Are we ready to travel? 

Strong and content I travel the open road, wrote the great American poet Walt Whitman in his classic poem Song of the Open Road. Out of the dark confinement! Out from behind the screen! he urges us as able to foresee what our 2020 would look like.

While last year brought along the experience of unprecedented confinement and endurance, 2021 lifts the curtains and asks us to think about the freedom of movement, a change of scene, unrestricted time with family and friends, and the proverbial open road ahead of us. However, with risk and caution on our minds and Covid-19 still very much part of our reality, how do we reconcile this need for movement and freedom with caution and reluctance?

According to the UN World Tourism Organization’s (UNWTO) recent report, in the period between January and March 2021, destinations around the world reported 180 million fewer international travelers compared to the first quarter of 2020. Asia and the Pacific experienced a drop of 94 percent in international arrivals over the three-month period. Europe took the second spot with an 83-percent decline, followed by Africa (-81 percent), the Middle East (-78 percent) and the Americas (-71 percent). However, the UNWTO’s Panel of Tourism Experts expressed more optimism about the upcoming May-August period.

It is clear that travelers will need support from the tourism industry, but how prepared is the industry after a hard year? A recent report from Allianz Research, takes a closer look at the 220-billion-euro European accommodation industry’s road to recovery.

The Covid-19 whirlwind

Swept up in the Covid-19 chaos of 2020, the accommodation industry experienced a 52 percent slump in accommodation activity in the EU27+UK, wiping off more than 115 billion euros in turnover and putting an end to ten years of dynamic growth. Structural differences across European accommodation markets and differences in crisis management explain the different performance, with France and Germany faring far better than the UK, Spain, and Italy.

Summer of 2021: The importance of vaccines

The industry, as well as travelers, is placing its hopes on the progress made on the vaccination front to ensure a more lasting return to normal. A slow easing of restriction measures would support the accommodation industry by lifting mandatory restrictions on accommodation activities and facilitating intra-country and intra-European travel. Such actions would also propel the food service industry, cultural, and sports activities.

Based on the progress in mass vaccination, Allianz Research estimates that in the second quarter of 2021, France would register a growth in activity by 23 percent with domestic demand supporting domestic supply, while regions more exposed to international travel (Paris, for example) will not see a significant improvement before the end of the year.

Germany would recover by 18 percent in 2021 and is leading the vaccination race among continental European countries. In the coming quarters, it could benefit from a higher spending from locals, as it did in the summer of 2020.

The UK accommodation sector would benefit from the country’s rapid pace of vaccination, with demand picking up firmly. The 2021 turnover would bounce back by 34 percent.

Italy reopened the economy in the first quarter of 2021 only to reinstate the restrictions again in March. The country could see a slower loosening of restrictions as it is comparatively late in the vaccination race, but would see the strongest rebound in 2021 (40 percent).

Spain stands out as the country that had the toughest restrictions in 2020 and is also most reliant on international travelers. With households earning a comparatively lower income, the domestic demand alone will not be able to account for a significant recovery in local activity. After seeing the steepest decline in activity in 2020, Spain would see an accommodation turnover grow by 30 percent in 2021.

Vacination before Travel

The road to recovery

For medium-term growth, the industry will be driven by more fundamental factors such as GDP growth and the pace at which countries return to their pre-crisis levels. After the slump of 2020, the European economies are expected to recover gradually, with France and Germany returning to pre-crisis GDP levels in 2022 and Spain, Italy, and the UK later.

Another factor that has the potential to influence medium-term growth is the exposure to international demand, with Spain and France facing more lasting headwinds because of their strong exposure to international demand. The recovery in international travel could also speed up due to vaccination certificates or passports that would document the health status of travelers.

Exposure to business travel will also contribute to the strong dispersion in performance between countries and between destinations in the same country. To which extent will the corporate travel budgets return to their pre-crisis levels remains a major uncertainty: 2020 showed that corporate clients were capable of keeping business continuity despite lower opportunities for in-person meetings. Whether that trend remains is to be seen, but there is a strong incentive among corporations to keep the travel budget low.

The industry as a whole is expected to recover by 2024 at best. By then, leisure demand will be bouncing back faster than business demand and domestic guests will be returning sooner than European and extra-European guests.

The rise of the conscious traveler

The pandemic has inevitably changed the behavior and mindsets of travelers. Amid all the short- and long-term changes, the tourism industry will also need to rethink its approach to customers who now value safety and security as important factors when choosing their destinations and accommodation.

A recent survey commissioned by Allianz revealed that we’d like to travel again, but still don’t travel as much. According to our survey, respondents in Italy and France were more willing to travel to risk regions, while Germans and Spaniards remained more cautious.

Rigorous hygiene measures and flexible bookings seem to be a natural progression toward a new travel normal. In addition to that, a recent report by Euronews and Globetrender identifies some new potential trends that could shape travel and tourism in years to come. These new trends will offer things like star-gazing events in the wilderness; glampervan journeys where you can take your home with you as you travel; cultivacations that help you relax through activities such as gardening or fruit-picking; longevity retreats that offer immunity-boosting and anti-ageing treatments; community immersion experiences for an authentic experience; or co-working camps where you can spend a month or two abroad to work on projects as you also explore the host country.

The future of travel seems to be innovative, adaptive, and certainly resilient. 

The Allianz Group is one of the world's leading insurers and asset managers with around 125 million* private and corporate customers in nearly 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 746 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.8 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2023, over 157,000 employees achieved total business volume of 161.7 billion euros and an operating profit of 14.7 billion euros for the group.
* Including non-consolidated entities with Allianz customers.
** As of March 31, 2024.

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Lorenz Weimann
Allianz SE
As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:

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