VENETIANS HAVE long complained that a surfeit of tourists has turned their city into a historical Disneyland. As if to prove them right, in 2018 the city council erected turnstiles to control the 40m or so holidaymakers swarming in every year. In 2019 “La Serenissima” went a step further and announced plans to charge visitors coming through those gates up to €10 ($11.50) a day.
Now Venice’s problem is not too many tourists, but too few. The covid-19 pandemic has caused a collapse in international travel. The OECD, an intergovernmental think-tank, forecasts that international tourism will fall by 60% globally in 2020 and by up to 80% if second waves of the pandemic delay economic recovery. So several governments, including Italy’s, are trying a radical new method of reviving their tourism industries: paying subsidies directly to holidaymakers. But with a recent spike in covid-19 across European tourism hotspots, increasing the risk of suddenly imposed quarantine rules that could wreck holidays, doubts are growing as to whether this is a sensible way to splurge taxpayers' money.
Governments have long sought to help the industry indirectly, with handouts for airlines, subsidies for airports and other infrastructure, or lower value-added tax (VAT) rates for hotels and restaurants. Handing visitors cash or spending vouchers is a new departure for most, but the idea has caught on rapidly.
In June Italy unveiled a “holiday bonus” scheme costing €2.4bn, under which Italian families on low incomes receive up to €500 towards domestic holidays. To lure both foreigners and mainlanders, Sicily’s regional government recently approved spending €75m on vouchers, redeemable for accommodation, guided tours, museum tickets and more. Voucher schemes are also being implemented in Iceland, South Korea, Taiwan and Thailand. Tackling wary travellers’ fears head-on, Cyprus has promised to meet the quarantine, health-care and holiday costs of any visitor who contracts the virus. And perhaps most ambitious and costly of all is Japan’s “Go To Travel”, which was launched on July 22nd. The government will pay for discounts of up to half the cost of trips within the country, reimbursing hotels and travel agents at a potential expense of ¥1.3trn ($12.6bn).
It is easy to see why politicians want to prop up the tourist trade. It is a big employer. Over the past five years, according to the World Travel and Tourism Council, an industry body, the sector created one in four net new jobs globally. Tiffany Misrahi of the WTTC calculates that if international travel falls by half this year, 121m jobs will be lost and global output worth $3.4trn forgone. Politicians may also think that subsidies for domestic tourism will be popular with voters jaded after months of lockdown.
Why are tourist subsidies suddenly so popular? Politicians have not abandoned old policies entirely. They are finding billions to stop ailing airlines going bust, but that will do nothing to stimulate demand. And although VAT cuts have been used to pep up the industry in past downturns, these are now regarded as “a blunt tool”, notes Jane Stacey of the OECD. When Britain cut VAT economy-wide in 2008, for instance, much of the stimulus quickly leaked out of the economy, as imports were boosted by more than activity at home. Aiming VAT cuts precisely at tourist spending is difficult. With vouchers, that is easier to do. The Resolution Foundation, a British think-tank, argues that their terms can be changed to help an area or sector in particular need of speedy help.
Despite their apparent political appeal, the subsidies are not proving universally popular. Some see them as unfair: wealthier folk are likelier than poorer ones to be able to take time off work and to have spare cash for holidays. To avoid subsidising the rich, schemes’ eligibility can be limited. In Italy, only households with incomes of under €40,000 a year qualify. In South Korea the government is paying extra “vacation bonuses” to employees of small firms who take time off.
Some intended beneficiaries oppose the schemes, too, fearing that travellers could bring covid-19 to remote tourist spots hitherto little affected by the disease. “Go To Travel” is especially unpopular. In a poll for Nikkei Asian Review, a Japanese newspaper, published on July 20th, 80% of respondents said it was “too early” to launch the policy; only 15% said it was “appropriate”. Residents of Tokyo, where infections have risen in recent weeks, were excluded from the scheme at the last moment to calm country-dwellers’ worries of being overrun by coronavirus-carrying staycationers.
If the politics of holiday handouts are not clear-cut, nor are the economics. Many people who are staying at home can doubtless afford a trip. Household savings have been rising rapidly in both America and Europe, as people have spent less on commuting and eating out. Lower prices, and even state handouts, may not tempt them to venture out on holiday. They may fear catching the virus while travelling (even in Cyprus). And they are increasingly worried about getting stuck abroad in renewed lockdowns or unexpected quarantines on their return. British holidaymakers in Spain, for instance, received just five hours notice on July 25th that they will need to self-isolate for 14 days when they arrive home. Compounding these problems, it is still difficult to buy travel insurance that covers covid-19.
And vouchers or no vouchers, some over-visited cities are wondering whether they really want all the tourists back. “This is the moment to consider other alternatives,” declares Paolo Costa, a former mayor of Venice and president of the city’s port authority. Jobs in tourism tend to be low-skilled, poorly paid and seasonal. Developing a tech cluster from the universities that Venice hosts, or developing its port as a trans-shipment hub between central Europe and the Far East, could produce better, more stable employment. But obtaining seed money for this from the central government is harder than getting yet more subsidies for tourism. Why? “The tourism lobby is bigger than the Venice lobby group,” Mr Costa sighs.
By The Economist https://www.economist.com/international/2020/07/27/why-governments-are-paying-people-to-go-on-holiday