European Investment Report

European
Travel & Tourism:
Where are the greatest current

and future investment needs?
April 2015 1
April 2015
European
Travel & Tourism:
Where are the greatest current

and future investment needs?
A report prepared by Oxford Economics for the World Travel & Tourism Council
Restoration of the Parthenon on Acropolis Athens, Greece
Foreword
The World Travel & Tourism Council (WTTC) is the global authority on the economic and
social contribution of Travel & Tourism. It promotes sustainable growth for the sector,
working with governments and international institutions to create jobs, to drive exports and
to generate prosperity.
Members are the Chairs, Presidents and Chief Executives of the worlds leading, private
sector Travel & Tourism businesses. These Members bring specialist knowledge to guide
government policy and decision-making, raising awareness of the importance of the
sector as an economic generator of wealth.
Understanding and addressing the challenges inhibiting the sustainable growth of our
sector is paramount for all industry stakeholders. Together with our research partner,
Oxford Economics, and to coincide with the 15th annual WTTC Global Summit in Madrid,
Spain in April 2015, WTTC is pleased to have produced this report on Travel & Tourism
investment in Europe. The report draws on data from WTTCs annual Travel & Tourism
Economic Impact Research 2015 and the World Economic Forums Travel & Tourism
Competitiveness Report 20131 , and seeks to understand whether and where the regions
infrastructure and investment will constrain or support future industry growth.
WTTC has forecast that there will be 2.1 trillion worth of Travel & Tourism investment
made in Europe over the next decade. However, with the sector forecast to grow as fast,
or faster, than the economies overall in every major European region, and the lagging
state of much infrastructure today, baseline growth forecasts for both investment and
Travel & Tourisms overall contribution to GDP may only be met with sufficient and effective
investment to support this demand.
Given the diversity of Europe, there are disparities in the relative contributions of
Travel & Tourism to economies as well as to the state of Travel & Tourism infrastructure in
the region. As a result, some countries are much better placed than others to capitalise
on forecasted demand. While a positive relationship exists between Travel & Tourism
infrastructure and the contribution the sector makes to GDP, this report gives heed to
the fact that government deficits, fiscal austerity and high competition for foreign direct
investment requires future investments to be smart and well-targeted.
This need for smarter investments gives even more importance not only to opportunities
for greater collaboration between public and private actors, but also to seeking crossborder cooperation and creative funding options. Breaking down barriers to infrastructure
development through the right business, political and regulatory frameworks will help to
ensure that Travel & Tourism in Europe maintains a strong and competitive position.
David Scowsill
President & CEO
World Travel & Tourism Council
www.weforum.org/reports/travel-tourism-competitiveness-report-2013
European Regional Groupings

For the purposes of this report, Europe is defined according to the UN regional
classifications* listed below. Countries and sub-classifications of countries in Europe.
Contents
Executive summary
08
Eastern Europe
Southern Europe
Western & Northern Europe
How investment and infrastructure support Europes Travel & Tourism sector
11
Belarus
Albania
Austria
1.1
The economic contribution of the Travel & Tourism sector to Europes economy
11
Bulgaria
Bosnia and Herzegovina
Belgium
Czech Republic
Croatia
Denmark
1.2
Defining the role of investment and infrastructure in supporting the Travel & Tourism sector
13
Estonia
Cyprus
Finland
1.3
The importance of investment to success in the Travel & Tourism sector
14
Hungary
Greece
France
1.4
Infrastructure quality and capacity today are strongly related to historical investment spending
16
Latvia
Italy
Germany
Lithuania
Macedonia
Iceland
Moldova
Malta
Ireland
Which European countries have the greatest need for current and future investment?
17
Poland
Montenegro
Luxembourg
2.1
Assessing the quality and capacity of Europes Travel & Tourism infrastructure
17
Romania
Portugal
Netherlands
Russia
Serbia
Norway
2.2
Assessing objective subcomponents of the three major WEF infrastructure pillars
22
Slovakia
Slovenia
Sweden
2.3
Which countries have the greatest infrastructure needs between 2015 and 2025?
27
Ukraine
Spain
Switzerland
Turkey
United Kingdom
The outlook for European Travel & Tourism investment spending
29
3.1
A regional comparison of forecasted investment spending
29
3.2
Sectoral composition of investment spend
32
Conclusion putting Travel & Tourism investment on European governments agendas
36
Cyprus and Turkey reclassified as Southern Europe for purposes of this report. In addition, Western European and Northern
European countries have been grouped together, as they frequently represent a common narrative.
European Travel & Tourism: Where are the greatest current and future investment needs?
April 2015
Executive summary
Asky Bridge Bergen and Asky, Norway
The Travel & Tourism sector makes a substantial contribution to European economies. In 2014,
including its direct, indirect, and induced impacts, Travel & Tourism supported 33.5 million
jobs and made nearly 1.6 trillion in contribution to gross domestic product (GDP), or 9.3%
of total European GDP. By 2025, the Travel & Tourism sectors total economic contribution
is expected to grow to 38 million jobs and 2.1 trillion in contributions to GDP (9.9% of total
European GDP). In addition, Travel & Tourism will be a key to recovery for countries hit hardest
by recession and the Eurozone crisis, including Greece, Spain, and Portugal.
The sectors growing GDP and jobs contribution depends on supportive infrastructure and
investment. While investment must be smart, there is a strong historical link between the
magnitude of Travel & Tourism investment spending and the quality and capacity of European
countries Travel & Tourism infrastructure. The success and size of the economic contribution
from Travel & Tourism is directly linked to the amount of investment in the sector.
Travel & Tourism is forecast to grow as fast, if not faster, than the economy overall in every
major European region, putting pressure on infrastructure capabilities and increasing the
need for additional infrastructure investment. For example, Western and Northern European
countries are expected to experience average annual growth in their Travel & Tourism
sectors of 2.7%, compared to whole economy growth of 1.9% per year. In Eastern Europe,
Travel & Tourism growth of 3.3% is expected to marginally outpace economy-wide growth of
3.2%, while Southern Europes Travel & Tourism sector growth of 2.8% per year will outpace
economy-wide growth of 2.6%.
Few countries can claim a high ranking across all three major Travel & Tourism infrastructure
pillars analysed in this report, comprising tourism, air transport and ground transport
infrastructure. Southern and Eastern European countries tend to have weaker air transport
capabilities, while a number of Western and Northern European countries including the
UK, Germany and Denmark need to improve their tourism infrastructure before being
ranked best in class for that pillar. Several Southern and Eastern European countries,
including Albania, Poland, Romania, and Serbia, fall short on all three infrastructure pillars.
Compared to baseline forecasts, however, poor existing infrastructure quality and capacity
or inadequate future investment could slow growth in Travel & Tourism GDP and jobs
contributions between 2015 and 2025. This report shows that several countries could fail
to achieve baseline forecasts for Travel & Tourism GDP and jobs, and fall behind in global
competitiveness terms, due to limited infrastructure and underinvestment relative to Travel &
Tourism demand.
The 41 European countries analysed in this report are expected to invest 2.1 trillion in Travel
& Tourism between 2015 and 2025. That is 5% of all forecasted European investment over
the period. The 14 Western and Northern European countries analysed in this report will
contribute the largest amount, at 1.3 trillion, or 62% of the European total and 210 per
foreign visitor and domestic resident. The 14 Southern European countries analysed in this
report will contribute 570 billion, or 27% of the European total and 100 per foreign visitor
and domestic resident. And the 13 Eastern European countries analysed in this report will
contribute nearly 240 billion, which is 11% of the European total and equivalent to a little
over 50 per foreign visitor and domestic resident.
This report uses three categories to identify country typologies, ranging from those that are
at risk of losing Travel & Tourism infrastructure competitiveness over the next decade, to
those that are well-placed to benefit from forecasted investment spend between 2015 and
2025 (Figure 0.1):
Well-placed: This group of countries, exemplified by Austria, Germany and the United
Kingdom, has high existing quality and capacity of Travel & Tourism infrastructure which
they are expected to maintain and improve between 2015 and 2025. With investment
growth expected to outpace demand over that period, these countries are well-placed
to capture the full benefits of forecasted Travel & Tourism demand.
Well-placed, but with key risks: France, Italy, Switzerland, Ireland, and Greece
are one set of countries included in this category. Each of them has existing Travel
& Tourism quality and capacity that is greater than the European average. Yet their
strong positions are likely to deteriorate somewhat over the next decade, since Travel &
Tourism demand growth is forecast to outstrip Travel & Tourism investment growth over
the period. Similarly, Denmark and Finland have better than average Travel & Tourism
infrastructure quality and capacity; however, weak historical investment growth
presents risks to the forecast that investment growth will exceed demand growth in the
next decade. Slovenia and Latvia are also well placed, with risks. Their key strength is
that they are expected to see investment growth that is stronger than demand growth
over the next decade; their key risk is their existing infrastructure quality and capacity,
which is below the European average.
Future investment in the European Travel & Tourism sector must be smart. Government
deficits, strained corporate balance sheets, and strong competition among major world
regions for foreign direct investment mean that future investment spend must be welltargeted. A recent report by the European Court of Auditors 2 highlighted the dangers of
poorly targeted spending: of 460 million in Cohesion policy funds spent on 20 airport
infrastructure projects in Estonia, Italy, Greece, Poland, and Spain, 28% was deemed to have
gone to projects that were not needed at all. Seven of the 20 airports which received funding
for expansion projects are unprofitable, and will likely be closed in the absence of permanent
public funding. Indicatively, only half of the airports analysed had more passengers postexpansion, suggesting significant underutilization of the newly built infrastructure.
Government and financial sector constraints on funding suggests that European countries
should seek opportunities for cross-border collaboration and creative funding options.
Europes relatively small geographic size and existing integration means cross border
Travel & Tourism infrastructure collaboration can be uniquely effective. For Europe, smart
investment, especially in periods of fiscal austerity, may come in the form of creative funding
options like public private partnerships or even crowdfunding.
At medium or high risk: This category includes countries like Albania, Bosnia and
Herzegovina, and Moldova, which are considered to be at high risk because they have
the poorest existing infrastructure quality and capacity of the 41 countries analysed in
this report. Croatia, Serbia, and Slovakia are also considered at risk, because Travel
& Tourism investment growth is expected to lag behind demand growth over the next
decade, and their starting infrastructure quality and capacity today is average in the
case of Croatia or low in the case of Serbia and Slovakia. Portugal, having relatively
strong existing infrastructure capabilities, is a special case: because demand growth is
expected to outpace investment growth by such a wide margin, the country faces a risk
that its current infrastructure quality and capacity will degrade over the next decade.
Unlike Spain, Portugal did not have the same high level of Travel & Tourism investment in
the period before the global recession.
EU-funded airport infrastructures: poor value for money, (2014), European Court of Auditors, December.
April 2015
Figure 0.1: Defining the problem with country typologies

T&T investment to demand ratio* (20102014 avg to 2025)
Higher current
Travel & Tourism
infrastructure
quality and
capacity
Less favourable ratio
-0.4
-0.2
0.0
More favourable ratio
Balance
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Switzerland
Spain
France
United Kingdom
Austria
Germany
Italy
Iceland
chapter 1
How investment and infrastructure support
Europes Travel & Tourism sector
Cyprus
1.1 The economic contribution of the

Travel & Tourism sector to Europes economy
Malta
Ireland
Greece
Norway
The Travel & Tourism sector continues to grow in value and importance in the global
economy. Recent economic impact research by the WTTC and Oxford Economics estimates
that Travel & Tourism supported 5.7 trillion3,4, in gross domestic product (GDP) in 2014,
amounting to 9.8% of global GDP for the year. The sector also supported nearly 280 million
jobs worldwide.
Denmark
Portugal
Netherlands
Belgium
The European Travel & Tourism sector is an important part of the global picture. In 2014, it
supported nearly 1.6 trillion in GDP, or 28% of global Travel & Tourism GDP and 9.3% of
total European GDP. Furthermore, the European Travel & Tourism sector supported a total
of 33.5 million jobs, more than is supported (individually) by the European ICT, mining, or
banking sector.
Finland
Sweden
Croatia
Slovenia
There is, however, significant variation in the relative contribution of Travel & Tourism
between Europes regional economies 5. In Southern Europe the Travel & Tourism sector
supports an average of 12.7% of GDP (Figure 1.1). That is a full 2.9 percentage points more
than the world average of 9.8%. Southern European economies, several of which have
struggled economically in recent years and continue to face significant challenges, can
therefore be characterised as being highly reliant on Travel & Tourism. Western and Northern
European countries (8.8%) and Eastern European countries (6.2%) are less reliant on the
sector than the global average.
Estonia
Czech Republic
Turkey
Latvia
Bulgaria
Russia
Hungary
Lithuania
Figure 1.1: Direct, indirect, and induced Travel

& Tourism contribution to GDP in 2014 (%)
Poland
Slovakia
Romania
Serbia
6.2
Macedonia
10
11
Albania
Eastern Europe
Bosnia and
Herzegovina
Lower current
Travel & Tourism
infrastructure
quality and
capacity
8.8
Moldova
Western &
Northern Europe
Legend:
Well-placed
Well-placed,
but key risks
At medium risk
9.8
At high risk
World
12.7
* The T&T investment to demand ratio is the ratio of forecasted average annual Travel & Tourism investment growth over the next decade divided by forecasted average
annual Travel & Tourism demand over the same period.
Note: Four countries are excluded from this diagram. Belarus lacks WEF infrastructure data, forecasts for the Ukraine at the time of publication are vastly more uncertain
than is typical due to the countrys ongoing conflict, and Luxembourg and Montenegro are outliers that obscure trends among the 37 other countries in the diagram.
Southern Europe
0
10
% Whole Economy GDP

Direct
Indirect
Sources: WTTC, Oxford Economics
Induced
Including direct, indirect (supplychain), and induced

(consumer spending) impacts. A standard economic impact
analysis considers all three impacts: Direct impacts arise
from the sectors operational activities providing services
to its customers; indirect impacts arise as the sector makes
purchases from other sectors in the economy, precipitating
supplychain ripple effects; induced impacts flow from
consumer spending in retail and leisure outlets initiated by
employees working in the sector or in the sectors supply chain.
12
14
4
All currency values in this report are measured in Euros at
2014 prices and exchange rates unless otherwise specified.
See Page 6 for the countries that make up each regional

grouping.
April 2015
Madrid Atocha Railway Station Madrid, Spain
1.2 Defining the role of investment and

infrastructure in supporting the Travel &
Tourism sector
If the European Travel & Tourism sector is to support future demand and achieve the
baseline forecast of a 400 billion increase in direct contributions to GDP the continent
must focus on its supporting infrastructure, as well as supplyside issues such as talent.
Both the public and private sectors will need to devote resources to maintaining the
current stock of Travel & Tourism infrastructure, improving it and building new and better
infrastructure. The quality and capacity of infrastructure is a key competitiveness factor,
and other regions the Middle East and Asia, in particular have made (and are expected to
continue to make) large gains in this arena.
What is infrastructure and investment?

Infrastructure comprises the buildings, structures and equipment which are essential to
providing goods and services to society, yet are not immediately used up in the process of
producing and delivering them. Infrastructure can be provided publicly as governments do
regularly as well as privately. Travel & Tourism investment often includes:
The Travel & Tourism sector is forecast to grow as fast or faster than the economy overall in every major
European region, putting pressure on infrastructure capabilities and increasing the need for additional
infrastructure investment (Figure 1.2). Western and Northern European countries, for example are expected
to experience average annual growth in their Travel & Tourism sectors of 2.7%, compared to whole economy
growth of 1.9% per year.
In Eastern Europe overall, Travel & Tourism growth of 3.3% is expected to modestly outpace economy-wide
growth of 3.2%. Excluding Russia, however, the Eastern European Travel & Tourism sector is forecast to grow
by an average of 4% per year, outpacing economy-wide growth of 3.5% per year.
Meanwhile, in Southern Europe, Travel & Tourism sector growth of 2.8% per year will outpace economy-wide
growth of 2.6%. The gap is relatively modest in any individual year, but grows more important in cumulative
terms over a decade.
By 2025 the European Travel & Tourism sector will

be worth an estimated 2.1 trillion (a 66% increase
from 2014, or 4.7% average annual growth) and will
support 38 million jobs. These magnitudes highlight
the economic importance of supporting the sectors
growth.
4
12
3
accommodation development and major maintenance, including provision of new

building structures and furniture and equipment to fit-out or refurbish existing hotels
and holiday homes;
passenger transport, such as aircraft and cruise ships for specific tourism use;
capital projects and refurbishments designed to attract visitors;
information technology (ICT) projects; and
green and other sustainability-oriented investments within the industry, such as solar
and retrofit schemes, designed to enhance energy efficiency.
Government investment spending is often directed toward the construction of visitor

centres, tourist information offices, publicly funded airports, and utilities (including, e.g.,
water supply and ICT-based infrastructure), but can also include contributions to large
resort-based investments. Government Travel & Tourism investment does not include
government investment in multi-use infrastructure such as roads or public transport, even
though this may be used, in part, for Travel & Tourism as well as for other uses.
Private investment expenditure is often for residential structures such as vacation houses
and non-residential structures such as hotels, convention centres and privately funded
airports. It also includes Travel & Tourism equipment such as airplanes, cruise ships, and
rental cars.
Figure 1.2:
Whole economy GDP and Travel & Tourism
direct GDP growth forecast from 201525
Growth from 20152025 (%)
Both government and privately funded infrastructure investment are essential to support
the growth and development of the Travel & Tourism industry within Europe, as elsewhere.
Whether initiated by government or by the private sector, it can play the following roles:

Expanding capacity: In order to support higher demand and a greater volume of

tourists, infrastructure investment is required to build more visitor accommodation,
increase airport capacity and expand tourist facilities. Insufficient capacity can lead
to supply-side bottlenecks and a limit on growth, as well as put upward pressure on
prices, such as hotel room rates, which affects competitiveness.
This report will explore one of the key enablers of the

sector infrastructure and will seek to answer the
following questions:
0
Western &
Northern Europe
Southern Europe
Whole Economy
Is present day European Travel & Tourism

infrastructure adequate?
Is future sector investment going to be sufficient

to build the required infrastructure or will capacity
constraints prevent baseline forecasts for the
sector from being realised?
Are particular countries more at risk than others?
Eastern Europe
Travel & Tourism Sector
April 2015
13
Maintaining and enhancing current infrastructure: Continued investment in existing

infrastructure plays a central role in maintaining and improving its functionality and
quality through major refurbishment and upgrading. Capital expenditure on existing
infrastructure is essential for adapting infrastructure to account for the evolution in
consumer tastes over time, such as growing visitor demand for WiFi services, while
refurbishments extend the life of existing infrastructure assets.
Stimulating demand: Capital expenditure on new visitor attractions can generate

additional demand and help gain or retain market share in the face of competition.
These projects aim to enhance the appeal of a destination through improving its
offering. For example, a hub airport can put a location like Dubai on the Travel &
Tourism map, which stimulates demand for Travel & Tourism services well beyond the
airport itself.
Figure 1.3: WEF composite Travel & Tourism infrastructure

score and Travel & Tourism direct GDP contribution in 2014
Direct Travel &
Tourism GDP
(% total GDP)
Greece
6
Iceland
Portugal
Hungary
Turkey
Italy
Spain
Austria
France
United Kingdom
Serbia
Czech Republic
Switzerland
Denmark
Russia
Macedonia
0
Cyprus
WEF composite infrastructure score

Sources: World Economic Forum, WTTC, Oxford Economics
Street Renewal Project Brussels, Belgium
1.3 The importance of investment to

success in the Travel & Tourism sector
Whether travelling for business, visiting friends and family, or leisure purposes, at home or
abroad, travellers directly and indirectly rely on a wide range of infrastructure. Visitors travel
by rail, road, air or sea; communicate by phone, email, or instant message; sleep in hotels
and other forms of accommodation; attend meetings and enjoy entertainment options that
would be impossible without supporting infrastructure, whether it be a robust electrical grid
and water supply or a well-maintained road and airport network.
Historically, there has been a strong link between the quality and capacity of a countrys
infrastructure and the success of its Travel & Tourism sector, as measured by the sectors
economic contribution. This link can be measured statistically by comparing the measured
quality of infrastructure related to Travel & Tourism and the estimated economic contribution
of the sector across countries. That relationship is shown in Figure 1.3 for 37 European
countries in 20146. It uses the World Economic Forums (WEF) Travel and Tourism
Competitiveness Report7 results as the independent variables measuring infrastructure8,
while the WTTCs estimates of direct Travel & Tourism GDP are the dependent variables
measuring the association with economic activity.
14
Figure 1.3 provides a line of best fit between these two variables. It shows the correlation
between infrastructure and the magnitude of the direct contribution that Travel & Tourism
makes to a countrys GDP.
Note: Albania, Croatia, Malta and Montenegro are excluded from this analysis due to their distorting effect. These nations
benefit from exceptionally high direct Travel and Tourism GDP contributions despite having relatively poor infrastructure.
At the top right of the chart is Spain, which relies on the Travel & Tourism sector directly for
5.6% of its GDP (compared to 3.4% for Europe overall) and has very good infrastructure
capabilities, represented by a WEF composite infrastructure score of 6 out of 7. In the
middle of the graph lies a country like the Czech Republic, which has a composite
infrastructure score of 4.6 out of 7 and directly relies on the Travel & Tourism sector
for 2.6% of its GDP. And at the bottom left are countries like Serbia which has poor
infrastructure quality and capacity (its composite infrastructure score is 3.3 out of 7) and
does not have a significantly developed Travel & Tourism sector (Serbia directly relies on
the sector for 2.1% of its GDP). Serbia will require a host of infrastructure improvements
to support a larger Travel & Tourism sector. For example, the country could improve its
rural roads, overhaul an outdated rail network that is not up to the standards of most
international tourists, and increase air accessibility within the regions, which it could do by
allowing commercial flights at military bases.
It is too much to expect that Travel & Tourism infrastructure quality and capacity could
explain all of the variation shown in Figure 1.3. Much of the cross-country variability is
due to differences in climate, geography, the number of tourist attractions, and the size
of competing industries. For example, all else equal, Spains natural climate advantages
relative to Switzerland increase the likelihood that Spain will have a persistent comparative
advantage in satisfying Travel & Tourism demand relative to Switzerland. Unsurprisingly,
Switzerlands economy is more reliant on sectors that depend less on the weather, like
finance (11% of GDP in 2014) and manufacturing (19% of GDP). Finance and manufacturing
are more likely to hold longstanding comparative advantages for Switzerland than Travel &
Tourism, and improving Switzerlands already good Travel & Tourism infrastructure quality
and capacity will not change that.
Four countries Albania, Croatia, Malta, and Montenegro have been removed from the figure. They are unique in that they are small economies with
relatively undeveloped infrastructure, yet tourism impacts comprise exceptionally large shares of their GDP. They have been removed to avoid obscuring
the relationship observed between infrastructure capability and Travel & Tourism impacts in the majority of European countries. These four countries
comprise just 0.3% of the gross domestic product of the 41 countries comprising Europe in this report
World Economic Forum, (2014), Travel and Tourism Competitiveness Report 2013. The WEF produces a Travel and Tourism competitiveness report
every two years.
The WEF composite infrastructure score is computed as the simple average of three key infrastructure pillars within the Travel and Tourism
Competitiveness Report, including Tourism Infrastructure, Air Transport Infrastructure, and Ground Transport Infrastructure. Scores are ranked from 1-7
and are based on a WEF executive opinion survey.
April 2015
15
1.4 Infrastructure quality and capacity today are strongly

related to historical investment spending
If infrastructure capacity is to be improved, it is important to determine what drives it. Figure
1.4 shows that, for most European regions there is a strong relationship between the last
decade and a half of investment spending measured per foreign visitor and domestic
resident9 and WEF composite infrastructure scores in 2013 (although it is also important to
recognise that investments made more than a decade and a half ago also play a role10).
The relationship is strongest in Southern Europe. Greece, which hosted the Olympics
just ten years ago and spent an average of 200 per foreign visitor and domestic resident
annually between 2000 and 2014, lies at the top right of the graph. Spain (which spent an
average of 160 per foreign visitor and domestic resident over the period) and Portugal
(140) have also made considerable investments over the last 14 years. These countries
tend to have better WEF composite infrastructure scores than countries like Albania (34),
Serbia (17) and Macedonia (15) that have devoted fewer resources to Travel & Tourism
infrastructure development over the past 14 years.
chapter 2
Which European countries have the greatest
need for current and future investment?
The previous chapter highlighted how important the quality and capacity of infrastructure
are to capturing Travel & Tourisms economic benefits. This should be put in the context
of forecasted demand growth for the coming decade. The baseline forecast is for Travel
& Tourisms total impact (including direct impacts, supply chain impacts, and employee
spending impacts) on the 41 European countries analysed in this report to increase from
9.3% of GDP in 2014 to 9.9% by 2025. However, if that baseline forecast is to be met,
appropriate levels of investment must be undertaken. If that does not happen, the sector
runs the risk of failing to achieve the baseline forecast and losing competitiveness against
other world regions.
Similarly, investment in the Travel & Tourism sector in Eastern European countries over
the past 14 years is strongly related to their present day WEF composite infrastructure
scores. Within Eastern Europe, Estonia (90 in investment per foreign visitor and domestic
resident per year), the Czech Republic (80) and Bulgaria (50) are better placed to support
burgeoning tourism sectors with their infrastructure capabilities than are countries like the
Ukraine (7) and Moldova (6).
This chapter begins with a detailed assessment of European Travel & Tourism infrastructure
today. It then draws attention to economies and regions where potential growth bottlenecks
require attention.
Figure 1.4: Travel & Tourism investment spending per

foreign visitor and domestic resident versus WEF
composite infrastructure score

(2013)
Southern Europe Travel & Tourism investment per foreign visitor/domestic

resident and WEF composite Travel & Tourism infrastructure score
7
6
Turkey
Malta
Macedonia
Cyprus
Italy
R = 0.7313
Spain
Portugal
Greece
Croatia
Albania
To assess the quality and capacity of Europes Travel & Tourism infrastructure, this
section makes extensive use of the World Economic Forums (WEF) Travel and Tourism
Competitiveness Report11. The report features detailed scores for three key Travel & Tourism
infrastructure pillars across 140 countries, including 40 of the 41 European countries
analysed in this report. These pillars are Tourism Infrastructure (which includes, for
example, accommodation and car hire), Air Transport Infrastructure, and Ground Transport
Infrastructure. The scores are based on a combination of executive opinion surveys, which
allow for a measure of quality, and objective secondary data, which allow for a measure of
capacity and quantity12. The scores are imperfect certain quantitative-only variables may
skew scores that could benefit from a more qualitative perspective; per capita measures
can be distorting; and executive opinions do not necessarily encompass all travellers views
but nevertheless provide insight into Europes existing infrastructure capabilities. As of
the date of publication, the Travel and Tourism competitiveness report remains the most
comprehensive source available for Travel & Tourism infrastructure data.
Eastern Europe Travel & Tourism investment per foreign visitor/domestic

resident and WEF composite Travel & Tourism infrastructure score
7
R = 0.3832
6
5
Russia
Ukraine
Bulgaria
Hungary
Poland
Czech
Republic
Lithuania
Slovakia
Estonia
Romania
Moldova
2
1
16
Eastern Europe Travel & Tourism investment per

foreign visitor/domestic resident WEF composite
Travel & Tourism infrastructure score

(2013)
Southern Europe Travel & Tourism investment per

foreign visitor/domestic resident WEF composite
Travel & Tourism infrastructure score
2.1 Assessing the quality and capacity of

Europes Travel & Tourism infrastructure
50
100
150
200
Travel & Tourism investment spending (Euros per person, average

Travel & Tourism investment spending
2000-2013)
(Euros per person, average 200-2013)
250
20
40
60
80
Table 2.1 shows that compared to other regions of the world, Europe, as a whole, ranks
17
relatively well in terms of its current Travel & Tourism infrastructure capabilities. Its
composite Travel & Tourism infrastructure score is 4.8 out of 7, which places Europe second
only to North America13 on all measures. Currently, then, European infrastructure overall
should be considered of good quality and capacity but with room for improvement if Europe
aspires to have world-leading Travel & Tourism infrastructure.
100
Travel & Tourism investment spending (Euros per person, average

Travel & Tourism2000-2013)
investment spending
(Euros per person, average 200-2013)
The optimal denominator would be foreign and domestic visitors. Number of domestic residents is used here as a proxy for domestic visitors, because
data for the number of domestic visitors is unavailable. In addition, because investment unit costs vary by country wages especially a euro invested in
one country can result in different investment output than a euro invested in another country.
While countries like the UAE and Qatar have shown that it is possible to build world class Travel & Tourism infrastructure with critical mass in a very
short amount of time, the typical pattern for most countries is a sustained build-up over time.
10
11
World Economic Forum, (2014), Travel and Tourism Competitiveness Report 2013
The World Economic Forum is in the process of adjusting the composition of its Travel & Tourism infrastructure scoring system for its 2015 report, but
the results were not yet available at the time of publishing this report.
12
13
This report defines North America as the United States and Canada, while Mexico is included in Latin America.
April 2015
Table 2.1: WEF infrastructure ratings by world region and type in 201314
Table 2.2: WEF infrastructure ratings by world region and type in 201315
WEF Infrastructure ratings by world region by type (2013)

Composite
rank
Composite
score (0-7)
Tourism infrastructure
rank
Air transport infrastructure

rank
WEF Infrastructure ratings by world region by type (2013)

Ground
transport
infrastructure rank
Composite
rank
Composite
score (0-7)
Tourism infrastructure
rank
Air transport infrastructure

rank
Ground
transport
infrastructure rank
North America
6.0
North America
6.0
Europe
4.8
Middle East
3.9
Western &
Northern Europe
5.4
Asia-Pacific
3.7
Southern
Europe
4.6
Latin & Central

America
3.2
Middle East
3.9
Africa
2.6
Eastern Europe
4.0
Asia-Pacific
3.7
Latin & Central

America
3.2
Africa
2.6
A more nuanced picture emerges from a detailed regional analysis as in Table 2.2. It is clear
that Southern Europe and Eastern Europe face a number of Travel & Tourism infrastructure
challenges. Southern Europes greatest infrastructure weakness is its air transport
capabilities. With an air infrastructure score of 3.6 out of 7, it ranks 5th out of nine regions in
the world, behind the Middle East and Asia Pacific.
Eastern Europe faces an even greater threat from poor air transport infrastructure. Its score
of 3 out of 7 indicates urgent need for improvement, ranking only above Africa (which has a
WEF air transport infrastructure score of 2.5) for this infrastructure pillar. Eastern Europes air
infrastructure challenges are compounded by poor road and rail infrastructure. The regions
score for ground transport infrastructure is 3.9 out of 7, which is the lowest of any of the
European regions and indicates significant room for improvement.
Western Europe and Northern Europe have a composite score of 5.4. On average, then, the
14 countries in those regions have good infrastructure quality and capacity, although there
remains room for improvement if compared to North America, which can be treated as a
benchmark for Travel & Tourism infrastructure.
Airport Runway Gibraltar, UK
Within the European regions, it is possible to identify individual countries that have particular
infrastructure needs. Table 2.3 presents the WEF Travel & Tourism infrastructure scores
for 40 of the 41 countries included as part of this reports definition of Europe (it excludes
Belarus due to a lack of data). It also includes 12 comparator countries, from the high ranking
United States to the lower ranking Kenya, to provide a global context to the discussion.
At the top of the composite infrastructure rankings are Switzerland, Spain and France with
scores of 6.1, 6.0 and 5.8 out of 7, respectively. At the bottom are countries like Albania,
Bosnia and Herzegovina, and Moldova with composite scores of 3.1, 2.9, and 2.6 out of 7,
respectively. Countries falling somewhere in-between include Croatia (4.7), Estonia (4.6) and
Turkey (4.5).
It is notable that few countries are high-ranking across all three major tourism infrastructure
pillars. In some cases, this suggests that complementarity between two of the infrastructure
capabilities and/or a countrys geographical position make development of a third
infrastructure component less urgent; in other cases, there is a risk that a country will miss
opportunities for growth by failing to develop the third, weaker component.
19
For example, while Switzerland ranks the highest in aggregate among the 58 countries
shown, that is largely a function of its tourism and ground transportation scores; the
countrys air transportation infrastructure score is good but not outstanding, at 5.4 out of 7.
Switzerlands air transportation infrastructure score places it 8th out of the 52 countries in
the table, suggesting there is some room for improvement before it can compete with best
in class countries in this regard. While excellent road and rail networks connect Switzerland
internally and to its neighbours, the countrys air infrastructure could be made more
attractive to the third of its visitors who arrive from the Americas and Asia.
18
14
The composite score is calculated as a weighted average of the 3 separate infrastructure scores. Ranks and ratings are shaded using a colour scale,
where green signifies strong performance and red signifies weak performance. North America is defined as the United States and Canada. Where WEF
region aggregates dont exist, they are created using simple averages.
15
The composite score is calculated as a weighted average of the three separate infrastructure scores. Ranks and ratings are shaded using a colour
scale, where green signifies strong performance and red signifies weak performance. North America is defined as the United States and Canada. Where
WEF aggregates dont exist, they are created using simple averages.
April 2015
Similarly, the data suggest that Spains air transportation infrastructure may benefit from
well-targeted improvements16. The countrys WEF score for air transportation infrastructure
is 5.3, placing it 9 th among the 52 countries listed.
WEF infrastructure ratings by country in 201317

Country
Germany and the UK have strong infrastructure scores overall, but their tourism
infrastructure could be improved relative to the highest-ranked countries. The UK currently
ranks 20th out of 52 for this variable (5.8 out of 7), while Germany ranks 21st (5.7 out of 7).
Greece, which is heavily dependent on tourism (17% of its GDP in 2014), is considered to
have excellent tourism infrastructure, ranking 3rd for this pillar out of the 52 countries listed
in Table 2.3. Yet, the country has an urgent need to improve its road and rail networks: its
ground transportation infrastructure pillar has a score of 4.0 out of 7, placing it 35th in the
table. The same can be said of Bulgaria (for which 13% of its GDP depends in some way on
the Travel & Tourism sector), although in addition to ground transportation, the countrys air
transportation infrastructure is also in need of attention.
Composite
score (0-7)
Population density (people per

sq km of land)
Land mass (000

sq km of land)
6.1
6.7
5.4
6.4
205
40
6.0
6.7
5.3
5.9
94
499
United States
6.0
6.3
6.2
5.0
35
9,147
France
5.8
6.1
5.4
6.2
121
548
United Arab
Emirates
5.7
5.7
6.1
5.0
112
84
5.7
5.8
5.6
5.8
265
242
Germany
Australia
Italy
Iceland
Cyprus
Malta
Ireland
Greece
Norway
Singapore
Denmark
Portugal
Netherlands
Belgium
Finland
Sweden
Japan
Luxembourg
Croatia
Thailand
Slovenia
Estonia
Czech Republic
Turkey
Latvia
Bulgaria
Montenegro
Russia
South Africa
Hungary
Lithuania
Brazil
Poland
Slovakia
20
Ground transport infrastructure score
Spain
Austria
Artistic impression of a construction site
Air transport
infrastructure
score
Switzerland
United Kingdom
A number of Southern and Eastern European countries are candidates for urgent
improvements in all three major infrastructure pillars. For example, Albania, Bosnia and
Herzegovina, Macedonia, Moldova, Poland, Romania, Serbia, and Ukraine each have
composite infrastructure scores of 3.7 out of 7 or below, and rank in the bottom 25th
percentile of the 52 countries in Table 2.3.
Tourism infrastructure score
Ukraine
Romania
India
China
Serbia
Macedonia
5.7
7.0
4.4
5.6
103
82
5.7
5.7
5.4
6.2
231
349
5.5
5.9
5.9
4.2
7,682
5.5
7.0
4.6
4.5
203
294
5.5
6.7
4.8
4.5
100
5.4
6.7
4.3
5.3
124
5.4
6.3
4.8
5.0
1323
5.4
6.3
4.6
5.2
67
69
5.4
6.8
4.7
4.0
86
129
5.4
6.4
5.1
3.8
14
304
5.3
5.0
5.1
6.5
7713
5.2
5.6
4.5
5.8
132
42
5.2
6.1
4.3
5.2
114
91
5.1
4.4
5.2
6.3
498
34
5.1
5.5
4.2
5.9
370
30
5.1
4.8
5.3
5.2
18
304
5.0
5.0
4.7
5.5
24
410
4.9
4.6
4.5
6.2
349
365
4.7
4.8
4.1
5.8
210
4.7
6.7
3.0
4.1
76
56
4.7
5.2
4.6
3.8
131
511
4.6
6.3
2.8
5.0
102
20
4.6
6.1
3.1
4.8
31
42
4.6
5.1
3.7
5.2
136
77
4.5
4.8
4.5
4.1
97
770
4.4
5.0
3.8
4.3
32
62
4.4
6.7
2.6
3.1
67
109
4.4
6.0
3.4
3.1
46
13
4.3
4.9
4.3
3.1
16,377
1,213
4.2
4.5
4.0
3.8
44
4.1
5.2
2.9
4.5
109
91
3.8
4.3
2.6
5.2
47
63
3.8
4.4
3.8
2.6
24
8,459
4.7
2.7
3.7
126
304
4.9
2.2
4.2
113
48
79
579
3.7
3.7
3.7
4.6
2.8
3.5
3.6
5.1
2.6
2.9
87
230
3.6
2.6
4.2
4.4
421
2,973
4.1
145
9,327
87
3.5
2.5
4.3
3.3
4.5
2.3
2.8
82
3.2
4.3
2.2
3.2
84
25
3.1
2.9
3.4
3.1
82
995
Albania
3.1
3.7
2.5
3.2
101
27
Bosnia and
Herzegovina
2.9
4.2
1.8
2.6
75
51
Kenya
2.7
2.4
2.8
3.2
78
569
Moldova
2.6
2.9
2.1
2.7
124
33
Egypt
21
*Belarus is not included in the WEF Travel and Tourism Infrastructure rankings.
Sources: World Economic Forum
The composite score is calculated as a weighted average of the 3 separate infrastructure scores. Ranks and ratings are shaded using a colour scale,
where green signifies strong performance and red signifies weak performance. North America is defined as the United States and Canada. Where WEF
aggregates dont exist, they are created using simple averages.
17
16
This may not always mean additional capacity. The case study in Box 2.1 later in this report highlights the dangers of unnecessary capacity expansion.
April 2015
Box 2.1:
Case study: The importance of smart investment
Not all investment expenditure results in improved infrastructure. Investment expenditure can be poorly
targeted, subject to political corruption, or otherwise misspent. In such cases, the resulting infrastructure is
likely to be poor value for money.
A recent analysis by the European Court of Auditors18 suggests that poorly targeted investment in air transport
infrastructure is an important issue for a number of European countries. The report, published in December
2014, analysed 460 million in Cohesion policy funds (such as the European Regional Development Fund) that
were spent on 20 airport infrastructure projects in Estonia, Italy, Greece, Poland, and Spain. It found that the
funding, which was spent between 2000 and 2013, was poor value for money overall.
Overbuilding was a key reason for this. Just half of the airports analysed increased passenger numbers after
project completion, suggesting significant underutilization of the newly built infrastructure.
A high rate of failure to achieve financial sustainability was another reason for the reports conclusion. Seven out
of the 20 airports analysed are unprofitable and will likely be closed if they are not supported by ongoing public
funding.
The European Court of Auditors report concluded that 28% of the EU funding analysed, or 129 million, went
towards projects that were not needed at all19.
Smart investments, then, must be based on a realistic possibility of increasing user numbers and profitability.
Examples of misplaced investment in the European Court of Auditors report often neglected both. One such
example is Kastoria National Airport in Greece.
An example of cost-ineffective capacity expansion: Kastoria National Airport in Greece.
Kastoria National Airport, with 5,300 in passenger traffic in 2013, is one of the smallest airports analysed by
the European Court of Auditors report. The potential for air infrastructure bottlenecks in the region are limited
because virtually all residents within the Kastoria Airports catchment area have access to a nearby competing
airport within 50 minutes by road, and two other competing airports can be accessed within two hours drive.
Within this context, the report assesses whether a runway expansion project, costing 16.5 million (34% of
which was EU funded), was good value for money. The assessment notes that the expanded runway has never
been used by the type of aircraft it was built for and the airport operated at a loss between 2005 and 2012.
Having lost 275 for every passenger using the airport over this period, the report concludes that the expanded
runway cannot be considered as an effective use of public funds 20.
Restoration of the Colosseum Rome, Italy
Table 2.4: Objective infrastructure pillar subcomponents

Major Infrastructure Pillar
Ground transportation infrastructure
2.2 Assessing objective subcomponents of

the three major WEF infrastructure pillars
Within WEFs major infrastructure pillars tourism infrastructure, air transportation
infrastructure, and ground transportation infrastructure are a number of subcomponents.
A selection of those subcomponents, comprised of those that contain objective data
rather than survey/opinion questions, are shown in Table 2.4. The ground transportation
infrastructure pillar has one objective subcomponent underpinning it, which is the
kilometres of road per 100 square kilometres of land by country. There are four objective
subcomponents supporting the air transport pillar, including airports per capita and the
number of international and domestic seat kilometres originated by country. And there are
three objective subcomponents underpinning the tourism infrastructure pillar, including
the number of major car rental companies in the country, the number of automated teller
machines accepting Visa per capita, and the number of hotel rooms per capita. Each of
these subcomponents sheds some light on how easy or difficult it is for visitors to experience
the best of what a country has to offer.
22
Air transportation
infrastructure
Tourism
infrastructure
Capacity Pillar Subcomponent

Km of road per 100
Km2 of land
Airports per capita
Presence of major
car rental companies
International seat
Km originated
ATMs accepting
Visa per capita
Domestic seat Km
originated
Hotel rooms per

capita
23
Number of departures per capita

18
EU-funded airport infrastructures: poor value for money, (2014), European Court of Auditors, December. Quotes are from pages 14 and 66.
19
Ibid. Page 14.
20
Ibid. Page 27.

April 2015
Table 2.5: Objective infrastructure subcomponent ranks
24
Country
UN Classification*
Switzerland
Spain
France
WEF composite
infrastructure
(scoreout of 7)
WEF composite Direct Travel

& Tourism
infrastructure
contribution to
rank
GDP (%)
KMs of road
per 100sq. KMs
land (rank)
KMs of
road per
vehicle
(rank)
Airports per
capita (rank)
ATMs accepting Hotel Rooms

Visa per capita
per capita
(rank)
adjusted for
visitors (rank)
Capacity: International seat

KMs originated
(rank)
Capacity:
Domestic seat
KMs originated
(rank)
Number of
departures per
capita (rank)
Presence of
major car rental
companies (no
out of 7)
11
6.1
32
24
18
Southern Europe
6.0
16
21
22
16
5.8
19
18
21
27
United Kingdom
5.7
10
37
15
11
13
Austria
5.7
19
24
26
13
17
18
Germany
5.7
34
31
15
23
Italy
Southern Europe
5.5
13
38
28
26
Iceland
5.5
38
25
21
18
Cyprus
Southern Europe
5.4
15
14
22
27
10
Malta
Southern Europe
5.4
10
15
39
29
30
28
13
Ireland
5.4
11
14
10
15
20
20
12
Greece
Southern Europe
5.4
12
24
30
12
11
17
14
Norway
5.4
13
35
13
18
19
Denmark
5.2
14
11
15
13
14
13
13
16
34
Portugal
Southern Europe
5.2
15
23
31
14
10
12
19
Netherlands
5.1
16
36
36
26
14
37
25
Belgium
5.1
17
20
31
11
27
17
23
Finland
5.1
18
37
25
17
12
35
17
Sweden
5.0
19
17
16
10
25
33
11
Luxembourg
4.7
20
35
11
34
30
40
20
Croatia
Southern Europe
4.7
21
13
29
29
12
28
19
27
32
Slovenia
Southern Europe
4.6
22
11
16
38
30
19
14
Estonia
Eastern Europe
4.6
23
17
33
25
24
15
28
Czech Republic
Eastern Europe
4.6
24
12
18
29
21
23
22
31
21
10
Turkey
Southern Europe
4.5
25
31
12
30
28
29
24
Latvia
Eastern Europe
4.4
26
22
21
27
30
25
29
Bulgaria
Eastern Europe
4.4
27
34
33
33
26
22
30
12
Montenegro
Southern Europe
4.4
28
10
38
40
36
30
23
27
15
Russia
Eastern Europe
4.3
29
40
17
25
29
10
30
Hungary
Eastern Europe
4.1
30
36
24
30
20
22
35
Lithuania
Eastern Europe
3.8
31
20
19
31
30
31
36
33
Poland
Eastern Europe
3.7
32
21
28
39
19
15
36
24
37
Slovakia
Eastern Europe
3.7
33
24
23
19
35
24
34
26
31
Ukraine
Eastern Europe
3.7
34
36
26
34
20
14
37
17
38
Romania
Eastern Europe
3.6
35
26
10
27
23
16
33
21
16
Serbia
Southern Europe
3.3
36
30
27
36
30
30
35
32
22
Macedonia
Southern Europe
3.2
37
28
17
39
30
39
30
39
Albania
Southern Europe
3.1
38
27
35
32
30
32
39
36
Bosnia and
Herzegovina
Southern Europe
2.9
39
32
16
23
40
29
40
34
26
Moldova
Eastern Europe
2.6
40
33
22
40
37
30
38
38
40
25
April 2015
Table 2.5 shows objective subcomponent ranks for each of the 40 countries for which WEF
data are available. A number of interesting patterns are apparent within the table.
First, there is room for improvement even for countries with high averages among the three
major infrastructure pillars. For example, France and Austria, which both rank highly overall
for Travel & Tourism infrastructure quality and capacity, could stand to increase the number of
available hotels. The United Kingdom, the Netherlands, Luxembourg, and Germany are among
the countries that would benefit from increased road capacity. Each has at least 60% more
cars per kilometre of road capacity than the European average. This causes congestion, both
in urban areas and on inter-urban links. A recent European Commission report21 found that
these countries have a disproportionate number of inter-urban links where delays of over ten
seconds per kilometre are common.
Second, even among countries with poor infrastructure scores overall, there are rays of
hope. Russia perhaps not surprising for such a large country shows an impressive ability
to shuttle people around domestically, and has greater ATM saturation than the United
Kingdom. The Czech Republics road network is more extensive than that in Italy or Ireland
if measured relative to land mass. And visitors to Bulgaria and Montenegro are unlikely to
complain of a shortage of hotel rooms, which are adequate to service their domestic and
visiting populations. Such countries can build on these successes to improve their overall
infrastructure capabilities. A sustained focus on the weaker points of infrastructure over the
next decade (and beyond) is imperative if they are to meet the baseline forecasts for
Travel & Tourisms economic impacts discussed earlier in this report.
2.3 Which countries have the greatest

infrastructure needs between 2015 and 2025?
On an individual country level, will poor infrastructure quality and capacity and a lack of
investment constrain the Travel & Tourism sectors growth? This section puts a spotlight on the
countries that face the greatest risk of failing to meet baseline forecasts of economic benefits
due to insufficient infrastructure and investment.
Three indicators are used to form this assessment:

Has historic Travel & Tourism investment growth been relatively high or low? This is
assessed in the decade to 2008, which is representative of a normalised macroeconomic
environment.
What is the current quality and capacity of Travel & Tourism infrastructure, as assessed
using WEF composite infrastructure scores?
According to WTTC and Oxford Economics forecasts, is it expected that Travel & Tourism
demand growth will outpace investment growth in the sector over the next decade?
Figure 2.2 presents the results of this assessment. It groups countries into three categories,
ranging from those that are at risk of losing Travel & Tourism infrastructure competitiveness
over the next decade, to those that are well-placed to benefit from forecasted demand
between 2015 and 2025.
The groups include those that are:
26
Well-placed: This group of countries, exemplified by Austria, Germany and the United
Kingdom, has high existing quality and capacity of Travel & Tourism infrastructure which
they are expected to maintain and improve between 2015 and 2025. With investment
growth expected to outpace demand over that period, these countries are well-placed to
capture the full benefits of forecasted Travel & Tourism demand.
Well-placed, but with key risks: France, Italy, Switzerland, Ireland, and Greece are one
set of countries included in this category. Each of them has existing Travel & Tourism
quality and capacity that is greater than the European average. Yet their strong positions
are likely to deteriorate somewhat over the next decade, since Travel & Tourism demand
growth is forecast to outstrip Travel & Tourism investment growth over the period.
Similarly, Denmark and Finland have better than average Travel & Tourism infrastructure
quality and capacity; however, weak historical investment growth presents risks to the
forecast that investment growth will exceed demand growth in the next decade. Slovenia
and Latvia are also well placed, with risks. Their key strength is that they are expected
to see investment growth that is stronger than demand growth over the next decade; their
key risk is their existing infrastructure quality and capacity, which is below the European
average.
At medium or high risk: This category includes countries like Albania, Bosnia, and
Moldova, which are considered to be at high risk because they have the poorest existing
infrastructure quality and capacity out of the 40 countries for which data are available.
Croatia, Serbia, and Slovakia are also considered at risk, because Travel & Tourism
investment growth is expected to lag behind demand growth over the next decade.
Portugal, having relatively strong existing infrastructure capabilities, is a special case:
because demand growth is expected to outpace investment growth by such a wide
margin, the country faces a risk that its current infrastructure quality and capacity will
degrade over the next decade.
Construction of the Kalinin-Solntsevo Subway Moscow, Russia
21
European Commission, (2012), Measuring road congestion.

April 2015
27
Figure 2.2: Country typologies: will current infrastructure quality and capacity and
lack of investment constrain Travel & Tourism sector growth?
T&T investment to demand ratio* (20102014 avg to 2025)
Higher current
Travel & Tourism
infrastructure
quality and
capacity
Less favourable ratio
-0.4
-0.2
0.0
More favourable ratio
Balance
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Switzerland
chapter 3
The outlook for European Travel & Tourism

investment spending
Spain
France
United Kingdom
Austria
Germany
Italy
3.1 A regional comparison of forecasted

investment spending
Iceland
Cyprus
Malta
Worldwide, nearly 9 trillion is expected to be spent on Travel & Tourism investment between
2015 and 2025. Asian countries particularly China and Japan will be the biggest source
of this future investment. They are expected to account for 40% of the global total, or nearly
3.6 trillion (Figure 3.1). The United States and Canada will contribute a further 18% of
the global total (1.6 trillion), while Latin America, the Middle East, and Africa will initiate a
combined 17% (1.5 trillion). Meanwhile, European countries are expected to make Travel &
Tourism investments equal to nearly a quarter of the global total between 2015 and 2025.
Ireland
Greece
Norway
Denmark
Portugal
Netherlands
Belgium
Finland
Figure 3.1: Sources of future global and European Travel &

Tourism investment spending from 201525 ( billion)
Sweden
Croatia
Slovenia
Estonia
Latin America
710
Latin America, 710
Czech Republic
Middle
East
Middle East,
500
500
Turkey
Latvia
Bulgaria
North
NorthAmerica
America, 1,628
1,628
Eastern
237
Eastern, 237
Russia
Hungary
Southern
Southern, 573
573
Europe
Europe
Lithuania
Poland
Western
&
Western & Northern,
1,321
Slovakia
Northern
1,321
Asia
3,550
Asia,
3,550
Romania
Serbia
28
Macedonia
Albania
Source: WTTC, Oxford Economics
Bosnia and
Herzegovina
Lower current
Travel & Tourism
infrastructure
quality and
capacity
29
Africa
Africa, 321
321
Legend:
Well-placed
Well-placed,
but key risks
At medium risk
At high risk
* The T&T investment to demand ratio is the ratio of forecasted average annual Travel & Tourism investment growth over the next decade divided by forecasted average
annual Travel & Tourism demand over the same period.
Note: Four countries are excluded from this diagram. Belarus lacks WEF infrastructure data, forecasts for the Ukraine at the time of publication are vastly more uncertain
than is typical due to the countrys ongoing conflict, and Luxembourg and Montenegro are outliers that obscure trends among the 37 other countries in the diagram.
Travel & Tourism investment trends have varied considerably over the last decade among
the three major European regions analysed in this report (Figure 3.2). However, some key
growth patterns that were evident between 2000 and 2008 are likely to re-emerge. Eastern
European countries, which tend to need the greatest improvement in Travel & Tourism
infrastructure among all European countries, are expected to see investment growth of
3.2% per year between 2015 and 2025. The forecast reflects expectations that the region will
recover from a stagnation in investment since the recession. Southern European countries
experienced a significant drop in Travel & Tourism investment expenditure post-recession,
but on average are expected to see investment growth of 3.3% per year between 2015 and
2025. Western and Northern European countries, which can to some extent rely on historic
infrastructure and investment, will have moderately slower growth in Travel & Tourism
expenditure over the next decade, at just 3% per year on average.
April 2015
Figure 3.2: European Travel & Tourism investment

spending growth between 2000 and 2025 (2000 = 100)
decline in private funding combined with a modest increase in government funding. Since
2009, the government funded share of total economy investment has fallen back to 15%, and
a recovery in private funding meant the private share was 85% in 2013.
Overall, the available evidence suggests that government funding has grown in importance
in recent years, despite austerity measures. However, it is important to recognise that private
funding still comprises the vast majority of total fixed investment.
Index:
2000 = 100
250
Figure 3.3: Source of economy-wide investment expenditure between

2000 and 2013 in six European countries
200
Government
expenditure
Forecast
150
100
40
90
30
80
20
70
10
60
50
Private
2025
2020
Eastern Europe
2015
Southern Europe
2010
2005
2000
50
Private
expenditure
Government
Sources: OECD
Includes Belgium, Finland, France, Netherlands, Norway, and the UK
Public Private Partnerships
Infrastructure investments can be funded from multiple sources Public Private

Partnerships (PPPs) are an example of such an investment strategy. While not all projects
are suitable for PPPs, a recent Brookings publication22 notes that successful PPPs offer
chances for risk-sharing and specialisation in roles that can ultimately deliver good value
to taxpayer. For that reason, and because at least in some countries sources of private
funding have diminished relative to public funding sources, PPPs may increasingly be seen
as an attractive funding model.
Box 3.1:
Who will invest if austerity dominates fiscal choices over the next five to ten years?
Crowdfunding
30
Crowdfunding is a relatively new form of finance, enabled by widespread internet use,

which could grow to have implications for Travel & Tourism. Crowdfunding companies
provide online platforms for enthusiasts and small-scale investors to band together to
31
fund projects that may not be suitable for traditional financing. TravelStarter is an example
of crowdfunding for the Travel & Tourism sector, offering travelers with an interest in
investing the opportunity to invest small amounts (as little as $10, or 7.50 23) to fund
hostels and lodges in places like the United Kingdom, Croatia, and Slovenia. Benefits
range from recognition to free accommodation if the venture succeeds. WiSEED, a French
crowdfunding platform recently took pledges to privatise the Toulouse-Blagnac Airport
Company in France, suggesting that crowdfunding platforms could be applied to larger
infrastructure projects, too.
Over the next five to ten years, fiscal deficits, austerity, and corporate sector credit
constraints may act individually or in tandem to prevent greater investment in the Travel &
Tourism sector. If that is the case, who will invest?
Who is currently investing?
While a detailed breakdown of investors by type for Travel & Tourism infrastructure is not
available, it is possible to look at the origins of whole economy investment for several
countries, shedding some light on overarching funding trends for infrastructure investment.
Between 2000 and 2013, France, the United Kingdom, the Netherlands, Belgium, Norway,
and Finland invested a total of 14.3 trillion in fixed capital (Figure 3.3). On average over
that time period, 14% of this amount was funded by governments, while the remaining
86% was funded privately.
Is government becoming a more important source for funding?
The share of government investment expenditure, as opposed to private investment
expenditure, that makes up total economy investment has shifted slightly over the last
decade and a half. In 2000, the government funded share was 12%, but that rose to 17%
in 2009, immediately following the onset of the global financial crisis in 2008 and before
government austerity became commonplace. This was primarily a function of a steep
22
Private Capital, Public Good: Drivers of Successful Infrastructure Public-Private Partnerships, (2014), Brookings Institute. December.
23
Measured at 2014 prices and exchange rates.

April 2015
3.2 Sectoral composition of

investment spend
Since 2000, Travel & Tourism investment in Europe as a whole has made up around
45% of economy-wide investment. Table 3.1 shows some of the variation in that share
among countries between 2000 and 2013. The share is especially high in countries that
are highly reliant on the Travel & Tourism sector: 13% in Greece (which directly relies on
Travel & Tourism for 7% of its GDP) and 11% in Malta (direct Travel & Tourism is 15% of
GDP). Countries that rely less on Travel & Tourism also tend to invest less in the sector. The
Netherlands and Slovakia rely on Travel & Tourism for just 2% and 3%, respectively, of their
GDP; investment in the sector is similarly low relative to overall economy investment just
3% for both the Netherlands and Slovakia between 2000 and 2013.
For Europe as a whole, the Travel & Tourism investment rate in the last decade and a half
tended to be higher than service sectors like wholesale and retail trade, professional
services, and education, likely because Travel & Tourism is more capital intensive on
average (for example, hotels, roads, rail, and airports all require significant capital
investments). On the other hand, the Travel & Tourism investment rate tended to be lower
than for mining and quarrying and utilities, which are far more capital-intensive than the
Travel & Tourism sector per unit of output.
Table 3.2: Investment relative to sectoral GDP,

20002013 average
Across all countries in Table 3.1, Travel & Tourism investment tends to make up a larger
proportion of total economy investment than does mining and quarrying and the utilities sector,
but less than the manufacturing sector, which tends to be both large and capital intensive.
Sector
Table 3.1: Sectoral investment share of economy-wide

investment between 2000 and 2013
Country
32
Whole
Economy
Travel
& Tourism
Manufacturing
Transportation and
Storage
Information
and Communication
Construction
Electricity,
Gas and
Utilities
Accommodation
and Food
Services
Mining and
quarrying
Europe
Eastern
Europe
Western &
Northern
Europe
Southern
Europe
Travel & Tourism
24%
30%
23%
33%
Whole Economy
24%
29%
24%
26%
Construction
10%
13%
6%
24%
Electricity, Gas and Utilities
30%
32%
26%
26%
Information and Communication
24%
40%
25%
29%
Land Transport
11%
10%
11%
11%
23%
34%
24%
16%
Austria
100%
5%
16%
9%
4%
2%
3%
2%
0%
Manufacturing
Czech Republic
100%
4%
23%
10%
5%
3%
5%
1%
1%
Mining and Quarrying
26%
39%
27%
19%
Denmark
100%
5%
14%
10%
6%
2%
3%
1%
2%
Transportation and Storage
30%
42%
26%
44%
Estonia
100%
6%
12%
10%
4%
4%
9%
1%
1%
Accommodation and Food Service Activities
9%
17%
8%
8%
France
100%
5%
13%
4%
5%
2%
3%
1%
0%
Wholesale and Retail Trade
5%
16%
4%
1%
Germany
100%
4%
19%
6%
4%
1%
2%
1%
0%
Air Transport
18%
86%
20%
4%
Greece
100%
13%
6%
12%
4%
2%
2%
2%
0%
Information and Communication
22%
32%
24%
25%
Hungary
100%
4%
23%
9%
6%
2%
4%
1%
0%
Telecommunications
24%
28%
29%
4%
Italy
100%
4%
18%
7%
4%
3%
5%
2%
1%
Professional, Scientific and Technical Activities
16%
19%
21%
3%
Luxembourg
100%
6%
7%
9%
8%
2%
3%
1%
0%
Education
13%
16%
14%
14%
Malta
100%
11%
16%
5%
5%
3%
0%
4%
0%
Source: Eurostat
Netherlands
100%
3%
10%
6%
4%
2%
2%
1%
2%
Norway
100%
4%
6%
6%
3%
3%
2%
0%
24%
Slovakia
100%
3%
26%
8%
6%
2%
9%
1%
1%
Slovenia
100%
6%
21%
10%
4%
3%
5%
2%
1%
Spain
100%
6%
9%
7%
4%
10%
4%
2%
0%
How will investment in the Travel & Tourism sector compare to investment in other sectors
between 2015 and 2025? Oxford Economics has previously conducted detailed research
33
for PricewaterhouseCoopers on infrastructure investment by sector across more than 40
countries worldwide which can shed light on how Travel & Tourism investment is likely to
fare relative to other sectors between 2015 and 2025. Figure 3.4 below shows the expected
average annual growth between 2014 and 2025 of investment in 16 sectors across 13
European countries24 as well as for the average of the 41 countries analysed in the rest of this
report for Travel & Tourism.
Source: Eurostat
Across Europe and in two of the three major regions analysed in this report, the Travel &
Tourism sector has historically made investments relative to its direct GDP contribution that
are very similar to the investment rate for the economy overall (Table 3.2). Between 2000
and 2013, Travel & Tourism investments amounted to 24% of the sectors contribution to
European GDP; at the same time, investment in the whole economy amounted to 24% of
total GDP. Similarly, in Eastern Europe (30%) and Western and Northern Europe (23%), the
Travel & Tourism investment rates were close to investment rates economy-wide (29% and
24%, respectively). Southern Europe, however, had higher Travel & Tourism investment
rates, at 33% compared to economy-wide investment rates of 26%.
Among the countries analysed, investment in railroad networks is expected to grow

the fastest, at an average annual rate of 3.9%. That is followed by investment in power
generation and sea ports, each forecast to grow at 3.7% per year. Meanwhile, investment
spending targeted at the Travel & Tourism sector in particular (although this is not perfectly
mutually exclusive of other investment categories presented in the chart) is forecast
to grow by 3.1% per year, faster than investment in electricity transmission (2.6%) and
telecommunications (2.3%).
Europe in the context of non Travel & Tourism sectoral analysis is comprised of the Czech Republic, France, Germany, Hungary, Italy, Netherlands,
Poland, Romania, Russia, Spain, Sweden, Ukraine and the United Kingdom; for Travel & Tourism, the figures for Europe represent all 41 countries
analysed in the main report.
24
April 2015
Figure 3.4: Forecasted growth in investment by sector in

Europe between 2015 and 2025
Box 3.2:
Case study: What does the European Fund for Strategic Investments (EFSI)
mean for Travel & Tourism investment?
Growth in Investment by Sector in Europe from 2015 to 2025

Amount of additional investment expected
Average Annual Growth (%)

-1.0
0.0
1.0
2.0
3.0
In November 2014, the European Unions legislative body, the European Commission,
proposed the creation of a 21 billion fund to spur investment in the areas of infrastructure,
education, research, innovation, renewable energy and energy efficiency25.
4.0
Railroad Network (including Stations and Terminals)
The stated aim is that the initial investment of 21 billion, made up of 16 billion in EU funding
and another 5 billion from the European Investment Bank, will encourage private sector
funding between 2015 and 2017 that will multiply the amount invested by a factor of 15. Thus,
in total, the European Commission hopes that the EFSI will result in 315 billion of additional
investment spending between 2015 and 2017.
Power
Sea Ports
Travel & Tourism
Airports
Whether the full 315 billion of investment will materialise is unknown. If the full amount
does occur which may be a best-case scenario it would amount to a 3.6% boost to total
economy fixed investment spending scheduled to occur between 2015 and 2017. In the
worst-case scenario, where none of the additional private funding materialises, the plan
would amount to a 0.2% boost to currently forecasted total fixed investment spending. The
eventual outcome is likely to lie somewhere between those two possibilities.
Electricity Transmission
Road Network (including Bridges and Tunnels)
Telecommunications
Gas Distribution
Hospitals
The impact on Travel & Tourism investment
Primary Metals
The European Commissions announcement for the EFSI fund does not explicitly mention
the targeting of Travel & Tourism infrastructure needs. However, infrastructure in general is
one of the primary targets for the fund, and there may be some elements that redound to the
Travel & Tourism sector.
Chemicals
Water Supply and Treatment
Petroleum Refining
In 2014, an estimated 4.9% of total fixed investment in the European Union was made up of
Travel & Tourism investment. In the absence of concrete details of the spending breakdown,
it could be assumed that the same share of the European Commissions initiative may
ultimately filter through to Travel & Tourism-related infrastructure. That would mean new
Travel & Tourism investment of between 1 billion and 15 billion, depending on how much
the EFSI fund stimulates additional private funding. For context, those scenarios represent
an additional 1 for every 415 of Travel & Tourism investment already expected to occur
(least optimistic scenario materialising) or an additional 1 for every 28 already expected to
occur (most optimistic scenario materialising).
Extraction of other Minerals

Colleges and Schools
Petroleum and Natural Gas Extraction
Source: Oxford Economics
Expected Travel & Tourism investments between 2015 and 2025 are high relative to that for
other sectors. If expectations are met, and the money is well spent (see Box 2.1 for examples
to the contrary), Europes Travel & Tourism sector may find it is well-placed to continue
to compete strongly for global visitor flows; if expectations are not met, there is a danger
that the sectors infrastructure will fall behind. In both scenarios, there will be pockets of
inadequacy, where sustained efforts at improvement should be kept up.
Given the uncertainty, the lesson for would-be beneficiaries is to submit bids early, submit
strong bids, and demonstrate learning from bad past investments when applying. An ability to
collaborate and tie-in with other countries infrastructure capabilities may also be a boon.
35
34
Road Network Paris, France
25
European Commission, (2014),The European Fund for Strategic Investments (EFSI): Questions and Answers. Page 1.
April 2015
A focus on targeted, smart-investment will be critical to success

A recent report by the European Court of Auditors shows that additional capacity is not
always be beneficial. To avoid overbuilding and ensure high returns and value-for-money
investment, investment strategies must realistically plan to increase the relevant user base
after completion and then achieve financial sustainability. Well-targeted investments may
involve additional capacity, but they can also maintain and expand existing capacity, and
encourage improvements in quality, competitiveness, productivity and sustainability.
conclusion
Travel & Tourism investment should be ongoing rather than one-off
Putting Travel & Tourism investment on

European governments agendas
The European Travel & Tourism sector is forecast to grow in importance over the next
decade, according to the WTTCs latest annual economic impact research
Travel & Tourism markets are dynamic, and tastes evolve over time along with individual
definitions of home versus luxury comforts. This calls for a consistent and sustained focus
on Travel & Tourism investment across time in order to keep up with changing market
demand characteristics.
In periods of government and financial sector funding constraints, investors in
the Travel & Tourism sector should seek cross-border collaboration and creative
funding options
Cross-border Travel & Tourism infrastructure collaboration can be uniquely effective on the
continent because of Europes relatively small geographic size and existing integration. And,
particularly in periods of fiscal austerity, those engaged in Travel & Tourism investment may
wish to consider creative funding options like public private partnerships or crowdfunding.
In 2014, the Travel & Tourism sector supported 33.5 million direct, indirect, and induced jobs
(9.3% of the European total) and nearly 1.6 trillion in GDP (9.3% of European GDP). The
Travel & Tourism sectors total economic contribution is expected to grow to 38 million jobs
(10.4% of European employment) and 2.1 trillion in GDP by 2025 (9.9% of European GDP).
This assumes that supply-side capacity, in areas like infrastructure and talent, does not act
as a constraint tot the sectors growth.
Both industry and governments should therefore place Travel & Tourism
investment high on their agendas, or risk failing to achieve the baseline forecast
and resulting economic benefits
Cruise Ships in the Aegean Sea Santorini, Greece
The strong statistical relationship between Travel & Tourism infrastructure capabilities
and the sectors economic impact means the issue warrants attention from both private
and public investors and policy-makers. It also highlights the need for businessfriendly policies and legislation in the Travel & Tourism sector to support and encourage
infrastructure development. But any new infrastructure must represent the right sort
of investment to meet specific demand requirements and address gaps, and not be
investment for the sake of investment, given the more constrained financial environment
and lessons from past bad investments.
Travel & Tourism investment strategies must be evidence-based
This report provides forecasts for Travel & Tourism investment and demand growth,
providing an evidence-base for industry and government investment strategy, as well as
national-level tourism development plans and overall tourism strategy.
This report highlights unique opportunities and challenges for three country typologies
36
Well-placed: Austria, Germany and the United Kingdom should focus on

maintaining and improving their existing, high-quality infrastructure. A key strength
is that Travel & Tourism investment growth is forecast to outpace Travel & Tourism
demand growth over the next decade.
Well-placed but with key risks: Denmark, Finland, France, Greece, Ireland, Italy,
Latvia, Slovenia, and Switzerland should be wary of complacency and relying on
existing infrastructure capabilities. Several of these countries risk Travel & Tourism
investment growth in the next decade being overwhelmed by growth in Travel & Tourism
demand. Others have a recent history (in the decade from 1998 to 2008) of declining
investment growth, presenting a risk of returning to pre-recession investment patterns
rather than meeting baseline forecasts of investment to 2025.
At medium or high risk: Albania, Bosnia and Herzegovina, and Moldova need to
address urgent existing infrastructure quality and capacity issues. Croatia, Portugal,
Serbia, and Slovakia are likely to see Travel & Tourism demand growth that significantly
outpaces investment in the sector over the next decade. Each of these countries is at
risk of failing to fully benefit from forecasted demand.
37
April 2015
Sewage Treatment Plant Wroclaw, Poland
38
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European

Travel & Tourism:

Where are the greatest current

Where are the greatest current

Restoration of the Parthenon on Acropolis Athens, Greece

European Regional Groupings

Western & Northern Europe

Bosnia and Herzegovina

The importance of investment to success in the Travel & Tourism sector

Assessing objective subcomponents of the three major WEF infrastructure pillars

The outlook for European Travel & Tourism investment spending

A regional comparison of forecasted investment spending

Sectoral composition of investment spend

Conclusion putting Travel & Tourism investment on European governments agendas

Figure 0.1: Defining the problem with country typologies

Less favourable ratio

More favourable ratio

1.1 The economic contribution of the

Figure 1.1: Direct, indirect, and induced Travel

% Whole Economy GDP

Sources: WTTC, Oxford Economics

Including direct, indirect (supplychain), and induced

See Page 6 for the countries that make up each regional

Madrid Atocha Railway Station Madrid, Spain

1.2 Defining the role of investment and

What is infrastructure and investment?

By 2025 the European Travel & Tourism sector will

accommodation development and major maintenance, including provision of new

capital projects and refurbishments designed to attract visitors;

information technology (ICT) projects; and

Government investment spending is often directed toward the construction of visitor

Expanding capacity: In order to support higher demand and a greater volume of

This report will explore one of the key enablers of the

Is present day European Travel & Tourism

Is future sector investment going to be sufficient

Are particular countries more at risk than others?

Travel & Tourism Sector

Sources: WTTC, Oxford Economics

Maintaining and enhancing current infrastructure: Continued investment in existing

Stimulating demand: Capital expenditure on new visitor attractions can generate

Figure 1.3: WEF composite Travel & Tourism infrastructure

WEF composite infrastructure score

1.3 The importance of investment to

1.4 Infrastructure quality and capacity today are strongly

Figure 1.4: Travel & Tourism investment spending per

WEF composite infrastructure score

Southern Europe Travel & Tourism investment per foreign visitor/domestic

Eastern Europe Travel & Tourism investment per foreign visitor/domestic

Eastern Europe Travel & Tourism investment per

WEF composite infrastructure score

Southern Europe Travel & Tourism investment per

2.1 Assessing the quality and capacity of

Travel & Tourism investment spending (Euros per person, average

(Euros per person, average 200-2013)

Sources: WTTC, Oxford Economics

Travel & Tourism investment spending (Euros per person, average

(Euros per person, average 200-2013)

Sources: WTTC, Oxford Economics

WEF Infrastructure ratings by world region by type (2013)

Air transport infrastructure

WEF Infrastructure ratings by world region by type (2013)

Air transport infrastructure

Latin & Central

Latin & Central