Market monitor: Italy at a glance

Falling confidence, weaker credit flows and rising uncertainty define Italy’s economy.

Economic woes weigh on air and hotel suppliers as business travel spending slows.

The market for business travel to, from and within Italy was worth nearly US$73 billion (more than €61 billion) in 2018. Domestic trips accounted for 43% of this amount. The remainder was evenly split between outbound and inbound international trips. From 2013 to 2018, spending on corporate travel increased by 6% a year. Corporate travel spending is expected to grow 3% a year through 2023. While spending on inbound travel is forecast to increase 5% annually, outbound travel will grow just 1% per year.

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Economic environment

Economic growth and business travel spending

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  • Italy is Europe’s fourth-largest economy behind Germany, the United Kingdom and France. It accounts for 15% of the eurozone’s economic output.
  • Italy has the eurozone’s second-largest manufacturing sector, but its companies are small. They struggle to finance innovations needed to be competitive in export markets.
  • Falling confidence, weaker credit flows and rising uncertainty define Italy’s economy, which is technically in recession.
  • The economy is vulnerable because public finances are in poor shape; the country’s political situation is uncertain; and Italian banks are highly exposed to government debt.
  • Growth is unlikely in 2019, and future growth is expected to remain below 1% a year through 2023, according to Oxford Economics.

Air

International travel

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  • Demand for international travel increased by more than a quarter between 2013 and 2018 to 94 million journeys. Arrivals and departures grew at a similar pace, averaging nearly 5% per year. Through 2023, growth in international travel is predicted to slow to 2.2% per year.
  • More than one-fifth of travelers to Italy arrive from Germany; 13% come from France. The U.K. is the third-largest source of demand, with a 9% share.
  • France is the most popular destination for Italian travelers, accounting for 24% of departures in 2018. Spain sits in second place with a 12% share.
  • Alitalia is Italy’s largest airline, with strong positions in the country’s two largest markets—Rome and Milan. But it faces challenges on short-haul routes from low-cost carriers Ryanair and easyJet, and Air Italy could develop into a threat on long-haul routes.
  • Alitalia faces financial challenges brought on by years of poor performance. The government has propped up operations since 2017; it’s seeking a buyer for the airline.

Accommodation

Hotel demand

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  • Between 2013 and 2018, hotel demand in Italy grew over 12%, rising to 286 million room nights. The demand is evenly split between domestic and international travelers. Oxford Economics predicts hotel market growth of 1.8% a year through 2023.
  • Travelers from Germany accounted for more than a quarter (27%) of international demand for hotel rooms in 2018. France, the U.S, the U.K., the Netherlands and Switzerland each contributed shares of 5-6%.
  • The number of hotels in Italy has decreased since 2008. Chains account for just 5% of hotels, although the size of their properties means they control 15% of rooms.
  • Two-thirds of chain supply is dedicated to the upscale and upper-upscale tiers. But midscale-focused Best Western Italy’s largest chain with more than 150 hotels.
  • Gruppo UNA is the largest local chain. In all, 137 domestic chains operate in the Italian market.
  • Average daily rates (ADRs) in Italy in 2018 aligned with BCD Travel’s Industry Forecast prediction of 0-2% growth. ADRs should expand at roughly the same rate in 2019.

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