COMMENT: Innovation, a key for the development of Cyprus tourism

By Angelos Loizou

 

January 1st was a benchmark date for Cyprus and Cypriot economy since it was the starting point of the 7th EU Funding Framework Programme (2007-2013 period) which will be one of the factors that will determine our island’s position in the enlarged European family.

Investment in innovation across the European Union is one of the top priorities of the Cohesion Policy. According to the Union’s official position, in order to attain regional development, resources must be made available in such a way as to achieve critical mass and generate a multiplying effect.

The greatest challenge that Cyprus will be called to face during is being able to incorporate innovative practices in the tourism industry, an industry which contributes today approximately one quarter of GDP. However, according to a number of statistics, the industry’s income has been constantly declining since 2001, while real losses for 2005 amount to CYP 300 million and CYP 259 million for 2006, based on the 2001 level of visits. At the recent 29th Annual Hotel Conference organised by the Pancyprian Association of Hoteliers (PASYXE) with the title “The Challenge, the Vision and the Way towards Total Recovery of Tourism in Cyprus”, extensive reference was made to innovation as a crucial factor not only for the recovery of the industry, but also for the economic prosperity and growth of the country in general. Besides, tourism offers the most fertile ground for the development and implementation of innovative practices.

Over time, the healthy development of the tourism industry has been and must continue to be inextricably linked with the implementation of innovative actions. A typical feature of mature tourist markets is the unconditional support and encouragement of innovation by the industry professionals themselves (with the assistance, of course, of the competent local authorities). But research and the data deriving from it are the common denominator of all actions and a structural cell of innovation. In the hands of the right people, this data will be turned into precious tools for the development of the tourism product. In our next communication we will refer to examples of other tourist markets and the way the results of the research are being utilised for the benefit of tourism and, in particular, of the hotel industry.

But what is the official position of Cyprus with regard to the innovation factor? The answer can be traced in Cyprus’  “National Strategic Framework for Innovation”, published in the Working Document of the Directorate General for Regional Development and summarised in the following three points:

 

1. Overview of the current situation: According to the Innovation index, in 2005 Cyprus ranked 17^th out of all 25 EU Member States. This position demonstrates the imperative need to develop innovative actions as there is substantial room for improvement. In the 2000-2006 period, 5,2% of State and public funds were allocated to innovation, a rate which must increase considerably in the future. Discouraging factors include, mainly, the large number of small-sized enterprises, the lack of research infrastructure, the limited use of new technologies and the limited number of persons employed in research and development, despite the high educational standard of the country’s inhabitants. 
2. Degree of priority for Innovation: Amongst other interrelated topics covered by the National Strategic Framework for Innovation, the official strategy of Cyprus is “to promote the information society and improve its efficiency in the sectors of research and innovation”. A programme which will focus on development, regional cohesion and competitiveness (Cohesion Fund and European Regional Development Fund) and another one on employment and social cohesion (Social Cohesion Fund) will be implemented.
3. Areas of Focus of Activities:

• Research and Technological Infrastructure – increase in public expenditure on research and research networks and increase of private research

• Businesses – support of innovative entrepreneurship, development of services to support innovation

• Access to funding– development of financial mechanisms and establishment of a State guaranteeing body

• Information Society – promotion of the Information and Communication Technologies in businesses and public services, strengthening of e-government services and further development of e-health services

• Human Resource – development of the research and innovation philosophy at all levels of education, improvement of the professional nature of the researcher’s occupation and enhanced mobility and access to international networks.

 

As stated above, innovation will be “adopted” only through the development of research programmes and the utilisation of their results. Unfortunately, in this sector Cyprus has a long way to go. According to the National Strategic Reference Framework for Cohesion Policy, despite the significant growth of the sector, the GDP share which is made available for Research and Development activities remains extremely low compared to other countries, and Cyprus ranks 24th amongst the EU Member States. Moreover, the Cyprus tourism industry should be concerned by the fact that the private sector’s contribution to the funding of research activities reached a mere 28% in 2003, far behind the target of 67% set at the Council of Ministers for Competitiveness in Barcelona.

Through the relevant authorities, the State should aim at inspiring a new culture for innovation. Professionals in the tourism industry have a leading role to play in attaining this objective, since the contribution of private entrepreneurship is regarded as not only important but necessary. Besides “innovation is the result of processes such as the ability of businesses to gain access to complementary knowledge deriving from other factors of the market, other organisations and other foundations” (Commission of the European Communities, COM0299, Brussels, 05.07.2005).

 

— Angelos Loizou, member of the board Leader of the Hospitality and Leisure Industry of PricewaterhouseCoopers Cyprus, is a Member of the International Society of Hospitality Consultants (ISHC) since December 2003 and Member of its Board of Directors since October 2005.