Economist and economic historian Prof. Giuseppe Tattara offers an analysis of tourism’s economic impact, the current imbalances in income and quality of work created by the sector – and its untapped potential.
By Giuseppe Tattara
Italy’s growth in recent years has in part been thanks to tourism. Tourism, especially from abroad, is booming, with international visitors up 14 percent compared to 2023, while spending by foreign tourists in the first months of the year has grown by twenty percent compared to the same period of the previous year. This increase could contribute up to 15 percent of the annual variation of the Italian Gross Domestic Product (GDP).
Venice (Municipality) is the eighth city in Italy in terms of GDP, with a value of 5.6 billion euros (ISTAT 2015 data processed by CGIA of Mestre, 2018). Almost half (46 percent) involves the transportation, trade and tourism sectors. In terms of employment, there are approximately 112,000 workers in the municipal area and over one in three is employed in the trade and tourism sector. The leading sector for employment is the hotel and restaurant sector, which employs almost 21,000 workers.
There have been many satisfied speeches underlining these positive results, which were recently confirmed at the provincial level in the ISTAT data of 2024.
At the municipal level, however, the economic data is not what a scholar might hope for. Amidst the lack of information, we note that the GDP of Venice is higher than that of the other large municipality in Veneto, Verona, both in absolute value and per capita, and always higher per capita than all of the provincial capitals (unfortunately this data is rather old, referring to the year 2000). The primacy of Venice in GDP value, however, is not reflected in the data on IRPEF tax revenue, where all the other regional capitals clearly surpass Venice. Not only that, but Venice is last for equality in the distribution of income (73 percent of the total taxpayers have an income of €26,000, while in the other provincial capitals this percentage is considerably lower). The fact that a higher gross product in Venice corresponds to a lower IRPEF tax and a more unequal distribution of IRPEF income suggests either a lower standard of living for employed workers and/or the existence of a large margin of tax evasion, linked to a high level of employment in off the book arrangements.
While the product/income ratio is usually the first point of reference in evaluating the impact of tourism, its distribution and the trend of employment also cannot be ignored. As for the latter, for simplicity’s sake let’s take a look at what is happening in the two municipalities of Venice and Verona: they have approximately the same number of private employees in non-agricultural sectors and employment has grown in both over the last fifteen years. In Verona, however, the increase was sixteen percentage points, about eleven thousand more employees created in the last seven years, compared to Venice. Employment collapsed with Covid (2020, fig.1) and then recovered, with a similar trend in the two territories.
Obviously, there are multiple causes for this gap, which can be clearly seen in fig.1:
Verona invariably does better than Venice in construction, less badly in manufacturing.
Coming to the tourism sector (accommodation and dining, according to the Institute of Statistics) we note that Venice has a number of employed people more than double that of Verona and that this sector has a profound impact on the GDP. Looking at the composition of employed people we see that the data referring to Venice are qualified for a low level in the type of workers in the tourism sector, consistent with the fiscal data just commented on, which materializes in three elements:
- The higher number of temporary employees out of the total number of employees (57 versus 43 percent in Verona on average in the period).
- the highest seasonality in Venice, linked to the greater importance of temporary contracts, estimated at around three thousand workers hired and then fired in the year on average, which is fifteen percent of the total. The tourist season remains relatively limited in Venice, compared to the tourism linked to fairs or other commercial events that characterizes Verona.
- the larger number of foreign workers, citizens of Eastern Europe, Africa, Central and Southern Asia, who are employed in Venice. The crisis linked to Covid has led the sector to rapidly change the composition of its workforce, greatly increasing the number of these workers who, even in the years that have followed, continue to constitute the majority of those hired (net of terminations) in the sector (sixty percent on average, compared to forty percent in Verona).
All this suggests that the very lively increase in gross product due to the excellent result of tourism, which has given Venice primacy at the regional level, has not corresponded to an increase in qualified employment: indeed, today the city’s employment levels are suffering. A paradoxical situation, considering the opening of numerous new hotels in the luxury sector and the entry of important international chains into the city. The phenomenon is probably wider than what is represented by the statistics, because hotels are increasingly outsourcing parts of their management to service companies that try in every way to reduce the cost of labor, and we are unable to adequately account for this.
Among the various factors that explain why the economy of Venice performs worse in terms of employment compared to Verona, the serious lack of innovative services emerges. The difference in the number of specialized workers in the advanced tertiary sector in the two municipalities amounts to seven to eight thousand units, a variation in the fifteen-year period examined, and this significantly affects the overall difference.
These are people employed in information technology, mass media, research and development, consulting, training, financial planning, blogging, design and even the entertainment industry. The higher number of employees with a high level of education in Verona is confirmation of this trend (ISTAT Asia and Veneto Lavoro).
There would seem to be a negative relationship between tourism workers and those in the advanced tertiary sector, although we have noted that, in the last twenty years, tourism has been managed on hi-tech platforms. Web-based intermediation agencies have generated a derived demand for highly specialized innovative services, which, however, have been developed abroad; even the most innovative transportation companies, for example some airlines such as Ryanair, which now manage various forms of “holiday” together with transport, have made use of sophisticated foreign software. The same happens for the financial sector and for hotel software services (reservations, management and management) developed at an international level by the chains that own the hotels or in any case purchased by them and distributed in the various locations. We recall that in Venice about forty percent of hotel beds are managed by international chains that cover the high end of the market. The demand for lower-grade services remains at a local level, a dynamic which is represented by the high percentage of less qualified workers we have spoken about.
This further consideration leads us to say that the tourism sector operates in Venice like it is in an enclave, a territory dominated by non-local interests, whose development is the result of a capital market without constraints, where investments move attracted by good earnings prospects, settle where they find fewer obstacles, quickly change objectives, follow profit and leave little on the ground. After all, profiting from tourism is not too difficult: the income produced is linked to the number of visitors, so it is enough to increase the number of tourists – which is a global phenomenon – and, with the same average expenditure, income increases. The problem is that those who benefit from tourism exploit the primary resources that are linked to the specificity of the city without contributing, if not to a minimal extent, to the costs sustained by the community for its maintenance, while the benefits at the local level are limited.
However, there could be a lot of room to increase the benefits that come from tourism. Regulate new real estate investments by applying municipal regulations, without exceptions and without turning a blind eye, regulate the flow of tourists, create a positive, highly qualified local demand for services around tourism. The opportunities range from booking visits to the historic city, to the computerized management of tourist flows, from choices towards sustainability, to multimedia equipment connected to artistic works. Tourist flows must be managed using information and communication technologies. In a city where life is affected daily by the “tourist invasion” there is a need to use new technologies to connect communities that are attentive to the needs of citizens and the territory with the local government. Why does the government of Venice accept tourism as an inevitability, failing to manage it and to take advantage of it? There are conditions for doing this in an intelligent and transparent way, involving the citizens themselves in the management.
Giuseppe Tattara was a professor of Economic Policy at Ca’ Foscari. He dealt with economic history and applied economics. Now retired, he is interested in the problems of his city.
Source: YtaliGlobal.com
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