Market monitor: Italy

International travel spend will help boost Italy’s recovering economy.

Economic overview

Italy is Europe’s fourth-largest economy, but its recent performance has lagged other European Union countries. That’s largely because the country has lost share in export markets. Italy just emerged from a three-year recession, yet economic growth in 2015 of 0.6% hardly suggests a robust recovery. What’s more, Italy’s growth in the final quarter of last year was the weakest among eurozone members.

Oxford Economics expects the Italian economy will grow by 1% in 2016, accelerating to 1.3% in 2017. An improving labor market and low inflation rate continue to support the consumer spending that has driven Italy’s recovery so far. But there’s little sign of a pickup in business investment.

Business travel industry insight

More than 80 million visitors went to Italy in 2015, making it Europe’s second-largest inbound travel market after France. One fifth of all travelers visited Italy on business.

Italy is Europe’s fourth-largest business travel market, with close to €30 billion spent in 2015. Domestic travelers account for more than half of this figure. Europeans are frequent visitors, as well. Only 16% of the country’s 2015 visitors arrived from countries outside Europe. Over the next five years, spending by international travelers will grow more quickly, lifting total spending to about 50% by 2020.

Italy is Europe’s best-supplied market for hotel accommodation; 1.1 million rooms were available in 2014. After years of growth, supply in lower-tier inventory began to decline in 2008. Upscale and luxury supply continues to grow in response to strong demand, particularly from international travelers. Chain penetration is low at just 4%, reflecting the importance of leisure travel, which is well served by independent hotels.

National airline Alitalia faces strong competition from low-cost carriers, which account for almost 60% of seats on flights to European cities. Alitalia now is backed by Etihad Airways, a major shareholder. The investment has encouraged Alitalia to rebuild its long-haul network, with new links to destinations like Beijing, Mexico City, Santiago and Seoul. 

Opportunities

  • Progress in the government’s reform agenda, such as labor market changes that took place in 2015, is improving Italy’s competitiveness and laying the foundation for stronger growth.
  • Employment growth and property tax reforms increase disposable income, helping consumers continue supporting economic recovery.
  • Alitalia is rebuilding, thanks in large part to Etihad Airways’ support, and is poised to offer business travelers better options for globally integrated airline service in the Italian market.

Challenges

  • Weak confidence and external demand hamper business investment.
  • Interest rates are low, but credit is not widely available, which limits economic growth.
  • High public debt means Italy is vulnerable to financial market shocks or economic slowdowns. And the government plans more spending.

BCD Travel’s Research & Intelligence experts translate the trends driving international business growth in new markets. Talk to your account manager about how BCD Travel can support your company’s growth and get your travelers where they need to be across the globe.

 

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