Economic overview
Italy is Europe’s fourth-largest economy, but its recent performance has lagged other European Union countries. That’s largely because the country has lost share in export markets. Italy just emerged from a three-year recession, yet economic growth in 2015 of 0.6% hardly suggests a robust recovery. What’s more, Italy’s growth in the final quarter of last year was the weakest among eurozone members.
Oxford Economics expects the Italian economy will grow by 1% in 2016, accelerating to 1.3% in 2017. An improving labor market and low inflation rate continue to support the consumer spending that has driven Italy’s recovery so far. But there’s little sign of a pickup in business investment.
Business travel industry insight
More than 80 million visitors went to Italy in 2015, making it Europe’s second-largest inbound travel market after France. One fifth of all travelers visited Italy on business.
Italy is Europe’s fourth-largest business travel market, with close to €30 billion spent in 2015. Domestic travelers account for more than half of this figure. Europeans are frequent visitors, as well. Only 16% of the country’s 2015 visitors arrived from countries outside Europe. Over the next five years, spending by international travelers will grow more quickly, lifting total spending to about 50% by 2020.
Italy is Europe’s best-supplied market for hotel accommodation; 1.1 million rooms were available in 2014. After years of growth, supply in lower-tier inventory began to decline in 2008. Upscale and luxury supply continues to grow in response to strong demand, particularly from international travelers. Chain penetration is low at just 4%, reflecting the importance of leisure travel, which is well served by independent hotels.
National airline Alitalia faces strong competition from low-cost carriers, which account for almost 60% of seats on flights to European cities. Alitalia now is backed by Etihad Airways, a major shareholder. The investment has encouraged Alitalia to rebuild its long-haul network, with new links to destinations like Beijing, Mexico City, Santiago and Seoul.
Opportunities
- Progress in the government’s reform agenda, such as labor market changes that took place in 2015, is improving Italy’s competitiveness and laying the foundation for stronger growth.
- Employment growth and property tax reforms increase disposable income, helping consumers continue supporting economic recovery.
- Alitalia is rebuilding, thanks in large part to Etihad Airways’ support, and is poised to offer business travelers better options for globally integrated airline service in the Italian market.
Challenges
- Weak confidence and external demand hamper business investment.
- Interest rates are low, but credit is not widely available, which limits economic growth.
- High public debt means Italy is vulnerable to financial market shocks or economic slowdowns. And the government plans more spending.
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