Wednesday, 6 April 2011

How is Greek tourism holding up ?

We’ve been hearing a lot lately that Greek tourism sector's receipts will be boosted this year thanks to the on-going strife in MENA (Middle East North Africa), since some of the tourists that intended to spend their vacation there will chose Greece instead.

If this materializes (I will believe it when I see it) it will be some source of cheer for depression stricken Greece. I would prefer though to see a steady climb in revenues and tourists arrivals than such one-off apparitions.

This doesn’t appear to be the case though, since may Greece’s revenues from Tourism be climbing but, according to anecdotal evidence, it seems like that Greece is losing market share to new entries in the tourism trade like Croatia and Turkey.

Let’s take a look at what the data have to say. I have included a lot of charts in this post so brace yourselves.

The first graph shows how arrivals at hotels have fared, both for locals and for non-residents. Arrivals have grown in the span of the decade but there was some stagnation in the first half of it. During 2008-2009 non-resident arrivals slumped, probably the recession and low consumer sentiment worldwide can be blamed. Residents arrivals were more resistant and climbed, since more Greek people were forced to travel inwardly due to the crisis.

source: Eurostat

It appears that there was some modest rebound in non-residents arrivals or at least in revenue during 2010, according to travel balance data.

A look at relevant data for other countries may throw some light on whether Greece is gaining or losing market share to its international competitors. I have included countries that more or less offer the same touristic product that Greece does. For Mediterranean countries growth in arrivals at hotels from non-residents were at the same level as for Greece. One country though that saw non-residents arrivals grow explosively (at the beginning of the decade mostly since for the remainder they moved in tandem with those for other countries) was Croatia.

source: Eurostat

My humble opinion is that non-residents arrivals matter since they represent money pouring in the country from abroad, remember this is one of the very few areas that Greece has a surplus in the relevant balance. 

So Croatia appears to have gained market share from traditional Mediterranean destinations. 

The worst thing for Greece though and a serious hole (?) in the country’s tourist edifice is that it misses on a whole market niche and a fast growing one at that, alternative accommodation (camping sites etc.).

As you can see in the following chart the ratio for total arrivals at other accommodation vs. hotels stands at almost zero for Greece, while it accounts for 80% of arrivals in Croatia. With that Croatia essentially doubled its tourism industry capacity. Moreover, the said niche offers cheaper services and during the two years (2008-2009) that arrivals in hotels declined for most countries, arrivals for alternative accommodation grew.

source: Eurostat

For most countries, alternative collective accommodation, is a welcome add-on to the total tourism industry capacity with the plus that is less cyclical than other segments of the market thanks to its lowest prices.

source: Eurostat

The chart above shows growth rates for the  for total arrivals in collective accommodation establishments. Don’t be fooled by the large positive change in arrivals for Greece, the overall arrivals number is negligible. As you can see from figures for other countries this is a rapidly-growing market, one though that Greece misses out completely.

One other issue, the main one probably, is the amount of revenue that the tourism industry generates. I couldn’t find a better indicator of that other than the exports of tourism services, which accounts only for the non-residents expenditures. Earnings for the tourism industry appear to be volatile and it seems to me that they are affected by the Euro x-rate significantly. Look at the 2007 exports of tourism services when the Euro was rising and then on 2008 when the Euro had plummeted. That’s the way it seems to me, but then what do I know about the tourist industry…

source:Bank od Greece (SDDS Data)

Finally, I would like to take a look at the structure of arrivals and especially whether guests are residents or not. I think that the tourism industry has greater pricing power with residents and less so with non-residents, who are more mobile and could always choose to go to another country if they thought that the price they paid was too high. 

source: Eurostat

On the other hand, non-residents tend to spend more nights in the hotels they book into. You can see that in the following chart. These are two opposing effects at work here, lower pricing power for the industry but more nights spent in hotels. I don’t know which prevails.

source: Eurostat

As you can probably see from the chart, the majority of guests were foreign but not by a large margin. Now that Greece is mired in depression, will Greek guests’ arrivals and expenditures decrease? And if this gap is filled by more non-resident guests (in a dream scenario) does this mean that the margins and overall earnings of the Greek tourism industry will decrease? I’m just thinking aloud here, I don’t know the answer to any of these questions…

I hope that the Greek tourism industry gets its act straight and does well since a lot of the areas with high touristic turnover do not have many other sectors with the capacity to generate jobs. Overall this is one of the sectors that comparative advantage for Greece might lay and we certainly don’t have the luxury to let these opportunities go to waste. Let’s all pray for a strong (guest-wise) summer season…  

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