The Tourism Industry

Our analysis of the Italian tourism industry shows a picture of a sector of great potential, but which is struggling to realise that potential to the full.

Over the last sixty years, tourism has witnessed changes and developments of inconceivable proportions, polarising into two extremes:

• on the one hand, there are “all-inclusive” offers (resorts, major hotels, cruises) and artificial oases that are walled off and strictly controlled (large theme parks), which cater to the need for escape from the daily routine into a risk-free dreamworld of high quality, without contact with the local reality—a.k.a. mass tourism;
• on the other, there is travel in search of authentic experiences and excitement, involving only a minimum of organisation, in which direct contact with local populations and immersion in nature and the environment are favoured—a.k.a. experiential travel.

These two extremes are linked by a number of essential elements, including a focus on the quality of facilities and services offered, on the localities and the experience in general and the importance of time, which is limited, concentrated and not to be wasted.

Positioning of Italy

Italy ranks in top place among the countries most aspired to by travellers, but drops in the rankings when it comes to actual numbers. Italy ranks fifth in the world by number of international arrivals, with around 50 million tourists, and sixth in terms of tourist spending, equal to approximately $46 billion.

In the conviction that tourists would continue to visit Italy, attracted by the renown of its past, we have stopped investing in the present, a decision that is estimated to have cost the country in recent years around 2 per cent of GDP and 3 per cent of jobs.

Yet we are talking about the country with the greatest number of UNESCO World Heritage sites (51), the country with the greatest number of hotel rooms in Europe and the Mediterranean country with greatest number of cruise-ship visitors.

The world scenario in which Italy as a tourist destination competes has changed profoundly in recent decades:

•     the staggering expansion of new communication technologies has radically transformed supply and demand (on-line bookings and reviews, the sharing economy, etc.)
•     the geographical tourist map has changed completely, shaped by the entry onto the international scene of countries that until recently were excluded from the tourist circuit, but which today are important sources of demand and strong competitors to more mature economies.

Italy does not appear to have fully adapted to these major transformations and has continued to lose market share over the last twenty years. Although the trend has affected all of the country’s most direct European competitors - France, Germany, the United Kingdom and Spain - it cannot be ignored that Italy has been affected by it much more strongly.

In 2015, Italy ranked eighth in the World Travel & Tourism Competitiveness Index prepared by the World Economic Forum, trailing Spain in first place, France in second, Germany in third and the United Kingdom in fifth. It is above all contextual factors that mostly affect the country’s ability to attract tourist flows.

There is a lack of key infrastructure, such as airports, ports and high-speed rail, but also poor maintenance of the territory, hydro-geological instability, urban decay, the perception of high crime rates in cities, low levels of local public services and the inadequacy of digital infrastructure.

Issues for the sector

Besides the strong resistance that the general economic system appears to show towards enabling tourism to grow in line with the country’s potential, other major issues exist that are specific to the sector:

•     the quality of accommodation, with capacity spread equally between hotels and other accommodation, is on average not very high. The majority of hotel rooms continue to be concentrated most of all in three-star establishments (43.1%), whereas the number of luxury and superior luxury hotel rooms is negligible (3.1%). Other accommodation is characterised by the widespread presence of the informal economy
•     the average size of hotels is still quite small (average 33 rooms per establishment vs. 37 in France and 47 in Spain)
•     only 4 per cent of hotels belong to a hotel chain, compared to 11 per cent in Germany, 23 per cent in France, 28 per cent in Spain and 40 per cent in the U.K.
•     the number of facilities advertising on the Internet is still insufficient (88.5%) and even fewer establishments permit on-line bookings (68.3%). As few as 52.8% of Italian hotels offer free Wi-Fi to their guests.

Accommodation services thus appear to cater inadequately to new tourists, who focus increasing attention on quality and sustainability:

•     employment rates at Italian accommodation facilities are dropping and are among the lowest in Europe (net 40% employment rate in Italian hotels vs. 46% in France, 48% in the United Kingdom and as much as 56% in Spain)
•     demand continues to be very much seasonal, with booking rates at establishments reaching 64 per cent in August, but dropping below 20 per cent in the months of January, February, November and December.

While an overhaul of accommodation services is largely needed, there has been a worrying drop in the investment capacity of establishments. Yet an analysis conducted of hotels’ financial accounts clearly shows that the capacity to invest has been the key to overcoming the crisis that since 2008 has heavily penalised the sector.

All this is accompanied by complicated governance and a regulatory and administrative framework that is highly contradictory and unstable (over the last ten years, the organisational approach to the central administration of the tourism sector, today the responsibility of the Ministry of Cultural Heritage and Activities, has changed six times).

The weakness of the Italian tourism industry emerges all the more when the focus is restricted to southern regions only. The South of Italy does not appear at all able to exploit the immense artistic, historical, cultural, natural and environmental heritage that it has. Accommodation services consist mostly of second homes and continues to cater overwhelmingly to beach tourists, a segment that is mature, of low added value and subject to strong competition from other countries with Mediterranean coasts.

Relaunching the sector

It thus appears that a turn towards greater quality can no longer be put off, through efforts involving all stakeholders in the Italian tourism industry and with special attention focused on the country’s south, which potentially represents an asset of great importance for the tourism sector of the country as a whole. To achieve this goal, the priority actions identified include:

•     a national strategy that goes beyond the association of tourism and culture to embrace the industrial side of tourism
•     the rationalisation of the sector’s governance, with a view to promoting greater coordination between various sectors and the many institutional levels involved in the management of the tourism industry
•     boosting investment for the benefit of enterprise and to enhance tourist destinations and new tourist products
•     the consolidation of accommodation services through various forms of business combination, including the creation of large groups and chains but also looser forms of collaboration for smaller establishments (consortia, associations, voluntary chains)
•     the promotion of specific investments in the more dynamic segments of contemporary tourism (bicycle tourism, wellness, cruises, conventions, theme parks).