In 1910, after deciding that his capital city lacked suitable lodgings for Europe’s high society, King Alfonso XIII presided over the opening of the Madrid Ritz, Spain’s first luxury hotel.

Last month, as Spain and southern Europe prepared for a post-pandemic era of tourism, the 153-room hotel reopened its doors following a three-year, €100m refurbishment. It now boasts 4-metre-high glass entrance doors, chandeliers beside the swimming pool and crown symbols woven into the carpet in front of every room.

The bet made by Mandarin Oriental, the hotel’s operator and co-owner, is that the world the Ritz now faces will be even more suited to high-end tourism than the pre-coronavirus period. It is a hypothesis gaining ground as Europe prepares to reopen its tourist market, with the UK setting out new rules for travel this week and the EU developing plans to open up from next month.

The big question is whether Covid has changed tourism for good. 

“Guests are impatient to start travelling again,” says Greg Liddell, the general manager of the Madrid Ritz, where rooms can cost up to €15,000 a night. “We are witnessing a strong pattern of demand.” Madrid’s increased offering of luxury hotels — Spain’s first Four Seasons opened nearby in 2020 — “will allow the city to compete with all well known destinations in Europe”, he adds.

It is part of a shift by southern European countries to move into more lucrative tourist activities as doubts increase about the sustainability of the mass market model. Some are using resources from the EU’s €750bn coronavirus recovery fund to back the switch.

“We are moving from a model of ‘the more tourists, the better’ to one of higher expenditures, more nights and premium tourists,” says Reyes Maroto, Spain’s tourism minister. “The sector and the government are going to use the EU fund to push ahead with this change . . . We have to improve our holiday offering so that travellers discover products beyond our marvellous beaches.”

While no one is suggesting the imminent death of the beach holiday — which ranges from all-inclusive deals in large seaside hotels to independent stays in villas or other types of accommodation — the industry is increasingly clear that post-Covid growth is likely to come from elsewhere.


International visitor spending in Europe in 2019, according to World Travel and Tourism Council


Decline in visitor spending across European countries in 2020 compared with the year before


Loss of jobs in Europe’s tourism sector, equivalent to almost 10 per cent of the 2019 workforce

Alan French, chief executive of the tour operator Thomas Cook — an online brand since the bricks and mortar version collapsed in 2019 — says people are now “more interested in doing an experiential holiday every two or three years than the annual sun trip”. His group is targeting “not just sun and beach holidays but holidays that are in those destinations with more activities in them”.

It is a huge issue for a vital European industry. In 2019, the continent attracted the most international visitor spending of any major global region, $619bn, according to the World Travel and Tourism Council, but the sector has shrunk dramatically as a result of the crisis. 

Spending by tourists declined 64 per cent in 2020 compared with the year before, while the overall contribution of travel and tourism to Europe’s gross domestic product was halved to $1.12tn. Across the continent 3.6m people have lost their jobs in the sector, almost 10 per cent of the 2019 workforce. 

“The pandemic has led to a shakeout of the traditional travel business model with operators and destinations focusing on more lucrative customers,” says Paul Charles, chief executive of travel consultancy PC Agency. “The current fly and flop model has to adapt.”

The Benidorm effect

The pandemic not only exposed the heightened dependency of economies like Spain on tourism — but also their reliance on a particular kind of tourist activity: the cheap flight and board pioneered by the Franco dictatorship in the 1950s and 1960s, which led to construction along Europe’s coasts and the appearance of high-rise tourist cities such as Benidorm.

Spain is trying to break away from that legacy. “If we improve our destinations,” says Maroto, “it will allow us to attract better quality tourists who appreciate the investments we are going to make.” Her government plans to spend €3.4bn in EU recovery funds modernising tourist infrastructure over the next three years — while seeking more visitors from Asia, more cultural visitors and more fans travelling to the locations of films and television series such as Game of Thrones.

Spain is far from alone in such ambitions. In Italy, Mario Draghi’s government has said it will focus on improving the sustainability of the country’s tourism sector as it prepares to reopen, using EU money for that effort. At the start of April his administration banned large cruise ships from docking in Venice, a practice that campaigners have long argued is environmentally damaging to the lagoon city. 

Levante beach in Benidorm. The pandemic has highlighted Spain’s reliance on the cheap flight and board style of holiday © David Ramos/Getty Images

France, the world’s most popular destination, is in a different situation. With two-thirds of its tourist revenues generated domestically, the country is less dependent on sun and surf packages. High-end US and Chinese tourists were an established fixture in Paris’s designer stores and four- and five-star hotels but an effort may be needed to woo them back once the pandemic subsides.

Greece, beloved by many northern Europeans, has also been rethinking its commercial tourism. Harry Theoharis, the country’s tourism minister, says Athens is no longer encouraging investment in traditional beach holidays “because I am not sure that this is a model that can continue unabated”. 

He expects customer demand for less crowded travel to persist for two to four years, adding that people will be “more aware” of health and safety issues for “at least a generation”. He notes that the luxury end of the market is recovering more quickly than mass market tourism, adding “in some cases it is more than 2019”.

Extras in ‘Game of Thrones’ leave Seville bullring after filming. Spain wants to attract more cultural visitors and fans of TV series to diversify from its traditional beach holiday options © Cristina Quicler/AFP via Getty Images

Luxury travel accounted for 21 per cent of Europe’s total tourism revenues in 2019, according to consumer data company Statista. And while it was worse hit than budget travel during the pandemic, it is expected to recover quicker, increasing its share of the continent’s tourism market. 

The Madrid Ritz expects to be at 100 per cent occupancy by year-end. Marriott, the world’s largest hotel group, says that amid a “rising demand for privacy” its homes and villas division has continued to grow despite the pandemic. In one case, a wealthy client booked out the entire floor of one of the group’s Ritz-Carlton hotels.

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One reason for the shift, as the pandemic exacerbates inequalities in income and wealth across the globe, is higher barriers to travel that have pushed up costs for consumers. In the UK, anyone leaving the country will have to take at least one PCR test, increasing the potential cost of a holiday for a family of four by around £500, according to average test prices collated by ABTA, the travel industry trade body.

Gabriel Escarrer, chief executive of Meliá Hotels International, adds that the pandemic has accelerated a long-term shift towards “a hyper-segmentation of demand, for offers such as cycle-tourism, walking holidays, rural tourism, caravans and so on, but also for hotels with large outdoor areas”.

He says such developments, together with health measures and social distancing, could increase the cost of travel in the medium and longer term. But he emphasises the benefits for countries with big tourist sectors.

“[The industry] has long been calling for a model based more on quality than quantity, which is more sustainable and economically and socially profitable,” he says. “Four- and five-star hotels generate more jobs and more wealth, not just for the hotels but also for the destinations.”

A cruise ship arrives in Venice. At the start of April, the Italian government banned large ships from docking in the lagoon city to protect it from environmental damage, as part of an attempt to improve the sustainability of the country’s tourism sector © Miguel Medina/AFP via Getty Images

Vaccinating their way to the beach

Despite the industry’s emphasis on higher-end tourism, both the UK and the EU are working intensively on preparations for a large-scale return to cross-border travel in Europe. Spikes in booking numbers to destinations that have said they will welcome tourists such as Greece and Turkey indicate there is demand for sun, sea and sand breaks, particularly from German and British tourists.

Budget airline Ryanair’s chief executive Michael O’Leary told an FT conference in April that he hopes the airline will hit 80 per cent of 2019’s volumes by the summer. In the previous month, he said, booking volumes had been “30 per cent of normal and trending in the right direction”.

The package operator and airline Jet2 says bookings jumped by up to threefold when Cyprus, Greece and Turkey announced plans in March to open for the summer.

Passengers return their negative PCR tests at Schiphol airport in Amsterdam. On Friday, the UK government is expected to unveil an initial list of countries deemed safe for travel so long as one PCR test is taken within two days of a return to the UK © Robin Van lonkhuijsen/ANP/AFP via Getty Images

“People in the northern hemisphere of Europe are hungry for sun and hungry for relaxation,” says Fritz Joussen, chief executive of Tui, Europe’s largest travel business, who praised Greece’s decision to welcome vaccinated tourists from May 14 as a “very smart move”.

Mark Tanzer, chief executive of ABTA, argues that sun, sea and sand trips still have a dedicated audience: “It is sunny, it’s outdoors and it’s good value and I don’t think anything [resulting from] Covid is going to alter those facts. There will be demand.”

He adds that targeting higher spending travellers is “something tourism ministers always say but if you took away the mass market they would be very unhappy”.

Indeed, package holiday bookings could be about to make a further dramatic rise. On Friday, the UK government is expected to unveil an initial list of countries deemed safe for travel so long as one PCR test is taken within two days of a return to the UK. Meanwhile, the European Commission, which is planning to reopen to non-EU tourism next month, is working on a “digital green certificate” scheme, to provide standardised proof of test results, vaccinations and past infections.

Bubble dining tents on the roof of the Ritz-Carlton hotel, in Moscow, Russia. The EU’s Climate Target Plan — which seeks to cut greenhouse gas emissions by at least 55 per cent by 2030 — is not easily compatible with last-minute city breaks © Andrey Rudakov/Bloomberg

Richard Clarke, a hotel and leisure analyst at Bernstein, warns that figures can be “very hard to interpret” and many recently reported spikes in demand for holidays have come from comparatively low levels.

The key determinant for opening up travel remains the rate of vaccination in both source and destination countries. European Commission president Ursula von der Leyen has moved the date when 70 per cent of the EU adult population would be vaccinated forward by two months, from September to July. At present, the proportion in the bloc of adults with at least one dose is just 31 per cent, compared with 66 per cent in the UK.

Other factors will also play big roles in deciding the scale of tourism this year. One is epidemiological. France, Italy and Spain are all currently relaxing domestic Covid restrictions. That could lead to a resurgence in incidence, which in the case of France is already high. New coronavirus variants, such as the strains first detected in Brazil, India and South Africa, are a persistent threat. There is also no guarantee that the EU and UK approaches will ease travel concerns.

Operators have warned of a “summer of chaos”, as various governments implement different rules ahead of any new EU system, from Greece’s readiness to accept printed proof of vaccination to Portugal’s insistence on a digital certificate with a QR code. One senior UK travel executive says he has been warned by border force employees that if travel ticks up, waiting times at major airports — already said to be six hours in some cases — could be much longer while paperwork is checked.

Shoppers in the Galeries Lafayette in Paris last year. France, Italy and Spain are all currently relaxing domestic Covid restrictions. That could lead to a resurgence in incidence © Alain Jocard/AFP via Getty Images

Climate concerns

Even as the trauma of the pandemic fades, pressures are likely to mount on traditional mass market tourism.

“There will be a first phase where there is so much pent-up demand and frustration that we will see a lot of people spending a lot of money on hotels and restaurants,” says Jean-François Rial, a travel agent who heads a trade group promoting Paris as a tourist destination. He predicts a second stage in which the “ecological agenda will come back to the fore, especially for younger travellers” as the industry tries to shift its focus from towering beach hotels and built-up coasts. “We must try to encourage people to take longer trips and visit places that are off the beaten path.”

Indeed, the EU’s Climate Target Plan — which seeks to cut greenhouse gas emissions by at least 55 per cent by 2030 — is not easily compatible with last-minute city breaks or budget flights criss-crossing the continent. “We need to be more sustainable, and consider [attracting] more prosperous visitors in future,” says Rita Marques, Portugal’s tourism minister.

VistaJet, one of the largest private aviation businesses, said last week it aimed to reach carbon neutrality by adopting new jets and artificial intelligence to better manage its fleet by 2025 — 25 years ahead of current industry goals. The impact is felt in conventional resorts too. Azora, the European real estate investor, recently bought a Spanish Costa Brava resort where it plans to invest around €40m to improve the site’s energy efficiency, expand sports facilities and create a “glamping” area with 125 bungalows and 62 tents.

Meliá Hotels’ Escarrer says the 2030 emissions target “does not necessarily represent, in itself, the end of low-cost tourism”, adding that his group’s €25m investment in energy efficiency over the past five years has reduced costs. But he acknowledges that Covid will leave a mark on the sector for many years to come.

The industry is likely to be more fragmented, more aware of health and environmental concerns, and in many cases more expensive. It is a change, he says, “towards a more digital and sustainable model of tourism, that the pandemic has unleashed”.

Additional reporting by Leila Abboud in Paris, Miles Johnson in Rome, Philip Georgiadis and John Burn-Murdoch in London and Eleni Varvitsioti in Athens