and penetrate the target markets.

The following graphs illustrate a comparative analysis over a decade of historical hotel overnights across the main Italian tourist city hubs, their share of international clients, and their RevPAR growth.

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