Travel bans a new blow to Spain's tourism sector

The UK's sudden decision on Saturday to enforce a 14-day quarantine on travelers from Spain sent shockwaves through an already troubled Spanish tourism sector. Within hours, TUI, Europe's largest travel firm, and budget airline Jet2 cancelled flights from Britain to mainland Spain for at least two weeks, leaving holidaymakers with little time to make alternative arrangements.

While TUI's competitors, including Ryanair and EasyJet, say they will maintain their flights, the airlines are also believed to have seen widespread cancellations as British travelers say they can't afford to miss work and self-isolate for 14 days upon return from their summer vacation. Both airlines' share price plummeted close to 10% on Monday following the quarantine announcement. The UK's latest travel update went even further, advising against all but essential travel to Spain for the time being.

Two days later, Germany advised its nationals against non-essential travel to three regions of Spain worst affected by a surge in coronavirus cases. The decision applies to Aragon, Navarra and Catalonia — including the popular coastal city of Barcelona and the Costa Brava.

Read more: Coronavirus latest: 'We have become negligent,' says disease agency chief

What it means for Spain's tourism sector

Spain's economy is heavily reliant on tourism, which makes up 12% of its gross domestic product (GDP). The huge influx of tens of millions of holidaymakers from northern Europe is a major economic boost for poorer coastal regions like Andalusia, for which agriculture is the other main earner, and where the unemployment rate is the highest in the European Union.

Britons make up the largest group of foreign tourists to Spain — some 18 million travelled there last year. This week alone, some 600,000 Brits were due to fly to Spain, according to estimates from public relations group PC Agency, cited by the Financial Times. Germans, meanwhile, are the second largest group — some 11.2 million traveled to the Iberian country in 2019.

Tourism is also responsible for 11% of jobs in a country with a stubbornly high jobless rate, at more than 15%. Tens of thousands of seasonal workers move from northern and rural parts of the country to the eastern and southern holiday resorts — as well as the Balearic and Canary islands — during the summer months to pick up work in hotels, bars and restaurants.

Hundreds of thousands of older Britons and Germans have holiday homes or retire along Spain's Mediterranean coast. Their bumper pensions are another huge source of income for regional economies. Foreigners have helped Spain's beleaguered property sector to recover in the wake of the crash during the 2008/09 financial crisis. Home prices on the coast and the Spanish islands have been increasing faster than the rest of the country, according to recent study by property appraisers Tinsa.

Read more: Coronavirus in Mallorca: The party's over for tourists amid new lockdown

Why this year is worse

After Spain was one of the hardest hit countries from the coronavirus pandemic, the national and regional governments faced a dilemma over how quickly to reopen to international tourists. Prime Minister Pedro Sanchez vowed that the country would be ready to welcome holidaymakers — at least from Europe — by July 1, but the extent of social distancing rules, which has limited the number of customers a restaurant or bar can host, has led many owners of hospitality outlets to question whether they should reopen at all.

Many of those who have bitten the bullet are barely making ends meet. According to research firm Dingus, Spanish hotels had reported that cancellations since the start of the year for July bookings had reached 64%. The figures were released even before the new German and British travel warning. Other data hints at the trouble facing holidays this summer, showing that occupancy from January to June was just 33% compared to 73% last year.

Although reports of crowds of Germans and Britons partying on the island of Mallorca have hit the headlines due to the lack of social distancing, reports suggest that many usually crowded beach towns are eerily quiet.

UK travel agencies, meanwhile, have had to heavily discount holidays to Spain to make it worthwhile for tourists to self-isolate upon their return. They were already offering £99 (€109, $128) bargains to entice people to travel abroad. Those deals will have knock-on effects on the profitability of airlines, hotels and transport firms this summer, who have already danced with insolvency during lockdown.

Read more: Budapest moves to make party tourism a thing of the past

The financial cost to Spain's tourism sector

The cancellations prompted by the UK's decision to impose a 14-day quarantine on travellers returning from Spain could alone cost the Spanish tourism sector €10 billion ($11.73 billion) in lost revenue, Jorge Marichal, the head of the tourism association CEHAT, told La Sexta television. The missing revenue from German tourists will similarly reach the billions.

It is too early to know how many hospitality sector workers are missing from Spain's tourism resorts this summer due to bars, restaurants and hotels making do with fewer staff. Anecdotal reports suggest many workers had just not been needed this season. A further hit to arrivals in August due to the new German-UK travel advisories could see thousands more tourism sector workers laid off. The loss of income has a knock-on effect on those already poor regions where many workers originate.

More than a million Spaniards lost their jobs during the coronavirus lockdown — a figure that doesn't include those workers who have been furloughed, which is believed to have affected another million people.