By Anthony O. Miller
IT WAS more bad news yesterday for the island’s hotel industry, whose leaders met with Commerce Minister Nicos Rolandis to discuss the government’s plans to re-impose a three-per cent tax on hotels.
The industry is already facing a profits squeeze and a tourism shortfall linked to the Yugoslav war. This week it sustained a nationwide six-hour strike, with the promise of more serious walkouts. And it is further feeling pressure to lower room rates, following the merger of two British tour giants.
“Such a tax will cause more problems” in the tourism industry, Rolandis said, adding “we already have competition problems” with Greece, Egypt and Turkey.
The tax, which Rolandis estimated to be worth £10 million to £12 million a year, would not take effect until November or December 2000, and then only if it passes both the Council of Ministers and the House of Representatives.
Rolandis said he opposed the tax, and that his was the lone vote against it when the proposal to reimpose it recently won the “preliminary approval” of the Cabinet.
With hotel profits already treading tight margins, hoteliers cannot absorb the extra tax, and will have to pass it on to guests, Rolandis said.
The Hoteliers Association, with whom Rolandis met to discuss the tax yesterday, has confirmed that the war in Yugoslavia has indeed hurt tourist arrivals this season, adding that the shortfall shows signs of worsening as the war drags on.
But Rolandis said the war cut both ways.
While some European tourists may be staying away from Cyprus while a war rages just up the road, he said tourists who might have gone to Italy, the Balkans, Eastern Europe and Turkey are coming to Cyprus. He could not say if the gains offset the losses.
Italy, Hungary and Turkey are Nato countries. Most of the Nato aircraft bombing Yugoslavia are using air bases in Italy, while many other allied warplanes are using bases in Hungary and Turkey.
Nato’s flotilla of ships assaulting Yugoslavia is in the Adriatic, between Italy and Yugoslavia, and its presence and the war are affecting such other Adriatic destinations as Slovenia and Croatia.
Pressure to lower room rates has followed the recent £1-billion takeover of First Choice Holidays by Airtours, both of Britain, cutting from three to two the number of major British tour operators servicing Cyprus.
With the competition reduced, the hoteliers face pressure from the remaining mega-operators to lower room rates for their tour packages.
As if this were not enough, Rolandis noted that hoteliers – uncertain of whether the three per cent tax would ultimately pass the Council of Ministers and Parliament – would probably tack the extra charge onto their rates just to be safe.
But this will discourage tour operators, he said, as they will soon be publishing the costs of their packages for 2000 and beyond, and if Cyprus rates rise by another three per cent, the tour operators can always look to the island’s competition.
Rolandis said the tax proposal was working its way through the Finance Ministry’s budget offices for a final vote by the Cabinet, for submission to the House for enactment.
