Future of Cyprus tourism: divided or reunited?

Enterprises see solution as a “win-win” situation

 

A very large majority of tourism enterprises on both sides of the divide see a solution to the Cyprus problem as a “win-win” situation for business, according to research carried out by an independent group of all-island academics and economists and published on Wednesday by the Management Center.

The team interviewed 92 Greek Cypriot and 70 Turkish Cypriot enterprises and found that 79.3% of Greek Cypriot tourism enterprises and 98.6% of Turkish Cypriot enterprises thought that tourism would be a “win-win” situation for them.

Greek Cypriot enterprises thought that a settlement would have a positive impact through additional flights (78.3%), increasing volume (73.9%), joint marketing (67.4%), availability of personnel (63.0%) and additional airports (56.5%).

Moreover, out of the 92 Greek Cypriot respondents, 69 expected more business from Turkey.

The findings suggest that, in the words of Rob Fenn, Deputy High Commissioner of the British High Commission, which funded the project, that tourism enterprises realise they are currently operating “with one hand behind their back”.

 

— Economic theory confirms the findings

 

However, the team did not just take the businesses’ word for it, they also cross-checked the results against economic theory.

This suggests that a larger, combined market will create greater efficiency gains from economies of scale, lower transaction costs and, importantly lower unit costs.

This, combined with greater competition, would be translated into lower prices for tourists.

However, in the words of one of the researchers, Professor Mehmet Özay, “the win-win situation is not manna from heaven”.

The enterprises need to work at overcoming mistrust and jointly promoting tourism.

 

— Marketing needs to differentiate between high and low-spenders

 

A nice feature of the study was that the team did not just take from the tourism enterprises (through the questionnaire), they gave back, in the form of recommendations on how best to market Cyprus as a tourist destination.

Using an econometric model devised by Vedat Yorucu, the team identified the main influences on tourism demand for key markets: Turkey, the UK and Germany.

They found that for the tourism market in northern Cyprus, income levels of the source country is an important factor for Turkish and British demand, whereas price in the destination country (Cyprus) is an important factor for both British and Germans.

In the south, price is an important factor only for Germans, whereas income level of the source country is an important factor for British demand.

Yorucu said that this suggests tourism enterprises should differentiate their marketing campaigns.

For Germany and lower-income British tourists, all-inclusive packages emphasising price are important, whereas for Turkey and higher-income British tourists, special interest tourism such as golf should be emphasised.

 

— “New mood of optimism”

 

The research comes hot on the heels of another report by Özlem Oğuz, Praxoula Antoniadou Kyriacou and myself, published by the Peace Research Institute Oslo (PRIO) called “The day after: Commercial opportunities following a solution to the Cyprus problem.”

Assuming that the specific solution is economically sustainable, we quantified, in euros, the peace dividend for key businesses of a solution to the Cyprus problem.

We found that the solution would be worth at least EUR 1.8 bln per year for key sectors (tourism, accounting and legal, education, construction and real estate and transport), or EUR 5,500 per household.

The positive message about the long-term economic benefits of a solution comes at a time when there is “a new mood of optimism” with respect to the Cyprus problem, according to Fenn.

“There is a real prospect of progress,” he said. “We can taste it”.

 

Fiona Mullen