The economic, financial, and political situation in Italy can be discussed as affecting the development of the tourism and hospitality industry in Italy significantly because the changes in the economic environment influence the businesses’ growth, profitability, and competitiveness; the aspects in the financial policies influence the possibility of investing into the Italian tourism and hospitality sector; and the political situation affects the legal environment related to foreign direct investment and taxes.
In this context, it is important to identify risks associated with the economic, financial, and political spheres in Italy and to determine prospects for the progress of the tourism and hospitality industry in the country.
Economic Risks and Prospects
The economic crisis observed in the euro-zone during the recent five years has affected the business environment considerably. The level of companies’ profitability decreased in more than 30% (Alonso-Almeida & Bremser, 2013, p. 143). Many businesses in the European countries were reorganized or closed. The economic challenges also impacted the development of the hotel business and hospitality industry (Alonso-Almeida & Bremser, 2013, p. 142).
However, the economic situation changed positively in 2012. In this context, the tourism and hospitality industry is traditionally discussed as the export driver in Italy (Smeral, 2009, p. 8). It is also important to state that during the period of 2009-2001, the potential and actual GDP in Italy decreased, and it became increasing only in 2013 (Alonso-Almeida & Bremser, 2013, p. 142; Smeral, 2009, p. 4). The consequences of the economic crisis that are observed in Italy are the decreases in a demand for hotels.
It is important to note that small businesses became affected by the crisis along with large businesses and corporations in the country. In order to attract the customers, the businesses started to develop different loyalty systems and discounts (Alonso-Almeida & Bremser, 2013, p. 143). The economic barriers caused the increases in prices for different types of services.
As a result, the overall level of consumption became rather low (Daniels, Radebaugh, & Sullivan, 2010). In addition, the economic crisis influenced the unemployment rate in Italy. The businesses needed to decrease the number of employees, and staff shortages affected the quality of the provided services (Williams, 2006, p. 483). From this point, the economic situation in Italy can be discussed as rather challenging for starting new enterprises in the country.
Financial Risks and Prospects
The financial sector in Italy has also faced many challenges that are associated with the necessity to restore the banking system after the economic and financial crisis. Currently, the Italian government is focused on implementing the policies that are oriented to debt reduction, and the contribution from the foreign capital is expected and supported in this situation (The hospitality sector in Europe, 2013, p. 4). It is important to note that in Italy, developing businesses traditionally choose to refer to bank loans in order to support their growth (Williams, 2006, p. 484).
However, the problem is in the fact that the percentage of loan applications for small businesses that can be discussed successful decreased in more than 10% during the period of 2008-2012 (The hospitality sector in Europe, 2013, p. 6). As a result, small businesses face additional challenges while planning the establishment of the enterprise in the country.
In contrast to the starting businesses, the developed international companies and hotel chains such as Hilton Hotels and other businesses that choose to operate in the European countries often use their own resources in order to develop businesses in these countries (Smeral, 2009, p. 4). The reason is that the conditions proposed in banks of Italy are not advantageous for starting businesses.
Political Risks and Prospects
Referring to the political environment in Italy, it is possible to note that the current situation can be discussed as contributing to attracting more foreign businesses to operate in this European country. The political situation in the country is comparably stable, and the authorities are oriented to proposing initiatives that are effective to recover the economics of this European country. Thus, the government initiated the establishment of the office that supports the foreign investors oriented to opening the business in Italy and to investing into the country’s domestic businesses and trade (Smeral, 2009, p. 4).
However, in spite of the establishment of a special office that supports foreign investors, the administrative procedures associated with starting a business by foreigners in Italy were revised during the period of 2009-2012 (Alonso-Almeida & Bremser, 2013, p. 143). Furthermore, the tax policies and property laws were also changed, and today the foreign businessmen need to provide the complicated documentation in order to prove the profitability of the business. As a result, taxes increased, and many businesses needed to adapt to the new tax policy.
While discussing the appropriateness of the economic, financial, and political environment in Italy for investing in business in this country, it is important to determine such risks as the increased taxes and the instable economic situation that is associated with the decreasing popularity of tourism in the country. The prospects are associated with the governmental support provided to foreign investors in Italy.
References
Alonso-Almeida, M. M., & Bremser, K. (2013). Strategic responses of the Spanish hospitality sector to the financial crisis. International Journal of Hospitality Management, 32(1), 141-148.
Daniels, J., Radebaugh, L., & Sullivan, D. (2010). International business. New York, NY: Pearson.
Smeral, E. (2009). The impact of the financial and economic crisis on European tourism. Journal of Travel Research, 48(1), 3-13.
The hospitality sector in Europe. (2013). Brussels: EYGM.
Williams, A. (2006). Tourism and hospitality marketing: fantasy, feeling and fun. International Journal of Contemporary Hospitality Management, 18(6), 482-495.