Hotels must maintain their prices, the CTO needs to spend more on marketing and extend the holiday season further
By Natalie Leonidou
Tourism is one of the biggest contributors to the Cyprus economy, which is why the tourism industry is well aware of the fall in the pound sterling that could potentially harm the strong relationship between the British holidaymaker and the ‘Island of Aphrodite’.
Industry experts are warning against complacency and have suggested measures to counter any negative outcome from a weaker sterling which could impact and limit overseas travel choices in Britain. These include maintaining hotel prices, increasing flight availability, a bigger promotional budget and extending the tourist season further to make it a more attractive destination all year round.
The dramatic drop in the value of the pound since the Brexit vote may trigger adverse effects on the tourism industry in Cyprus. There are concerns that the dismal performance of the sterling might add hundreds of pounds to the cost of many people’s summer holidays. Cyprus hoteliers and the Cyprus Tourist Organisation (CTO) are keeping their prices favourable to sustain the strong ties between Britain and Cyprus in terms of tourism.
The sterling plunged one day after the Brexit vote and continues to drop further with fluctuations in value. The pound is now weaker and holidays have become more expensive with the pound falling as low as GBP1.289 against the dollar and GBP 1.143 against the euro. Furthermore, the uncertainty on the sterling in the future with hurdles like the Brexit and the upcoming general election are bleak.
“There will be an influence in the tourism industry due to the fall of pound after Brexit,” said Lakis Avraamides, general manager at Ayia Napa – Protaras Tourist Board.
“In 2017, the tourism industry in Ayia Napa has a positive outlook since it is one of the most popular destinations for the Brits. However, in 2018 there might be a problem,” he added and explained that it all depends on how the currency will fluctuate.
According to the World Travel and Tourism Council, the impact of Brexit on 2016 world GDP growth is expected to be relatively negligible, although for the UK it is more evident. The market reaction to the Brexit vote has weakened the pound making it more expensive for holidaymakers to travel abroad.
Concern in key tourism industries is mounting following the triggering of Article 50 at the end of March. Other factors that may make a significant impact on the British tourist’s choices are the fears of border checks that may be reintroduced and whether the frequency of the flights and historically low fares may still be in the market.
Alessandra Alonso, founder of Women in Travel CIC, with more than 20 years’ experience in travel and tourism who held senior positions at KPMG and The World Travel and Tourism Council, explained: “A weak pound is good for inbound but for outbound it is not positive. The British love their holidays abroad and this year their holidays are going to be more expensive”.
Not only will the fall in the sterling impede British tourists from visiting Cyprus, but also the potential visa restrictions and costs that may be inflicted.
Alonso further explained that it’s not only about the weak pound and the incremental costs on British society, but also the implications of a visa to cross the border.
Tourism is a major contributor of growth for Cyprus economy
Tourism has been the cornerstone to the booming growth for the Cyprus economy in the post-1974 period, after the Turkish invasion that destroyed the then-blossoming industry. The development of a tourism infrastructure and the special ties between Britain and Cyprus has resulted in a high contribution to the county’s economy. Due to strong political and financial bonds between the two countries, Britain has always been Cyprus’ biggest tourism market.
Tourism is an important factor for the island’s economy, culture, and overall brand development. Only in 2016 the number of tourists that visited Cyprus jumped to over 3 million, reaching its highest number since 2003. The main concept of tourism in Cyprus is based on the ‘sun and sea’, which is why Cyprus has been popular as a summer destination but not so during the winter months.
“Ayia Napa tourism is very popular during summer, but due to the seasonality of the tourism industry the CTO needs to try to increase its marketing for March and November,” said Avraamides.
In terms of earnings, over the years 2003 to 2016 there was an increase in revenue from British tourists by 36% contributing highly to the economy in Cyprus.
Orestis Rossides, Director of the Cyprus Tourism Office in the UK said: “Certainly, there are years with huge increases of arrivals and other years with less. However, it has never ceased to be our biggest market.”
The graph shows the total revenues generated from tourism (Source: Cyprus Statistical Service)
The graph and the data extracted from the Cyprus Statistical Service (Cystat) shows that over the last 13 years there was a steady flow in the number tourists coming to Cyprus with 2015 showing a massive increase in the number of tourist arrivals. However, there is a steady decrease in the number of tourists from the UK, as the British still constitute more than 30% of the tourism traffic to the island.
Europe includes the 27 countries which are members of the European Union (Source: Cyprus Statistical Services)
The latest data from Cystat suggest that the number of tourists who arrived from the UK during April, covering the Easter period, has leaped by 49%, reaching more than 100,000 during April alone.
Rossides explained why British tourists find the island particularly attractive: “The English language is widely spoken, Cyprus is easily accessible from Britain with numerous direct flights, it is a short-haul destination (4hrs and 30min), offers high quality services catering for all tastes and provides a variety of experiences and adventures”.
The impact of Brexit on Cyprus tourism and the economy
In 2017, hoteliers are uncertain about what might occur after Brexit due to the fears in the changes of visa regulations and the weakening of the pound. However, it still would not have a strong negative impact on income to the Cyprus tourism industry.
Tommy Papageorgiou, financial controller of the Cyprus Managers Hotel Association and general manager of Navaria, a three-star hotel in Limassol, stressed: “In my hotel, the British holidaymakers constitute about 70% of our clientele. I have ‘repeat’ customers who return twice a year and we cannot afford to lose this kind of tourist. I do all my best to keep them satisfied by keeping affordable prices and a good service.”
“There are a lot of flights that come to Cyprus from the UK. Having a plethora of tourists does not depend on what the island can provide, but also on the frequency of the flights,” said Papageorgiou.
However, hoteliers believe that the possible exit of airline flights due to the EU's removal of the old bi-lateral restrictions on air service agreements will not have any impact on the frequency of flights from the UK to Cyprus.
Papageorgiou explained: “The frequency of flights won’t change, there will always be other airlines to replace the flights”.
Cyprus has been known as a summer destination, however, according to the statistical service there is a steady decrease in market share of tourists from the UK and an increase of tourists from Russia and other destinations in the EU. Until 2009, over 50% of visitors in Cyprus arrived from the UK, suggesting that the UK market’s share of tourists has decreased significantly in recent years. Furthermore, the tourism market has experienced substantial growth over the past five years and the industry is trying to maintain a steady flow in the number of British tourists.
“The British play a major role in the tourism of Cyprus. This type of tourists are the best tourists and they are people who spend a lot of money in Cyprus,” Papageorgiou said.
According to a Cyprus marketing report conducted by KPMG, the key tourist areas in Cyprus are Famagusta, Paphos and Limassol. The market is driven by tourist arrivals during the summer holidays and Ayia Napa has a high number of tourists primarily during the summer holidays. The coastal towns of Limassol and Paphos enjoy tourists throughout the year due to their historic and cultural events, such as the hosting of the “Pafos2017” celebrations as European culture capital.
A pre-active stance to Brexit
After Brexit, the slide in the pound means the price of everything from a cup of coffee to a night in a hotel could surge. Britons may have second doubts to fly to Europe this summer and may trigger a sense of financial worry for certain hoteliers. Papageorgiou added: “The Cyprus Hotel Association decided not to increase the prices of the hotel rooms and we agreed to keep the same prices because we do not want to lose our customers.”
The association does not want to inflate the prices and aims to improve services by providing better facilities at the hotels and offering competitive prices.
“The steady prices in the short term will be a loss for the hoteliers, however in the long term the state will gain from the revenues. A small loss in the short term would be a gain in the long term,” said Papageorgiou.
According to Cystat, Cyprus attracts over a million British tourists a year, constituting 36% of the tourist population in 2016. In 2017 concerns have prompted the Cyprus Hotel Association and the Cyprus Tourism Organisation to demonstrate a pro-active stance to keep a strong inflow of British tourists.
The potential impact of a weakening pound due to Brexit was expressed by Vassos Kilanis, the president of the Cyprus Hotel Managers’ Association and General Manager of the Mediterranean Hotel, a four-star hotel in eastern Limassol’s popular Amathus area. He explains that British tourists are one of the main nationalities that visit the island frequently and repeatedly, and contribute a major inflow for the country.
Kilanis said: “The hotel needs to have a good market mix from all the nationalities and tourism from England must increase.”
Furthermore, Kilanis openly expressed his concern about the pound. “Brexit and a weakening pound is definitely a disadvantage, but still it is difficult to reach a conclusion. However, it is important to have the right precautions and actions to keep Britons coming,” Kilanis stated.
Cyprus surge in tourism is due to the neighbouring countries
Cyprus has also experienced a surge in tourism in 2017 due to the political instability occurring in the neighbouring countries and rival destinations in northern Africa and the Middle East.
“Early pre-bookings for winter 2017/18 are very promising, since they seem to have an increase as well. We should consider for the Summer 2018 a gradual comeback in the market by Turkey and Egypt,” the CTO UK’s Rossides stressed.
“Both countries have suffered huge losses due to the political events that have taken place the last few years, but they are now recovering.”
Industry experts fear that these two destinations could also increase their promotional budgets in order to attract tourists back to their countries, while reducing hotel rates further in order to become affordable could also have an impact on Cyprus.
The future of British-Cyprus ties
A steady flow of British tourists visited Cyprus in January and February; however, no one knows what will happen in the long run.
Hotel manager Kilanis said: “At present, the effects of Brexit haven’t influenced the tourism operators. The currency is weak; thus, it might influence how much the British will spend in Cyprus in the longer term”
The impact of Brexit on tourism in Cyprus hasn’t been evident yet, however it doesn’t mean that the tourism industry shouldn’t try to take measures to protect the industry.
Rossides added. “First and foremost, a final agreement between the EU and the UK should be arranged. Right now, we can only make assumptions and conjectures.”
“Irrespective of whether Brexit will be ‘hard’ or ‘soft’, there is a strong historical and emotional connection between Cyprus and the UK which should ensure that the impact will be contained,” Rossides concluded.