Clouds over the costas ex­tin­guish rays of hope

Quar­an­tine de­ci­sion has scup­pered Spain’s ‘huge ef­forts’ to woo back Bri­tish tourists, says Tom Rees

The Daily Telegraph - Business - - Business -

‘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.

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