The impact of COVID-19 on European island economies

Opening up travel and tourism to the thousands of islands in Europe after COVID-19 is not just about pushing a button, but rather requires slow, careful effort and ultimately more painful than other coastal areas.

As it’s unclear how long the virus will go unchecked without an effective cure or vaccine, the island destination is expected to adopt plans to live with it for at least the next two years.

While many economic sectors are expected to recover once restrictive measures are lifted, international tourism is likely to suffer from a more lasting impact.

The impact of COVID-19 on island tourism

Most of the islands, in Europe and around the world, have preserved their populations from the pandemic, taking advantage of their geographic isolation. The positive results on the islands have allowed them to claim that they are tourist destinations without COVID-19.

Travelers in the arrivals terminal of Palma de Mallorca airport, Spain. EPA-EFE // ATIENZA

Admittedly, the economic and social impact associated with the containment of international tourism, which struck just before the opening of the tourist season, risks being disproportionate for the islands most dependent on tourism.

In the Spanish Balearic Islands, for example, tourism accounts for almost 50% of regional GDP, in the Canary Islands around 35%, in the Ionian Islands in Greece more than 70%, in the Aegean 92% and 42% in Crete.

A loss of the seasonal summer tourism year will therefore be a disaster for island economies, as well as for small and medium-sized enterprises (SMEs) in the hospitality sector, which account for around 80% of all SMEs. Saving everything that is possible at the moment is therefore the most realistic scenario for the islanders.

Traditional tour operators from Northern European countries, which have played a crucial role in the development of tourism in the island regions of Europe, have already canceled all contracts, guaranteed and unsecured, signed with island hotels.

At the same time, tour operators have asked local hotels to give deep discounts for the current season and give them credit for a period of 60 days after customers have left. In addition, they seek to include these conditions in all contracts that are expected to be signed for 2021.

While legal, this attitude is unfair to local businesses, given the huge financial issues and additional operating costs under tough new sanitation measures.

Moreover, most of the online customers, using electronic platforms like Booking, Airbnb and others, have also canceled their reservations.

Airlines were waiting for the green light to fully resume operations, but had to postpone resuming flight schedules or were forced to cancel most of their flights for most of the summer holiday season.

The cruise ship industry, which for several islands has seen a significant increase in revenues, has shut down almost all of its activities with no clear sign when it intends to attempt to resume operations. As a result, many local businesses doubt that it is realistic to think that they will be able to reopen their activities.

Efforts to restart

The islands, along with other destinations, are now pushing to break out of isolation and reorganize their core business, tourism, at all costs, taking the risk of a possible second wave of the virus. A successful opening depends not only on the supply side (destination), but also on the demand side (origin).

A woman sits on the bench of a ship as she heads to the Greek island of Samos in early summer. EPA-EFE // YANNIS KOLESIDIS

Typically, the islands have poor health infrastructure. Their first task is to strengthen local health systems in terms of their ability to diagnose and possibly treat COVID-19 or ensure rapid accessibility to a hospital or repatriation. Training local business staff on the new standards is a necessary condition for the process of fully restarting operations.

These new standards, based on protocols adopted as guidelines by various international organizations or associations, differ among the 27 members of the European Union, some of which are more flexible and sometimes more stringent. All of them, however, add an additional burden and cost to local businesses.

Additionally, island destinations and their local businesses are often confused by conflicting or ambiguous information from travel warnings or statements from EU officials and calls to countries to encourage domestic tourism.

In order to attract a large part of international tourists, the European islands, in agreement with national or regional authorities, have announced a number of economic measures related to the medical treatment of infected tourists at their destination and the cost of living for their families. also.

Almost all of the islands are lifting their mandatory 14-day quarantines for visitors who present a health certificate indicating they are COVID-19.

The most important conditions for the return to normality are the real demand of the markets generating tourism to the islands. The demand certainly depends on various factors, such as the general state of health of a given destination, but also the health situation in the country of departure, the travel directives in force, the psychological situation (confidence and confidence) and, last but not least, the economic situation of travelers.

Many countries that are promoting home tourism to their citizens for this year have imposed 14-day quarantines for those traveling outside their home country. This has left many people wondering if such measures create barriers for travelers.

Does an elderly person decide to go on a cruise if they are not 100% sure that there is no risk to their life, after the horrific events that occurred on the cruise ships of the whole world ?

Economic stimulus plans

At national level, most EU countries have introduced economic assistance programs for businesses in the tourism sector. The measures include tax moratoria, extended deadlines for the payment of payroll taxes, wage subsidies, loans and guarantees for workers and even the nationalization of businesses affected by the coronavirus.

The EU has announced a dual proposal for a new financial stimulus package that will help boost jobs and growth. Funding will be invested in supporting EU members with investments and reforms focused on green and digital transitions, boosting the EU economy through private investments to urgently support viable European businesses in the sectors, regions and countries most affected.

The European islands, which are suffering greatly from the crisis and are already considering green and digital transitions, should acquire a fair share of the investment in this budget.

Key messages

COVID-19, like any other natural disaster, has had a serious negative impact on European island economies. It will take time for the islands to recover to their pre-COVID growth levels.

The concept of “over-tourism”, which concerned some islands recently, has turned this year into “no tourism”. Some important urban destinations like Venice, Barcelona, ​​Paris and Amsterdam are facing similar problems and are already working to review their future in tourism.

This could be an opportunity for the islands to start thinking about their tourism model. It is up to each island to decide to offer its tourism product (s), but the transition from the existing model of mass tourism will not be at all easy, but returning to the old model is not. a possible alternative.

Two tourists in an almost empty garden in the center of Funchal, the capital of the island of Madeira, Portugal. EPA-EFE // HOMEM DE GOUVEIA

The creation of a Destination Management Organization (DMO), with a strong crisis management working group, should be a priority for all island regions. The DMO should study and implement ideas, suggestions, guidelines and propose actions to be taken by local authorities.

Networking and coordination of joint actions, vis-à-vis all aspects of the current crisis through the exchange of views and good practices, is a necessary condition for the islands to become more resilient and more strong.

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