IN THE LAST year or two Cyprus has re-discovered the importance of the tourism industry for the economy. Tourism had been the power engine of the economy in the eighties and nineties, funding development, earning foreign exchange and ensuring consistently high rates of growth, but as we entered the new century it fell into neglect because the financial services sector became a much bigger earner for the economy.
The bankers, accountants and lawyers were earning the big money, making a much bigger contribution to the economy. Strategic plans, announced by successive government, were never implemented, while nobody seemed to care that the competitiveness of Cyprus tourism was being steadily eroded and arrivals were on a downward path because the earnings from financial services more than compensated for these losses. The rising prices fuelled by the property bubble and easy bank credit also affected the industry making the tourism product even less competitive.
It was therefore no big surprise to read earlier this week that a survey conducted by British firm International Currency Exchange (ICE), found that Cyprus was the most expensive tourist destination, in terms of holiday spending. ICE, which provides people with a pre-paid currency card and monitors spending on holiday essentials such as food, drink, transport and hotel tabs, reported the following: “Cyprus proved to be the hardest on the pocket with expenditure on the ICE traveller’s cash card amounting on average to £564.54.”
This was higher than what tourists spent in Greece and Portugal – also in an assistance programme – the average for which was £493.86 and £460.55 respectively. Average spending in Italy and Spain was lower. Air fares to Cyprus, from British airports, are also higher, adding to the lack of competitiveness. It is astonishing that the worst recession Cyprus has ever experienced has not had an impact on prices in the tourist resorts. If economic logic were obeyed, prices would have fallen significantly at bars, hotels and restaurants in the resorts as has been the case in Nicosia. Perhaps prices have fallen, but were higher to start with.
Lack of competitiveness does not seem to concern the government, minister of tourism, Giorgos Lakkotrypis responding to the survey’s findings with an unhealthy dose of arrogant smugness. He said: “Our strategy is not to compete, based on price. Our strategy is to compete on the basis of the value of what is on offer. This is the reason we promote infrastructural projects such as golf courses, marinas and casinos.”
Does the minister believe that a couple of marinas and three golf courses give us such a big comparative advantage (the casino resort will be ready in three to four years) that tourists would keep flocking to Cyprus irrespective of the high prices? This is the ostrich mentality that has always dominated the thinking of the authorities, which for years were deluding themselves that the island would attract what they called ‘quality tourism’, ignoring the reality that the industry was doing well thanks to mass tourism.
And this was exactly what Lakkotrypis was trying to say in claiming that high prices were not a concern. Marinas, golf course and casino would transform Larnaca and Ayia Napa into such popular resorts that we would be able to charge whatever prices we want. It was at best a thoughtless remark by the minister, who should have been expressing grave concern about the lack of competitiveness and urging businesses in the tourism sector to keep prices down because this was in the industry’s long-term interest.
But it would appear that we cannot give up the short-term thinking that is the root cause of most of the problems being faced by the economy. Many in the tourism business have always shown a tendency to go for the big profits, in the belief that new visitors could be overcharged in the next season. Lakkotrypis should be fighting against this destructive business model and campaigning for competitive pricing, instead of smugly claiming that being ranked as the most expensive tourist destination was of no concern.
But it should be of concern and his ministry should be considering ways of promoting the message that fair prices were in the industry’s interest. Prices are probably the main consideration when people are deciding where to spend their holidays and Cyprus cannot afford to have a reputation as an expensive destination. Certainly not now that the economy is once again dependent on the tourism industry.
