Spain | Tourism: on the verge of collapsing?

Summary

One of the best surprises of 2022 has been the recovery by tourism. However, there are reasonable doubts regarding the industry's future outlook. A downturn could have major implications for the economy.

Key points

• Key points:
• Data show hotel occupancy is finally back to 2019 levels, mostly in key destinations along the coast, and even higher in certain interior destinations.
• In Spain's national accounts, the National Statistics Institute (INE) notes that non-resident consumption in Spain in the third quarter was 60% above year-end 2019 levels, while prices for accommodation are 14% higher than pre-pandemic levels.
• Revenue from higher spending by foreigners in Spain has offset the impact of the loss of funds caused by rising energy costs on the overall economy.
• We doubt the main drivers behind the recovery will have the same impact in 2023. For one thing, the easing of COVID restrictions and widespread vaccination in Europe has had a positive, but temporary impact on the industry.
• Moreover, traveling is much more expensive now than it was last year. The increase in fuel costs has already been passed on to transport prices, while prices for accommodation in real terms are slightly overvalued. With demand set to fall over the next year, we could well see margins shrink.

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