One of the principal tenets of the European Union — enshrined in the June 1985 Schengen Agreement — is the free movement of people and trade across the borders of its 27 member nations.

Within weeks, COVID-19 essentially ended that freedom, even if the virus will in the grand scheme of things be a temporary hindrance.

Inter-continental travel has not been as restricted across Europe since World War II, and in a hotel industry vastly different today from that of the 1930s, the effect on the industry has been colossal.

Apart from its first three months, 2020 was essentially a lost year, and there is fear Europe in 2021 will not reopen to the same extent as Asia and North America. Europe’s composition of many nations, usually an attractive draw for international travelers, will inevitably hinder reopening.

Tom Jenkins, CEO of the European Tour Operators Association, said a survey of incoming operators that he conducted in February raised definite alarm bells about continuing lost business.

“There is real concern at the inability of Europe, and I include the U.K. in that, to come up with a clear prognosis as to when visitors will be allowed to visit," he said. “Many people who booked to come to Europe from North America in 2020 postponed their trip, [and 2021] bookings are gradually being eroded as April, May and now June are being canceled as months when people can expect to travel."

Tom Barrett, director, hotels and leisure for Savills based in Dublin, said for Ireland, and the same is true of most EU nations — the big unknown is “when do Americans start coming back in large numbers.”

“It is a time factor. There are no exact dates as yet," Barrett said. "There were a lot of lost dates last year, and then we all discovered COVID-19 is a little unpredictable."
Both investors and consumers are getting more anxious across Europe, Jenkins said. The vaccination rollout has been patchy across the EU. On March 23, the U.K. had distributed the first dose of COVID-19 vaccinations to more than 50% of the adult population, while the EU’s official statistical organization, Eurostat, said the percentage on the same day for its member nations was just 11.3%.

Until the U.K. and the rest of Europe reach the same level of vaccination, international travel and hotel occupancy are unlikely to recover quickly, he said.

“We did a survey of buyers in January and in March [who] thought that 2021 might yield 26% of the volume of 2019," he said. "By March this dropped to 23%. The outlook is deteriorating the longer indecision reigns."

In 2020, Eurostat reported the number of nights spent at EU accommodation options totaled 1.4 billion, a decline of 52% from 2019 numbers. This included the first three months of 2020 before the extent of the pandemic was known and before lockdowns were imposed.

The most-affected EU membership countries were Cyprus, Greece and Malta, where hotel nights for the same period were all down approximately around 70%. Also, across the EU domestic overnights declined, too, averaging a decline of 38% from 2019, with only Slovenia (+33%), Cyprus (+15%) and Malta (+15%) seeing increases.

Eurostat's most recent economic data on the travel sector is from summer 2018, when EU residents booked more than 270 million trips, amounting to more than 1.9 billion overnight stays worth approximately 138 billion euros ($161.8 billion) in tourism spending.

According to CoStar’s hospitality analytics firm, STR, only 10 countries of the 27 European Union nations saw year-over-year occupancy declines of less than 60% in 2020. Only France (-45%) and Finland (-49.4%) saw declines of less than 50%.

Hungary experienced the worst occupancy decline in 2020 (-71%), while just behind it were the Czech Republic (-69.9%), Croatia (-69.2%) and Malta (-69%). Germany, the continent’s largest economy, saw a hotel occupancy decline 55.5% for the year.

Ten markets saw absolute occupancy in 2020 of less than 25%, with Croatia coming in at the lowest level with occupancy of just 18.7%, a destination known for its Dalmatian Coast beaches and islands and heavily dependent on international vacationers.

The next lowest three countries by absolute occupancy were Cyprus (20.7%), Bulgaria (22.2%) and Romania (22.3). France, Germany and Italy — the major economic nations in the continent — saw actual occupancy for the full year of 37.7%, 31.9%, and 25.8%, respectively.

For the United Kingdom — now separate from the EU after ending its direct membership at the beginning of 2021 — the focus is on June 21 when hotels are able to reopen to domestic travelers. That is, unless there is a reversal in fortunes regarding the virus.

UKHospitality’s CEO Kate Nicholls said it is critical the U.K. lifts all restrictions to hotels on that date, although with COVID-19 cases rising in mainland Europe, government ministers have warned about this summer being too early to book international travel.

“The U.K.’s tourism and hospitality sectors are both world leaders, but they have been devastated by the COVID crisis," she said.

Industry figures show hospitality sales plummeted 54% in 2020, equivalent to 72 billion pound sterling ($99.3 billion), she said. At the same time, 40% of accommodation and food service activities businesses have no or low confidence their businesses will survive for the next three months.

Andreas Scriven, lead partner of hospitality and leisure at Deloitte, said his firm’s March 2021 Hotel Sentiment Survey for Europe showed that “disruption has shifted towards the longer term with 71% of respondents expecting it to last beyond 2021, versus 59% in October 2020,” when Deloitte conducted its previous report.

Scriven said the markets in Europe likely to see the most hotel distress are Spain, the U.K. and Italy.

Consumer confidence is the key to any recovery in Europe's travel industry, Nicholls said.

“With the expectation that consumer confidence will take time to recover, trading is unlikely to return to anything like normal levels for at least six months,” Nicholls said.

On Feb. 1, the EU added a new color, dark red, to its map of Europe relating to the threat of COVID-19 in specific countries and markets.

Countries shaded dark red at press time include the Czech Republic, Estonia, Hungary, Malta and Slovakia and parts of France, Italy, Poland and Sweden.