Key view: Despite the large size of the tourism industry, Italy continues to underperform on the Tourism Risk/Reward Index, again ranking 17th out of 19 markets in the Western Europe region this quarter. High levels of political uncertainty continue to weaken the country’s overall score on the RRI, while investors also face a difficult operating environment due to inefficient and excessive bureaucracy. That being said, the market will continue to attract investment as Italy welcomes tens of millions of international visitors each year and also has a growing domestic tourism sector.
This is an assessment of the industry size and growth potential of each market, as well as broader industry/market characteristics that may impede development. Rewards scores for tourism take into account the number and percentage growth of tourist arrivals over the past year and our expectations for growth in 2022 and beyond. The market’s near-term outlook remains unstable due to the ongoing Covid-19 pandemic and regional security concerns, resulting in an awards score of 42.5 out of 100 for Italy in Q322, below the regional average (53.6).
The Industry Rewards score takes into account the size and value of the tourism market, taking into account the potential for growth in arrivals, expenditures and occupancy rates. The near-term outlook remains weak in light of the coronavirus pandemic which more than halved the market entering 2020 and caused further disruption for much of 2021. The pandemic also continues to create uncertainty in the market. in early 2022 due to the spread of more infectious variants. . However, Italy is home to one of the largest markets in the region and arrivals are expected to rebound in the medium term. As a result, Italy has a relatively strong Industry Rewards score of 41.2, although it is still below the regional average of 56.4.
The Country Rewards score takes into account the cost of labor, openness to investment and prospects for economic growth. Italy underperforms the regional average on this indicator. Labor costs are high compared to other markets in the region, and years of economic stagnation and significant bureaucratic hurdles have undermined investment potential. Like other regional markets, Italy’s economy suffered a sharp setback following the onset of the Covid-19 pandemic, and while the economy recovered well in 2021, challenges in 2022 stem from higher inflation and regional security concerns. Thus, Italy obtained a Country Rewards score of 44.5 out of 100 this quarter, below the regional average (49.4).
This section offers an assessment of industry-specific hazards as well as an assessment of hazards emanating from the country’s political and economic profile that call into question the likelihood of achieving anticipated returns over the forecast period. Overall, Italy scores a Risk score of 73.4 in Q322, again below the regional average of 84.9.
The industrial risk score takes into account the security risks and the logistical risks of the market. Italy continues to show a relatively good performance for this indicator, with a score of 72.2, well above the world average (50.4) but still below the Western European average of 83.6. The country has well-developed transport infrastructure, although years of underinvestment have eroded capacity. Security risks are mainly limited to crime; however, like other regional markets, Italy is exposed to the ongoing risk of terrorism, which could target international visitors.
The owner The country risk score covers aspects such as short-term and long-term political and economic risk. Italy has a country risk score of 74.6 this quarter, due to increased political instability following the collapse of the ruling coalition in early 2021. Mario Draghi has since been sworn in as Prime Minister , at the head of a fragile alliance of the main political parties. Economic risks have also been heightened by the war in Ukraine (particularly in terms of soaring energy prices in the region) and the continued disruption caused by the Covid-19 pandemic.