05.04.2022

War in Ukraine Dampens Tourism Expectations for 2022

Tourism Recently Recovered Surprisingly Quickly and Strongly

After the end of the COVID-19-related lockdown in mid-December 2021, the Austrian tourism industry recovered surprisingly quickly and strongly. Thereby, a demand-side gap of a third measured in overnight stays, and a quarter measured in nominal revenues from November 2021 to February 2022 compared with the pre-crisis period of 2018-19. However, optimism was abruptly dampened by the outbreak of war in the Ukraine, and the outlook for tourism in Austria is thus once again characterised by a high degree of uncertainty.

With the outbreak of war in Ukraine at the end of February 2022, the general conditions for the Austrian tourism industry deteriorated once again. This conflict is expected to have a negative impact on demand for vacations in Austria, with the indirect effects likely to far outweigh the direct ones.

In this context, price increases in many countries are restricting people's vacation budgets. Although this will seldom lead to a complete abandonment of vacation plans, it will dampen guests' propensity to spend. Fewer and shorter vacations, cheaper accommodations, and changes in destination and transportation choices could result. Also, disruption of international air travel will lead to lower demand from distant markets; in addition, demand from these markets could suffer from the perception of Europe as a "place of war."

On the other hand, within Europe, nearby destinations could benefit at the expense of more distant destinations, resulting in a not inconsiderable (additional) potential demand for Austria from Germany and the other neighbouring countries; likewise, destinations in Southern Europe that can be reached by car are likely to enjoy even greater popularity in the coming summer season. The boom in domestic tourism in Austria is expected to weaken somewhat this summer, but demand will remain above pre-crisis levels.

The combination of the COVID-19 pandemic and the war in Ukraine is an unprecedented event in recent history. No experience is available on the extent to which such a special situation specifically affects people's vacationing behaviour. In addition, neither the further course of the pandemic nor of the war and its economic consequences can be seriously predicted at this point in time. The outlook for tourism in Austria in 2022 is thus once again characterised by a high degree of uncertainty.

At the same time, the tourism industry took heart after almost two years of the pandemic and the lifting of the lockdown in mid-December, as well as the unexpectedly favourable development towards the end of 2021. Against the backdrop of expected catch-up effects and an unabated desire to travel in Austria and abroad, the outlook for 2022 was thus thoroughly positive. Despite the rapid spread of the new virus variant Omicron from the beginning of January 2022, with new highs in the number of infected persons, tourism demand in Austria was stimulated again with the extensive relaxation of the pandemic measures in February. As a result, demand from January to February 2022 was 27.9 percent lower in overnight stays than in the same period in 2019, and 29.5 percent lower in arrivals.

Looking at the first four winter months, Austrian accommodation establishments recorded 33.2 million overnight stays from November 2021 to February 2022, only one-third less demand than in the first four months of the last normal season 2018-19 (49.7 million). The number of arrivals in the same period was still 41.3 percent below the pre-crisis level at 8.0 million. The gap to the pre-crisis level was larger in the international segment than in domestic tourism (overnight stays –34.9 percent to –27.5 percent). From November 2021 to February 2022, nominal tourism revenues in Austria amounted to an estimated 7.74 billion € (–26.0 percent or –33.2 percent in real terms compared to the same period in 2018-19).