Published on
August 18, 2025
In 2025, several major European countries, including Germany, Austria, Ireland, Sweden, and Iceland, have recorded a significant tourism slump. This downturn is driven by a combination of economic uncertainty, rising travel costs, and geopolitical instability, further compounded by changing traveler behaviors. Countries like Germany and Austria, which rely heavily on tourism for economic growth, have seen sharp declines in overnight stays. Germany, for instance, reported a loss of 3.5 million overnight stays in Q1 2025 compared to the previous year. Austria experienced a similar decrease of 1.4 million overnight stays, mainly from domestic visitors.
Ireland has been hit the hardest, with an 18.6% drop in overnight stays, particularly from visitors coming from continental Europe and North America. Sweden and Iceland, despite having record tourism numbers in 2023, saw a downturn in 2025, with Sweden experiencing a double-digit decline and Iceland reporting a 5.7% decrease in tourism nights.
This decline has had a considerable impact on local economies. Tourism is a vital industry in these countries, supporting jobs in hospitality, transportation, and retail. The reduction in visitor numbers has led to financial strain on businesses, with many facing lower revenues and potential layoffs. Additionally, the tourism slump presents a challenge to these countries’ GDPs, with sectors reliant on international travelers particularly affected.
As the tourism industry struggles to recover, there is an urgent need for strategic initiatives to attract visitors back. Emphasizing sustainability, offering unique local experiences, and diversifying tourism offerings could help reverse the trend and ensure long-term growth for the European travel sector.
The Decline in International Visitors
The first quarter of 2025 saw a notable decline in international visitors across several European countries, with key destinations such as Germany, Austria, Ireland, and Iceland experiencing significant drops in overseas tourism. Factors like ongoing global economic uncertainty, geopolitical tensions, and the lingering effects of the COVID-19 pandemic have contributed to this decline. For instance, Germany and Austria reported fewer international overnight stays, while Iceland’s tourism faced a 5.7% drop compared to the previous year. The challenges faced by these countries are compounded by reduced flight capacities, with many airlines still operating at levels below pre-pandemic numbers, as well as increasing travel costs due to higher air traffic fees and taxes. In Ireland, the decrease in visitors from continental Europe and North America, coupled with concerns about broader market fluctuations, highlights the global nature of the downturn. The reduction in international travel has had a ripple effect on local economies, particularly in industries like hospitality and retail, that heavily rely on overseas visitors.
Economic Pressures on the Tourism Industry
The tourism industry in several European countries is grappling with significant economic pressures that have exacerbated the decline in visitor numbers. Rising costs, inflation, and higher travel-related expenses have directly impacted the affordability of travel, especially for international tourists. In countries like Germany, Austria, and Ireland, increased air traffic fees, fuel surcharges, and the continuation of the air passenger tax have added financial burdens on both travelers and operators. These rising costs are contributing to fewer international visitors, as people prioritize their spending in a time of economic uncertainty. Additionally, the global economic slowdown has affected consumer spending, leading to lower travel demand from key markets, including North America and Europe. The increased cost of living, coupled with slower wage growth, has led to more cautious consumer behavior, with many travelers cutting back on discretionary spending, including vacations. The tourism sector, reliant on international spending, is facing challenges in sustaining its growth while navigating these broader economic factors. The economic strain has not only affected tourism numbers but also has the potential to disrupt businesses within the sector, from airlines and hotels to local service providers.
Germany: Declining Domestic Tourism and Ongoing Challenges in International Travel
Germany experienced a notable drop in tourism during the first quarter of 2025, with a significant 3.5 million fewer overnight stays compared to Q1 2024. This decline was predominantly attributed to a dip in domestic tourism. However, the first half of 2025 shows promising signs of recovery when removing the impact of the UEFA European Football Championship (EURO) in 2024, with international visitor stays increasing by 4.0% compared to 2023.
Factors contributing to the slowdown include flight capacity remaining 20% below pre-pandemic levels, alongside rising air traffic control fees and the country’s air passenger tax. Despite these challenges, Germany is expected to rank among the top five European destinations for summer travel, indicating a potential recovery later in the year.
Austria: Domestic Tourism Declines but Long-Term Growth Prospects Remain
Austria saw a decline in overnight stays by 1.4 million in Q1 2025, primarily from domestic visitors. However, the country’s tourism sector remains resilient, with consistent growth in international tourism over the past years. Austria is forecasted to continue growing, with its direct contribution to GDP projected to increase to 5.4% by 2028. Austria also ranked 10th globally in 2023 for international tourist arrivals, despite the dip in Q1 2025.
Sustainable tourism is a key focus in Austria’s long-term strategy, with efforts to attract eco-conscious travelers to counterbalance the decline in domestic visitors. The country’s strong tourism foundation, paired with strategic growth forecasts, makes it well-positioned for recovery in the coming years.
Ireland: A Significant Decline in Overnight Stays
Ireland has seen a notable decline of 18.6% in overnight stays in Q1 2025 compared to the same period in 2024, with a substantial drop in foreign visitors. Visitors from continental Europe were down 8%, while those from North America decreased by 1%. However, visitors from Britain saw a slight increase of 2%.
This decline in tourism can be linked to broader global market struggles, including the potential effects of US trade policies on stock markets. Despite these challenges, tourism remains a significant industry in Ireland, employing 257,900 people. Ireland’s tourism recovery strategy may need to address the broader economic factors contributing to the dip in visitor numbers.
Sweden: Declining Numbers Despite Record Visitor Arrivals in 2023
Sweden experienced a double-digit decline in visitor numbers in Q1 2025, although the country’s tourism sector reached a record high in 2023, with almost 33 million overnight stays. Despite this decline, Sweden remains a key European destination, with international arrivals surpassing 6.8 million in 2024.
The country’s tourism sector has faced challenges, particularly regarding the projected decrease in its tourism GDP by 2028. Nevertheless, Sweden is expected to see an increase in tourist arrivals in the coming years, bolstered by its reputation as a year-round destination with both winter and summer appeal.
Iceland: Concerns Over Length of Stay and Geopolitical Challenges
Iceland saw a 5.7% decline in tourism nights in Q1 2025 compared to Q1 2024, leading to concerns about a possible decrease in the average length of stay and revenue per visitor. While 2023 was one of Iceland’s best years for tourism, with over 2.2 million arrivals, the country’s tourism sector is facing challenges due to geological unrest and the diminishing “tourist eruptions” effect.
Despite the decline, Iceland’s government anticipates setting a new tourism record in 2024, with arrivals expected to exceed 2.4 million. However, concerns about long-term growth remain, as the country navigates environmental and geopolitical issues affecting its tourism appeal.
Decline in European Industry
The decline in European industry revenue, particularly in the tourism sector, has been significant in 2025. Countries like Germany, Austria, Ireland, Sweden, and Iceland have reported sharp reductions in tourism earnings. Germany saw a drop of 3.5 million overnight stays in Q1 2025 compared to the previous year, contributing to a substantial revenue loss. Austria recorded 1.4 million fewer overnight stays in the same period, mainly from domestic visitors. Ireland experienced an 18.6% decline in overnight stays, with foreign visitors down significantly, especially from continental Europe and North America. Sweden also saw a double-digit decline in visitor numbers, despite a record year in 2023. Iceland, too, faced a 5.7% drop in tourism nights in Q1 2025. These declines are driven by rising travel costs, reduced flight capacities, and geopolitical instability. The downturn in revenue is concerning for economies reliant on tourism, as it affects local businesses and employment. To recover, European countries must focus on sustainable tourism, targeted marketing, and improving the overall travel experience.CountryQ1 2025 Overnight StaysYear-on-Year ChangeKey Factors Impacting TrendsGermany-3.5 millionDecrease of 3.5 millionDecline in domestic tourism, flight capacity 20% below pre-pandemic levels, air passenger taxAustria-1.4 millionDecrease of 1.4 millionDecline in domestic visitors, consistent growth in international arrivals, focus on sustainable tourismIreland-18.6%Decline of 18.6%Drop in visitors from continental Europe and North America, global market struggles, US trade policy impactsSwedenDecline (double-digit)Decline in visitor numbersRecord arrivals in 2023, geopolitical challenges, slight projected decrease in tourism GDPIceland-5.7%Decline of 5.7%Concerns about average length of stay, challenges from geological unrest, potential decline in “tourist eruptions” effect
Impact on Local Economy and Business Owners
The decline in tourism across several European countries has had a notable impact on local economies and business owners. As visitor numbers drop, local businesses, particularly those in the hospitality, transportation, and retail sectors, are facing significant losses in revenue. In countries like Germany, Austria, and Ireland, which rely heavily on tourism, this downturn has strained small businesses that depend on international visitors. Hotels, restaurants, tour operators, and even local shops have reported lower foot traffic and reduced sales. Additionally, the tourism slump has led to job cuts in the industry, affecting workers in service sectors, from hotel staff to tour guides. For business owners, the ongoing decline in tourism revenue means they must adapt quickly, often by diversifying their offerings, adjusting marketing strategies, and exploring new target markets to stay afloat. The ripple effect of the tourism downturn is felt throughout the local economy, making it even more crucial for governments and businesses to collaborate on recovery strategies.
What Can Be Done to Reverse the Trend?
To reverse the trend of declining tourism and restore growth in the sector, several strategies can be implemented by both governments and business owners.
Revitalize Marketing Efforts: Countries should invest in targeted marketing campaigns that highlight unique and lesser-known attractions. Shifting the focus to cultural experiences, sustainable tourism, and off-peak travel options can attract more visitors. Collaboration with travel influencers and international tourism agencies could also help rejuvenate interest in these destinations.
Improve Accessibility and Flight Capacities: With flight capacity still below pre-pandemic levels, countries must work to enhance international connectivity. This could involve negotiating with airlines to increase routes and reduce travel costs. Streamlining visa processes and offering incentives like discounts on travel fees or easing restrictions on certain countries can also boost tourism.
Promote Sustainable and Responsible Tourism: As eco-conscious travel becomes more popular, focusing on sustainable tourism practices can help attract a new generation of travelers. Offering experiences that focus on nature conservation, eco-friendly accommodations, and local culture will appeal to the growing demographic interested in responsible travel.
Offer Incentives and Discounts: Governments and businesses can offer discounts or tax incentives to encourage international and domestic tourists to visit. Special packages for family trips, off-peak travel deals, or loyalty rewards programs could also encourage repeat visits. This would not only stimulate the tourism sector but also help local businesses rebound.
Focus on Domestic Tourism: In light of declining international visitors, boosting domestic tourism can provide an immediate solution. Governments can encourage residents to explore their own countries through promotional offers, discounts on local attractions, and advertising campaigns targeting locals.
Enhance Visitor Experience: Improving the overall tourist experience through better infrastructure, services, and technology can help create positive memories and encourage repeat visits. Investing in user-friendly apps, improving transport connections, and offering diverse experiences can enhance the appeal of destinations.
Address Economic and Geopolitical Factors: Countries facing geopolitical instability or economic downturns need to stabilize their political and economic environments to ensure long-term tourism growth. Offering incentives for tourism operators, easing financial burdens on businesses, and fostering international diplomatic relations can help stabilize the industry.
