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Tourism and the Cyprus crisis

30 January, 2014 | Posted By: Jim Leontiades

Tourism and the Cyprus crisis
By Dr. Jim Leontiades

Cyprus International Institute of Management

How is Cypriot tourism performing? Banking and tourism were the two major industries before the March 2013 meeting of the Eurogroup. After that meeting, Cyprus was left with just one major industry, tourism. The question of its performance now assumes greater importance.
Unfortunately, the information made available to the public by the Cyprus Tourist Organization (CTO) in its frequent news releases regarding the performance of Cypriot tourism is not very informative. Yes, there are numerous news bulletins regarding tourist arrivals and earnings from tourism, e.g. “Tourist arrivals decreased in November”, “Arrivals from Ireland are up”, “Revenue from tourism increased in September”, etc. These snippets of information are inadequate. This is not how a well managed private company monitors its performance.
Any accurate analysis of “how the firm is doing” requires data that covers a span of years, preferably several time periods to distinguish day to day and month to month fluctuations from fundamental long-term trends. Most importantly, it requires comparison with competitors. If a company is growing 5% a year, that may be unacceptable if its competitors are growing faster. An explanation is needed.

CYPRIOT TOURIST ARRIVALS
Tourist arrivals are a basic measure for assessing a country’s tourism. Over the past twelve years (2000-2012) tourist arrivals globally, for all destinations, have increased by 52% (UNWTO data). Tourist arrivals to European countries during this time increased by 38%. For our closest competitors, the southern Mediterranean countries, tourist arrivals increased by 44% between 2000 and 2012. Cyprus tourist arrivals during this same time period have actually decreased by -8% (CYSTAT). Tourism to Greece increased 18%, a country which despite it’s crisis, saw record arrivals in 2013.
Let’s look at a different time period. In 2005-2012 tourist arrivals in the southern Mediterranean countries increased 22%. Globally and for Europe, they increased 19%. Tourist arrivals for Cyprus during this period increased not at all.
Only in the last several years has our tourism outperformed our most direct competitors. Cypriot tourist arrivals (2010 – 2012) grew 13%, compared to 10% growth in the southern Mediterranean countries. In interpreting these numbers we should keep in mind that the later years contain an unspecified number of tourists to Cyprus who will holiday in the north of the country. The “Arab Spring” has also curtailed tourism to the North African countries. The overall, long term performance of Cyprus tourism is one of stagnation. It peaked in 2001 at 2.7 mln arrivals and has still not been able to reach that figure; 2.46 mln tourists arrived in Cyprus in 2012, and the number appears to have decreased in 2013.

MARKET SHARE
A key indicator for any company assessing its performance is “market share”, its share of the total market. This is the single most informative figure on how an organisation is performing compared to its competitors. The Cyprus share of tourists coming to the southern Mediterranean is declining. In 2000 this country accounted for 1.7% of tourists arriving in southern Mediterranean countries. By 2012, our share of these arrivals was reduced to 1.3%. That may not look like such a great difference but if we had just been able to maintaine our 1.7% share, Cyprus would have hosted an additional 900,000 tourists in 2012.
Any company reviewing customer sales figures that show the sort of downward trend indicated above would conclude that it is in trouble. Yet, we get no such feeling of urgency emanating from the CTO. Its news releases, such as they are, typically have a positive spin. There is little apparent attempt to justify or attempt to explain the long term decline of tourism to Cyprus. Why is it happening? Why has there been a decline of 400,000 tourist arrivals from the United Kingdom since 2000? What has happened to the industry that more than any other helped Cyprus perform an economic miracle after the invasion of 1974, building a rapidly growing tourist industry where none had existed before? Today the country is facing an analogous crisis. It needs tourism to once again play a leading role in rebuilding the economy.
The CTO purports to be concerned with developing a strategy for Cypriot tourism. Strategy begins with a clear knowledge of the present situation. You have to know where you are before you can determine where you want to go. Perhaps, Cypriots have become so cynical regarding our governmental organisations that they neither expect nor insist on anything approaching an explanation as to why their money is being spent with so little in the way of a satisfactory result.
Is the CTO just another one of the rather large group of government related organisations that have been kept alive by tax payers money mainly for the benefit of its staff and politicians, with little need for accountability? Unfortunately, this organisation is charged with the “management” of what is now our most vital industry, the main source of the foreign currency necessary to pay for the cars, TVs, computers, medicines and other goodies necessary to sustain life on this island.