UniCredit Bank Austria Sector Report
Tourism continues to grow but will not reach the record levels of 2018
- With best-case growth of 2 per cent in 2019, the tourism sector in Austria will not be able to match 2018’s record revenue growth of 3.3 per cent in real terms
- Summer holidaying in Austria is becoming a pillar of growth
- The tourism sector is also expected to grow slightly in 2020, although international travel flows continue to slow down
- Austria continues to be one of the top tourism destinations worldwide
Austria’s tourism economy will fall short of 2018’s record levels in 2019. However, as UniCredit Bank Austria’s current Sector Report on tourism shows, the sector can still expect revenue growth in the range of 1 to 2 per cent in real terms and will continue to build on the 2018 revenues of EUR 28.1 billion. “The sector growth in 2019 and probably also 2020 is primarily a result of the high levels of competitiveness within the entire tourism sector in Austria, because the slower economic growth in the main countries of origin is also slowing down Austrian tourism,” explains UniCredit Bank Austria economist Günter Wolf.
The record growth of 2018 is unachievable for tourism in 2019 and 2020
In 2018, Austria’s tourism recorded its best annual result since the year 2000 with a revenue increase of 3.3 per cent in real terms. In 2018, the sector benefited in particular from foreign visitors who spent around 4.2 per cent more on tourism services in Austria than in 2017, for a total of EUR 21.4 billion. The sharp rise in tourism demand in 2018 resulted primarily from the very good economic growth rates in the main countries of origin. In addition, because of the record temperatures in the summer season, it is likely that the travel streams were diverted from southern European destinations to the cooler Austrian alpine and lake regions. Last but not least, the industry also recorded relatively high overall income growth in the last two winter seasons.
In 2019, the slight drop in demand in the first few months, due to Easter falling at the end of the winter season, was made up for in the summer season. As in 2018, Austria is expected to continue to be more attractive as a holiday destination in summer 2019 too, due to the above-average high temperatures. “The renaissance of summer holidaying in Austria in recent years – when not only tourism demand, but also revenue increased more sharply than in winter – is probably not only due to weather conditions, but also to the increased attractiveness of the summer offer,” says Wolf.
Stable growth by the end of the year
From January to October 2019, overnight stays increased by 1.5 per cent, a significantly slower rate than in the same period last year. According to preliminary data, revenue growth has also been roughly halved. However, in terms of demand and price developments for the next few months, tourism companies showed more optimism in November and are signalling stable growth by the end of the year. For 2019 as a whole, therefore, further growth in tourism revenues of 1 to 2 per cent on a price-adjusted basis can be expected.
In 2020, economic growth will continue to cool down in the main countries of origin, especially in Germany, thereby further reducing their population’s willingness to travel. The European Tourism Association expects the number of trips taken by Western Europeans to grow by just 2.3 per cent in 2020, following 3 per cent in 2019 and over 5 per cent in 2018. Guests from this region still account for three-quarters of all overnight stays in Austria. Half of these in turn are guests from Germany, for which Austria is already the third most popular holiday destination, according to the ADAC Travel Monitor. A decline in tourism revenues in 2020 is unlikely. However, as demand from Austrian visitors is also expected to slow, the growth of tourism revenues in 2020 should remain below the average over the last twenty years, i.e. 0.9 per cent per year in real terms.
Changing demand structure slows revenue growth
In the long term, Austrian tourism has succeeded in reaching new guest segments by improving the quality of the offer and compensating for the loss of demand and revenue due to growing competition and shorter stays. The offer was sold at higher prices, as demonstrated by the fact that the nominal income per overnight stay has increased more or less unabated over four decades (up to EUR 188 in 2018).
Only in recent years has revenue growth lost momentum compared to overnight stays, because the tourism demand has shifted more and more towards cheaper offers, especially towards holiday apartments. From 2008 to 2018, total overnight stays in Austria increased by 1.7 per cent per year, by around 2 per cent for 4/5 star accommodation, and by just under 1 per cent in other commercial accommodation. By contrast, almost 4 per cent more overnight stays were registered in holiday apartments each year. This development indicates that it is becoming increasingly difficult for the accommodation industry to achieve revenue increases. In the last ten years, Austria’s tourism revenues have only increased by an average of 2.5 per cent per year on a nominal basis, compared to more than 4 per cent in the previous decade.
The number of visitors to Austria is growing almost continuously, resulting in higher bed occupancy rates across the industry and rising tourism revenues overall. However, the decisive factor for individual businesses is that guests have spent less on average, i.e. they have been more thrifty, which, of course, negatively impacts the income of individual businesses as a result. The evaluations carried out by the Austrian Hotel and Tourism Bank show that, despite improved utilisation figures, operating profit in relation to revenues for 3-star and 4/5-star companies has not significantly improved on average over the last ten years. Only the strong growth in the tourism demand in recent years has led to a rise in the volume of earnings in the accommodation industry.
Austria among the top tourism destinations worldwide
In a global comparison, Austria is slightly losing market share as a tourism destination: the World Tourism Association expects that its current market share of international guest arrivals of around 2.2 per cent will dip below the 2 per cent mark over the next ten years. However, there is little risk of losing pace with international development. Austria is one of the most competitive tourism locations in the world, with a largely unique range of offers that is difficult to copy.
In addition, the Austrian tourism sector has successfully implemented structural adjustment measures and has been able to gradually improve the price/performance ratio of the offer. “The competitive strength of Austrian tourism is confirmed not only by the results over the last few years, but also by our high rankings in the World Economic Forum’s most popular tourism locations worldwide,” says Wolf. Compare with around 140 other countries, Austria is currently ranked 11th. At a detailed level, the tourist infrastructure and environmental conditions are among the best in the world.
UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel: +43 (0)5 05 05-41954;