THE HOTELIERS Association (PASYXE) on Monday submitted a list of proposals to the Finance Minister that would supposedly help boost tourist arrivals. The main proposal was the reduction of VAT on all tourism sector businesses from eight to five per cent, which would make hotel rates more attractive to tour operators and stimulate demand. According to the chairman of PASYXE, the reduction needs to be in place in two weeks’ time when hoteliers will be negotiating rates with tour companies.
Other measures proposed were the reduction of electricity rates paid by hotels, the subsidisation of flights from specific destinations and the lowering of airport charges. The measures have two objectives – to lower airfares and hotel rates through the reduction of operating costs and taxation.
Hoteliers obviously did their calculations and believe that the steps would make Cyprus more competitive as a tourist destination next year, when the World Tourism Organisation forecast a reduction in global tourism in the region of 12 per cent.
Finance Minister Charilaos Stavrakis was noncommittal at Monday’s meeting, saying he would have to discuss the proposal with the president before making any decisions. Considering its increased spending plans for next year, it is open to question how willing the government would be to reduce its tax revenue by lowering VAT on all tourism businesses.
The lower VAT could account for a significant loss of revenue. As for the subsidisation of flights, it could cause problems with the European Union, which does not allow such practices. Reduced airport charges would pose an even bigger problem as these are set by the operator and the government has no say. Unless the government makes a direct payment to the airport operator to cover the loss of revenue from lower rates, the operator would not even consider such a move.
In the unlikely event that all PASYXE proposals are adopted by the government, the cheaper tourist packages could possibly slow down the rate of decline in tourist arrivals but its success is far from guaranteed as nobody can safely predict how the world recession will develop.
Of course this would be a temporary fix that could help limit the scale of the imminent tourism slump. It will not revitalise an industry which has been in decline for the last few years and is now faced with a drastic drop in demand for holidays in its biggest market – Britain, which is already in the throes of a recession.
Irrespective of whether the government agrees to the proposed crisis measures, policy-makers and representatives of tourism sector need to undertake a thorough study of the industry and make plans that go beyond next year.
This was necessary long before the global crisis, but the state’s notorious ‘strategic plan for tourism’, passed from one government to the next without anything ever being done, is nothing more than a running joke. A crisis in the industry could, at last, force the authorities to think seriously about our tourism sector and start taking action to rescue it.
