It is no secret that the apparent bottoming of
Greece’s economy can be attributed solely to tourism. Hence, the million
dollars question is what does the future hold for the sector and if its
contribution will remain positive and that significant.
One, tourism-related, data-point that isn’t
getting much attention lately is the prices trajectory for tourism-related
services.
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| source: Eurostat |
As you can see in the chart above, prices have
almost stopped falling. How will it affect demand if prices start rising? I think
the next chart could be interesting in that respect.
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| source: Bank of Greece, Eurostat, own calculations |
The key takeaway if you ask me is that
causality has changed. In the pre-crisis years featured in the chart, prices’
rise slowed when demand slowed. In the crisis years I think that demand rose
when prices plummeted. One more fact for us to chew on is that during 2014, when
prices fall decelerated, growth in demand also decelerated. Of course, the
sector’s exports cannot keep growing with the same rate as they did in 2013
when the base effect was also at work. Also the slowdown evident in Europe
could be having an effect here as well as a number of other factors.
To wrap this up, the question the answer to which Greece’s
tourism sector is pondering right now is, what happens if prices in tourism-related
services start rising (and they eventually will). I won’t get into the whole “the
sector needs investments to improve the quality of services offered etc.” tirade since
you’ve probably read the same points a million times already. Let’s wait and
see what the future holds for the sector and since the sector is at present the
sole driver of the Greek economy, for us as well.
