Cyprus's tourism industry is bracing itself for the worst summer season on record as the global financial crisis hits the pockets of tourists, edging Cyprus closer to a recession, analysts said on Tuesday.
With tourism arrivals to the eastern Mediterranean island down 8.9 percent by May, authorities have clamoured to reverse forecasts of a massive 20 percent drop in arrivals during the holiday island's high season.
Locals worry that British tourists — over half of total arrivals to Cyprus — will holiday elsewhere this year, after a survey in April found Cyprus was the fourth least "value for money" destination due to sterling's weakness against the euro. "A drop in tourism this year is one of the reasons why we will see very low GDP growth," said Michalis Florentiades, head of economic analysis and research at Hellenic Bank.
Official data showed that tourism revenue for 2008 represented 11 percent of the island's GDP, from 2.4 million arrivals.
This month, Cyprus's central bank forecast 0.4 percent growth in the island's economy for 2009. The Finance Ministry sees 1.0 percent growth, down from 3.7 percent in 2008.
"I estimate that Cyprus will not go into a recession, but it will get very close," said Stelios Platis, an independent economist.
The island, a euro zone member since Jan. 2008, is the only country among its peers to expect growth this year.
Hoteliers in Cyprus believe that this year's experience has prepared them for the worst.
"We need to turn this crisis into an opportunity and spend time improving and rebranding our tourism product," said Harris Loizides, president of Cyprus Hoteliers Association. The government introduced a 51 million euro support package in tax breaks and visa waivers to support the tourism sector but tourism officials say this has come too late. "The measures came late, but they are paying off," said Loizides.
However, UN World Tourism Organisation data showed that popular destinations such as Malta and Croatia have seen their arrival numbers plummet between 18 and 20 percent.
Meanwhile, analysts are optimistic that last minute bookings will curb the drop in arrivals.
"People have cried wolf too many times in the past about tourism, which does have a tendency to improve at the last minute," said Hellenic Bank's Florentiades.
