Clouds over the costas extinguish rays of hope
Quarantine decision has scuppered Spain’s ‘huge efforts’ to woo back British tourists, says Tom Rees
‘Streets lined with drinking holes like the Red Lion hint at the issues as Britons are forced to stay away’
‘We have less deaths and less people in hospital in the last 24 hours than the UK, so we really do not understand’
While sunbathers are donning masks and queuing to get a spot on sociallydistanced beaches, relative normality has returned to resorts on the Costa Blanca in recent weeks. Leire Bilbao, head of Visit Benidorm, says visitors have been returning to the popular town “little by little” after “huge efforts” were made to make it safe.
The summer season could already be all but over for Benidorm and other Spanish coastal towns that depend on Britons jetting out, however.
Businesses in the resort are exasperated over the UK’s sudden decision to impose quarantines on holidaygoers arriving from Spain as the setback risks dampening the country’s recovery.
Streets lined with drinking holes named the Red Lion, the Queens Arms and the Loch Ness Pub hint at the issues facing the town as Britons are forced to stay away.
“We have less deaths and less people in hospitals in the last 24 hours than the UK, so we really do not understand,” says Bilbao. The decision “will hurt very much”, she warns. Economists predict the new restrictions will not only dampen Spain’s economic recovery but cause ripples that reach hotspots across Europe as confidence is rocked.
“If the quarantine still stands through the summer, it’s going to be a huge blow for the economy in Spain,” warns Angel Talavera of Oxford Economics. A large number of cancellations from the UK will mean third quarter growth “will suffer quite a lot” and the recovery “will be a lot slower than we thought”, he says.
Britons are vital for the tourismreliant Spanish economy as they swap drizzly summers for sizzling beaches, visiting and spending far more than other country’s visitors.
Some 22pc of all foreign visitors arriving in Spain came from the UK in 2019, well above second-placed Germany and France at 13pc each, according to Spain’s official statistics bureau. Britons also spent more than any other country, accounting for a fifth of expenditure, or close to €18bn (£16.4bn), compared to 13pc from German visitors and 8pc from French tourists. UK visitors were spending more than €2m every hour in Spain’s beach resorts, tapas restaurants and plaza cafes.
Talavera says there were hopes of a
“relatively quick” rebound but warns tourism “is a huge sector that is a critical part of the Spanish economy”.
Tourism accounts for around 12pc of Spain’s GDP and around 13pc of its employment but it has an outsized impact for some regions – around a third of output in the Canary and Balearic Islands.
Of the major European economies, only Greece and Portugal are more reliant on their tourism industries as a share of GDP, Jefferies data suggests.
Tourism is the third-largest industry after manufacturing and financial services with Catalonia, the Canary Islands, the Balearic Islands and Andalucia the hardest hit hotspots from foreign visitors drying up.
With cases far lower on the islands compared to the Spanish mainland, reports suggest a more regional approach to the new restrictions could be taken by the Government to help save the industry’s summer. Spain’s economy was already suffering a deeper downturn than the rest of Europe before the latest setback, according to forecasters.
Before Covid-19, Spain’s economy was slowing like the rest of the world but was an outperformer compared to its sluggish eurozone peers.
However, the pandemic has struck Spain harder than most, both in infections and economic activity.
Friday’s GDP figures are set to reveal that output in Spain plunged 16pc in the second quarter with many forecasters expecting the country to suffer the deepest contraction in Europe this year.
“We now have Spain being worst hit because it seems to be coming out of the worst part of the crisis a bit more slowly than Italy,” says Andrew Kenningham, chief Europe economist at Capital Economics.
“It’s very tourist dependent and the labour market has a lot of people on temporary contracts and we suspect they are more likely to lose their jobs.”
He says an “extremely severe lockdown” and Madrid’s lack of fiscal firepower also mean Spain’s economy is struggling.
The Government’s decision will not only hold back the recovery in Spain but also heap pressure on the travel and tourism industry in the UK and elsewhere. While some holidaygoers will spend their money in the UK or in other countries rather than Spain, it could rock brittle confidence in the sector. Adam Marshall, director general of the British Chambers of Commerce, says sudden changes to quarantine rules will be “another hammer blow for the fragile travel and tourism industries, both here in the UK and overseas”.
He adds: “Businesses will be asking why Spain was on the safe list on Friday, only to be taken off it on Saturday.” Share prices across the sector tumbled in London yesterday morning, wiping hundreds of millions of pounds off market values.
Shares in TUI, which has cancelled all holidays to mainland Spain until Aug 9, slid as much as 15pc while easyJet dropped 14pc and Ryanair sank 9pc in another torrid morning of trading for the sector.
Becky Lane, an analyst at Jefferies, warns the decision could also have “severe implications for customer booking confidence” and does not expect a full recovery in revenue for the sector until 2023.
Many would-be holidaygoers mulling over a return to Europe’s beaches could now opt for staycations or decide not to jet out if they fear their plans could be cancelled at the last minute.
That could mean Britons not only avoid Spain but hold off visits to Greek Islands, the French Riviera and Italian piazzas.
“The other big concern is this is something we are going to see in France, Italy and elsewhere,” says Kenningham. “You are going to think more carefully about going abroad.
“This is discretionary spending, it’s not like spending money on utilities or on food. This is really optional.”
Speculation is swirling that other countries could be next to face reimposed restrictions with the uncertainty likely to delay swathes of bookings to hotspots not only on the Costa Blanca, but across Europe.