Tourism is critical for the Greek economy. However indications are not promising for Greek tourism in 2009 given the global recession and rising unemployment in key markets, as well as lower disposable income from prospective visitors.
Greece is facing strong competition for tourism from Turkey, Bulgaria and Croatia and is having to contend with the impacts of an appreciating Euro currency and a perception that Greece is no longer a safe destination as a result of the recent riots.
Pre-bookings for this season do not bode well and if current trends continue the Greek economy risks sliding into recession and facing higher unemployment.
Only a last minute rush of bookings will save the tourism industry from a bad 2009.
Greece attracts up to 18 million tourist in good years such as 2007. So Greece has been complacent, focusing on a ‘sun-and-surf’ image and neglecting to see the potential of backpacker and food tourism and the value of cultural tourism.
In 2008 Greece also benefitted from 11 billion euros from tourism spending.
The majority of that came from British, American and German visitors, visitors whose countries are suffering heavy job losses as a result of the global economic crisis.
No one is sure if tourists from these three countries will travel to Greece or decide to that a vacation is a luxury.
They may choose cheaper destinations in the Balkans and the eastern Mediterranean as belt tightening becomes the order of the day.
Sources at the Greek Tourism Ministry are predicting a decrease in overseas tourists to Greece.
Its best case scenario forecasts a 10 percent drop while its worse case scenario predicts a 30 percent decrease in 2009.
Ministry sources blame part of this on the pricing of Greek hotels. Instead of lowering rates to be more competitive and make more revenue on higher occupancy, they are raising prices.
Senior economist, Nicholas Manginas, of National Bank of Greece said: “Many hoteliers are arguing that over the course of the last four years they have made significant investments and upgraded their services so they don’t want to reduce margins. And up until now internal tourism has been robust enabling their pricing and profitability”.
The full impact has not been felt yet because international tourists are going to be demanding high discounts.
The tourism sector makes up about 15 percent of local GDP. A drop in earnings from tourism could result in a 0.5 percent decrease in GDP growth. That alone could be enough to push Greece into a recession.
Moreover, a significant drop in tourism has an immediate impact on employment since the sector accounts directly for employment of about 10 percent of the labor force.
Add the indirect impact of tourism on associated industries and 20 percent of the Greek workforce is estimated to depend on this vital sector.
How many hotels will open for the beginning of the traditional tourism season is unclear and industry pundits expect staff lay-offs.
Anecdotal evidence suggests that early bookings are 25 percent down on last year. If Greece welcomes two million less tourists this could result in about 50,000 job losses.
National’s Manginas said: “This could be the worst season in 20 years because it won’t just be the arrivals that fall but also total revenues could be hit significantly. That’s a serious problem for the local economy and employment.”
Most industry analysts expect a 20 percent drop in tourism revenues for 2009. Add the combined effects of unemployment and a shorter tourism season and Greece might be exposed to the full force of the current crisis.
Pricing is a major issue for the Greek tourism industry as nearby countries such as Turkey, Bulgaria and Croatia are becoming competitive in terms pricing and quality of experience.
Bulgaria attracts many Greek and international tourists for its cheap shopping and good skiing.
Croatia has launched a major campaign to attract tourists that are interested in experiencing the Mediterranean.
Greece is an expensive country when it comes to accommodation, food and entertainment due to a lack of local competition and the pricing power of wholesalers and other oligopolies.
Turkey is a key threat to tourism to Greece in 2009.
The depreciation of the Turkish lira – 26 percent against the US dollar and 15 percent against the Euro over the last 12 months – allows Turkey to offer Western European and Americans tourists bargain priced packages.
While being in the Euro-zone has protected Greece from a devastating currency and borrowing crisis, it does not allow the flexibility of a small currency slide to improve its international competitiveness.
So many cost conscious visitors that would come to Greece may be persuaded to venture to Turkey.
The riots witnessed in the centre of Athens in December, the rising crime rate and random terrorist destruction across the land may also be putting some visitors off, providing a greater incentive for international tourists to visit Turkey.
Worse still the UK, a very important market for Greek tourism, has suffered a severe drop in its currency value.
The British pound has fallen about 17 percent against the Euro for the last year. There are fears that this will contribute to a decline in British tourists to Greece.
According to Costas Vorlow, senior economist at EFG Eurobank: “The current crisis could cost Greece about two billion Euro this year alone from tourism and there may be no recovery in sight for 2010 either.
“The only bright spot is that tourism in the Aegean Islands and Crete is fairly resilient and internal tourism, while easing, is not falling off a cliff.”
Greece is launching a new advertising campaign this month in key overseas markets and the Greek Government has increased spending on tourism marketing by 50 percent.
The Greek Government also introduced a stimulus package designed to support the tourism industry.
However many claim the ad campaign should have been introduced earlier.
And there is still no word from the state as to whether it will offer subsidies to tourism enterprises to protect staff numbers and prevent a jump in unemployment.
Greece is trying to attract more tourists from Eastern Europe, Russia and Asia as a way of cushioning tourism to Greece from its reliance on European, British and American tourists.
China, India and the Middle East are also some of the new markets whose doors Greece is knocking on.
The new advertising campaign will see Greece try to shift its image from a ‘sun-and-sea’ destination and focus on niches such as agro-tourism, city-breaks, winter sports, boutique hotels and gastronomy.
The upcoming promotions promise to tackle these aspects and will also underline the availability of a high quality product. The package recognizes that when you can’t compete on price, you need to compete on quality, and then deliver on that, which is not entirely certain.
The government has responded to changes in the volatile climate to try and improve Greece’s price competitiveness.
When Turkey reduced airport taxes, Greece responded by abolishing them at regional airports and has allocated funds for airport makeovers.
Landing, takeoff and stopover fees at Greece’s regional, and in particular insular airports, will be scrapped from April until September.
Foreign tour operators will also be offered incentives to maintain the same number of charter flights to Greece and will be paid in advance through the local tourism stimulus package.
A climate of uncertainty prevails for the Greek tourism sector but local hoteliers and industry professionals are not doing very much to help themselves. The government’s efforts are at best, belated.
Greece is a great destination but that alone is not enough.
It has to offer a wider range of products to an even wider range of prospective visitors at more competitive rates.
It also needs to offer more value added services, capitalizing on its long tourism experience. “There is obviously the hope for a last minute reservation rush from those that don’t want to sacrifice a holiday to their favourite location despite being in the midst of the current crisis,” National’s Manginas added.
Greek-Australians should visit and support the home land but they should insist on appropriate discounts and value for money.