Italy hotel performances after lockdown

How is the tourist season shaping up in Italy?

Following the end of the lockdown and the gradual restoration of free movement of people in our country, this is the question that all the workers in the tourism sector are asking.

This question is related to the fact that this is a season where the historical data of 2019 cannot be taken into account, since last year there was no pandemic and none of the things that a pandemic entails.

Moreover, the last pandemic dates back to a century ago, far too remote to draw useful information and make tourism forecasts.

Making estimates in an unprecedented situation with no historical data is dangerous and presuming to gauge the trend and results of the current season with the same benchmark and approach employed in the past season means setting off on the wrong foot.

In the presence of a market shock of such magnitude (as were in the past September 11 and the financial crisis of 2008), the season must be tackled as if it were a year zero, compiling historical data along the way and adapting with flexibility to a completely new situation with the only real goal of achieving the best possible outcome and closing the year with a profit.

However, to date there is a range of data that can provide some idea of what we can expect from this season.

What is happening worldwide

First of all, it is essential to understand what is happening in other countries that have lifted the lockdown for long time now, starting to coexist with the virus and resuming tourism activities.

The input of STR, the world’s largest hotel benchmarking company, is quite useful in this regard as it illustrates quite clearly the impact of Covid-19 (and related lockdown) on three macro- areas (China, Europe, United States).  What emerges is that while Europe, after the slump in March, is still experiencing a phase of occupancy stagnation, in China (which lifted the lockdown in mid-March) and in the US (which, despite being the country with the highest number of infections and deaths in the world, loosened restrictions in many states already at the end of April), occupancy is steadily growing week after week.

If one wished to make projections based on this trend of steady growth, it does not seem unreasonable to predict that China and the US will return to pre-crisis levels of occupancy within 4-5 months.

In any event, it is interesting to note that this national recovery of  occupancy average is initially driven in both cases by the domestic leisure segment and by those destinations that basically have these characteristics: strong domestic demand, reachable by car, very short booking window and very high pressure on weekends and long weekends, with occupancy peaks greater than 80%, in some cases.

This refers mainly to seaside, mountain, lake, and countryside destinations.

The US data is certainly emblematic as, despite the dramatic situation in domestic health and economy, people continue to fill hotels and beaches on the East and West Coast during weekends (naturally in those states where this is allowed and with all proper precautions and regulations).  Or, alternatively, mountain destinations.

The same trend was observed in South Korea, one of the countries that was better able to manage the epidemic and has been coexisting with the virus for some time now.

Let’s now focus on Italy

With an available sample of 300 accommodation facilities currently employing our consultancy services on the national territory, we have the possibility to measure the ongoing seasonal trend in Italy directly and outline what we might expect in the coming months (all data shown below are sourced from our software Revolution Plus).

For starters, the first positive factor, which seems to mirror the global trend, precisely concerns the weekends and long weekends.

The weekend of May 22-23  and the long weekend May 29-Jun 1, the first since the easing of the lockdown in Italy, were an interesting initial test.  And the response was indeed quite promising, especially if we bear in mind that, until 3rd of June, in Italy traveling was permitted only within the same region.

On a representative sample of 100 leisure facilities (seaside, lake and mountain) open and operational during the past weekends, more than half exceeded the 50% occupancy threshold with some virtuous cases of fully-booked facilities (we should likewise not forget that from March to current date the average occupancy rate of Italian hotels, in line with European data, hovers between 10% and 15%) and a +10% revpar increase compared to same period of last year.

This leads us to be confident about the performances of the season just as soon as inter-regional travel is reinstated and it is to be hoped that Italy will also be able to welcome foreigners once borders are reopened (from 3rd of June).

Indeed, if we want to take a comprehensive look at the situation for the entire season and the forward occupancy until September, segmenting the analysis by cluster (seaside, mountain, lake, countryside, business city, art city, spa) some interesting information arises.

What emerges is that at this time leisure destinations such as seaside, lake and mountain are outperforming business and art cities, relying especially on domestic segment.  And they are following a trend of slight but steady growth over the last 2 weeks (+3% pickup for July, August, September and pre-Covid ADR levels for peak season), consistent with the easing of restrictions and government announcements.

At this time, for forward bookings, it appears that the mountain gains more preferences than the seaside in July and August.  It must be noted, however, that seaside occupancy is an average subject to substantial fluctuations depending on the type of facility.  Indeed, outdoor facilities and serviced apartments in seaside destinations are now recording a higher number of preferences than hotels, likely due to the feeling of greater quiet and safety that this kind of properties instill in relation to the virus.

However, the data on these first two post-lockdown weekends show that hotels receive higher demand closer to check-in date.

As far as cities (business and leisure) are concerned, the situation is certainly more complex and the forward occupancy for the coming months is still low.  This is due to the fact that cities with a dual business/leisure vocation (Rome, Milan, Florence, etc.) thrive and depend primarily on segments that are currently at a standstill, such as corporate, MICE, and international leisure.

Clearly, the reopening of borders and air travel to/from Italy already announced by many airlines from June will lead to an improvement in the situation, which will be further consolidated from September when the sector related to conferences, fairs and events once again resumes operations.

In this sense, it is promising that as of today 35% of our forward bookings for the season comes from foreigners (Italy has been the first European country to reopen borders without quarantine to all European and then non-European countries starting from June).

In conclusion, this pandemic has certainly jolted the world of tourism and hospitality.

However, by analyzing the data in a cold, clear-headed and detached manner, what transpires is that there are types of destinations and facilities that will recover more rapidly from this crisis, while others will require longer times.

Reading these worldwide data, one thing is glaringly obvious: the virus has not destroyed tourist demand and people’s desire to travel, if anything, it has changed their habits.

As long as they are given the chance, people are eager to travel again and enjoy life and free time.

And the real factor affecting demand involves the restrictions on the movement of people.  Much more so than the psychological (fear of contagion) or economical (less spending power) aspects.

At least for domestic leisure destinations, judging by these data it’s undeniable that during this season weather will be definitely more important than Covid-19.

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