Austrian Tourism in the Corona Crisis

20.03.2020

A First Analysis by WIFO Economist Oliver Fritz

The Austrian tourism industry is facing difficult times", said WIFO economist Oliver Fritz on 20 March 2020 in a first economic assessment of the situation in view of the Corona crisis.

Tourism is one of the economic sectors most affected by the Corona crisis, as the shock affects both the demand side (restrictions on freedom of movement, border closures, fear of infection among guests) and the supply side (closure of all local accommodation and most catering establishments as well as leisure facilities that are also used by tourists).

In 2018, the tourism industry in Austria reached a share of more than 8 percent of GDP (direct effects as well as supply interdependencies), although the economic importance also differs greatly from region to region and locally – some regions, especially in Alpine areas, are very dependent on the provision of tourism services.

At the same time, tourism was one of the sectors that had recorded high growth rates in recent years. It has benefitted from its status as a "luxury good": Rising incomes and the expansion of the middle classes in emerging and developing countries have led to a disproportionate increase in the demand for holiday travel. Globalisation also ensured strong growth in business travel. In addition, it can be observed (and this gives hope for a rapid recovery of the tourism economy after the Corona crisis has been overcome) that tourists have so far relatively quickly resumed their behaviour before the occurrence of exogenous shocks (such as terrorist attacks or a deterioration of the security situation in certain countries).

From a current perspective, it can be assumed that

  • there will be a considerable reduction in the number of overnight stays and tourist expenditure in Austria, depending on the duration of the closure and all other restrictions on daily life; it should also be borne in mind that the current restrictions also affect day tourism, which will come to a standstill as a result.

  • the crisis not only affects the demand for holiday and business travel in Austria, but also the domestic demand for travel abroad, which will dampen the negative GDP effect.

  • according to an initial estimate, the loss of overnight stays will increase by about 5 percentage points every month in which establishments remain closed and demand is almost completely absent: from –12 percent of total overnight stays in 2020 if they are closed from mid-March to the end of April to –22 percent if the establishments could only reopen in July. If the main summer months of July and August were also affected, however, the loss in the number of annual overnight stays would rise significantly.

  • tourism in Austria, however, can look back on a very satisfactory winter season 2019-20, also taking into account the outages in March and April: the months of December and January, probably also February, brought a significant increase in overnight stays.

  • the effects on tourism will thereby vary from region to region: on the one hand, the Länder are dependent on tourism activities to varying degrees (sectoral structural effect), on the other hand, by source markets both the negative impacts as well as the recovery will not be uniform, so that some states could benefit earlier, some later.

  • however, the aforementioned recovery after the reopening of the tourism-relevant areas could progress relatively quickly – the desire for holiday trips and excursions is still strong and, once the restrictions on social contacts and freedom of movement have been lifted, it is to be expected that these needs will want to be fulfilled again as soon as possible. In addition, as already mentioned, in the past tourists have relatively quickly resumed their past behaviour and "forgotten" dramatic events.

In this case, domestic tourism can be expected to recover more quickly than demand from abroad and demand from European source markets will in turn recover earlier than demand from distant markets. This could also lead to substitution effects in favour of Austria if the spread of infection in Austria were to be curbed more quickly than in other European holiday destinations (such as northern Italy). 

However, any assessment of the development of the Austrian tourism industry over the next few months is subject to great uncertainty. The reasons for this are as follows:

  • It seems conceivable that the currently missed teaching time in Austrian schools will have to be made up for by shortening the holidays in July 2020.

  • The crisis will significantly worsen the economic situation both within and outside Europe – rising unemployment and reduced incomes will presumably reduce the demand for holidays as well as the compensation of current production losses after the lifting of the Corona measures.

  • Even after Austrian tourist businesses have reopened, border closures and travel restrictions could still be in place in other countries, which could massively dampen demand from abroad.

  • The national, but also international discussion about the "Corona-Hotspot" Tyrol could have damaged the image of Austria's most important tourism province in the long term.

  • And last but not least, it is currently hardly foreseeable by when the ordered closures can be lifted again.

A recovery of the tourism industry must be supported by accompanying measures, whereby above all targeted marketing activities after the reopening of the businesses appear necessary, which must be prepared now. Even more than before the crisis, sustainable and meaningful tourism must be put in focus, since "Ballermann tourism" has fallen into even more disrepute than before due to current events.

Please contact

Oliver Fritz

Research groups: Structural Change and Regional Development
© Martin Adams/Unsplash
© Martin Adams/Unsplash