The European Hot Spots Struggling With the Tourist Masses

MONTEROSSO AL MARE, Italy—A worker shouts in Italian, English and French, directing throngs of tourists through the small train station. Wild gesticulations, a fluorescent yellow vest and a booming voice help her to stand out on the packed platform.

Swarms of people holding backpacks and water bottles squeeze past each other, some heading for a departing train, others for the exit and a stunning view of the sea and cliffs that have made the villages of Italy’s Cinque Terre a global tourist draw.

Outside the station, lines form at food shops. Signs say all the umbrellas and reclining chairs are occupied at the pay-only beach on Monterosso’s waterfront. Narrow alleyways are crammed with tourists eating gelato or sipping bubble tea.

“Tourism is necessary, it’s almost all we have here, but it’s too much,” said Angela Costa, a longtime Cinque Terre resident.

Italy’s tourist season started with a record number of visitors over Easter. In the Cinque Terre, the congestion was so bad that local officials made the area’s famous hiking trails one-way on the busiest days. The situation repeated itself over several weekends in May and June.

“Easter was crazy, and now it’s ramping up again,” said David Cefaliello, who works in a cafe in Corniglia, another of the five Cinque Terre villages. “We aren’t at pre-Covid levels yet, but I suspect that will change in a few weeks.”

Millions of Europeans and Americans are engaging in so-called revenge tourism, making up for lost travel time during the pandemic-affected years of 2020-22. Millions of Chinese tourists are expected to visit Europe this summer and fall after the elimination of China’s travel restrictions.

Italy is likely to surpass the record number of tourists and overnight stays set in 2019, before Covid struck, according to market research firm Demoskopika. Arrivals in the period from June to September are expected to be 3.7% higher than the same period in 2019 and 30% more than a decade ago. Italy’s Tourism Ministry has also said it expects a record year, as have Spanish and Greek officials.

All those visitors are giving a welcome boost to Southern Europe’s economies, which depend heavily on tourism. In Italy, more than 10% of the economy is linked to travel and tourism, compared with 15% in Spain and 19% in Greece, according to the World Travel and Tourism Council. In France and the U.S., the level is around 9%.

But locals are increasingly asking how much the Cinque Terre, Barcelona and Athens can take. Discontent is also rising in some places, spurring local efforts to rein in the tourist hordes.

In Portofino, a small upscale village on the Italian Riviera popular with the international jet set, police are fining people who block foot traffic to take selfies.

In 2024, Venice plans to introduce an entry fee to the city on the busiest days of the year, according to the mayor’s office.

In Barcelona, locals hang signs saying “tourists are terrorists,” while in Athens, residents complain about how the spread of Airbnb rentals for tourists is driving up rents and displacing Greeks from the city centre.

In May, about 10,000 short-term rental properties were available in Athens, almost a quarter more than in May 2018, according to market-research firm AirDNA. Demand for short-term rentals in Greece increased 62% in May compared with the same month last year, the firm said.

The Italian Alpine region of Alto Adige has capped the number of beds available for tourists in private properties to fight the proliferation of short-term rentals.

The crowds are spreading far beyond the Mediterranean. On the coast of Normandy in northern France, authorities have turned people away from Mont Saint-Michel, the tidal island topped with an abbey. The Louvre museum in Paris has put a daily limit on the number of visitors.

The French government is planning an advertising campaign to encourage people to travel at different times of the year and to consider less-famous destinations.

The flow of tourists to France has held strong even as the country has been racked with protests, including months of demonstrations over President Emmanuel Macron’s decision to raise the age of retirement. Now the country is grappling with nightly riots following the shooting of a teenager by police.

Luxury hotels in Europe are enjoying the boom, but many are looking for new ways to keep their high-paying clients happy despite the masses of tourists.

“We are always looking for something we can offer that will avoid the crowds, like hiking trails that are less well known, a private boat trip to Capri or a wine-tasting tour,” said Pietro Monti, head of marketing at the five-star Hotel Mediterraneo near the Amalfi coast, where rooms cost an average of about $1,200 a night. “But when it’s the high season, especially a record year like this, some crowding is inevitable.”

Crowds are hard to avoid in Vernazza, the Cinque Terre village that sits just south of Monterosso. On the rocks surrounding the small port, sunbathers battle for space with children kicking a soccer ball and people jumping into the sea. The crush on the rocks grows when boats arrive from one of the nearby towns.

Juli Eger, who was sipping wine and eating focaccia on a recent morning in Monterosso, while ignoring the crowds around her, finds her own workarounds.

“We were just in Venice and if you walk around very early in the morning, you only have to share the city with people taking engagement photos,” said Eger, who is traveling with her mother, husband and teenage son. “If you make Venice your first stop you’ll be jet-lagged, so getting up at 5.30 in the morning won’t even be a problem.”

—Allison Pohle and Stacy Meichtry contributed to this article.

A sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.

The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.

The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.

The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.

This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.

The debt behind the AI build-out

Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.

Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.

JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.

The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.

That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.

A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.

When interest rates rise, those assumptions become less forgiving.

Inflation changes the calculation

September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.

The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.

CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.

Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.

Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.

The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.

China adds another source of pressure

Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.

Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.

The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.

That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.

A reset rather than the end of the boom

The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.

What has changed is the market’s willingness to overlook the price and financing structure of that growth.

The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.

More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.

For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.

Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.

The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.

Fact box

Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026

Philadelphia Semiconductor Index: Down approximately 11.4 per cent

Micron Technology: Down approximately 14.6 per cent

Samsung Electronics: Down approximately 18 per cent

SK Hynix: Down approximately 24 per cent

US September inflation: 3.7 per cent annually

Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion