Price correction needed to attract new investors
By Gina Agapiou and Andrew Rosenbaum
Tourism industry leaders called this week for the sector to be upgraded to attract more visitors to tackle the changing conditions imposed by the coronavirus crisis and the succeeding economic recovery.
The prospects for tourism was the theme of the second AstroBank Leadership Insights Web conference held on Thursday, organised by IMH, and moderated by Astrobank Chair Costantinos Loizides.
Cyprus is expected to reopen its airports on June 9, and, as of June 15, visitors from 19 countries may come to the island. Experts, however, expect more flights and travellers from July. Tourists from the UK and Russia, who have in the past accounted for nearly two-thirds of all tourism, will not be admitted for the time being.
“This year is lost for the tourist sector,” said George Leptos, vice president of the Paphos-based property investment firm Leptos group, at the conference.
But Eleni Kalogirou, chief executive officer of the Larnaca-based airport manager Hermes, was more positive. “This year we might need to work a bit harder to achieve objectives that we took for granted in the past.”
She called on business owners to see it as an opportunity, an opening to bring in more tourists from countries that had not favoured the island in the past. “We should break the dependence on traditional markets for our tourism like the UK or Russia,” she suggested.
Certainly, attracting both tourists and business travellers to the island may be possible, given that Cyprus has shown that it has managed the pandemic well, and that tourists here can benefit from assured health care in the unlikely possibility that they do contract the virus.
Nonetheless, the founder and managing partner of Invel Real Estate, a European real estate investment and asset management company, Christophoros Papachristophorou noted that business travel was also being postponed, and might be permanently transformed.
“Business travellers visit places for one or two days, and the last thing we need is to go somewhere and get stranded for two or three weeks because somebody on their flight tested positive [for Covid-19],” Papachristophorou said.
“This will be harmful for business apart from the possible health risks,” he said.
According to Papachristophorou, who last year boarded about 200 flights, business travel might be permanently affected after Covid-19 as many businesspeople would meet online or in virtual reality.
He suggested the virus crisis taught people that transactions can take place faster and without noxious carbon emissions with the use of technology.
“In recent weeks, dozens of investors in Initial Public Offerings (IPOs) purchased their shares involving billions of euros through Zoom or Microsoft Teams,” Papachristophorou said. “Doing business via electronic channels is already radically changing how companies operate.
“As a result, hotels that are business-oriented will need to change their approach and seek alternative clientele,” he added, notwithstanding the fact that the Landmark in Nicosia, owned by Invel, is a prominent business hotel itself.
What does Cyprus need to attract tourists from new places?
“Tourist attraction will occur when the quality of the product increases – when we have an upgrade,” explained Papachristophorou. “Local businesspeople need to offer better value for money to attract both tourists and investors.”
Papachristophorou emphasised the need to offer a ‘value for money’ tourist product.
Leptos and Vasilis Nicolaides, joint CEO of Limassol-based Atlantica Hotels and Resorts, shared his concern and agreed that the national tourism product needs to be upgraded in all respects (staffing, premises, services). He also expressed his concern about recruiting staff within the industry in the district of Paphos in particular.
Kaloyirou said that the Deputy Ministry of Tourism is working on rebranding Cyprus as an all-year destination by supporting hoteliers and hospitality establishments to promote local life experiences. This rebranding strategy is expected to trigger an increase of tourists from newly targeted markets, such as those of Northern Europe.
“But I don’t think that Cyprus now will easily attract new investors unless there is price correction. Opportunistic investors will prefer more developed countries with greater liquidity, while strategic investors, who for their own reasons, will still want to invest in Cyprus, will ultimately require sellers or banks to consider better economics after the pandemic outbreak,” Papachristophorou continued.
“One should evaluate whether making a property investment in Paphos would yield better returns than an investment in property in New York or London. There is no doubt that in Cyprus, the ability to obtain a second citizenship provides an incentive for second-home buyers. However, without that, the pricing of a second-home residence would be quite different,” Papachristophorou pointed out.
With flights coming in from only 19 countries for now, as opposed to from 40 countries and 190 destinations in previous years, hoteliers are concerned about operating this season, even if the government has extended the tourist season through October.
“Only about ten per cent of Cyprus hotels will reopen this year,” said Nicolaides. “These hotels will also need to consider the risk and implications of a Covid-19 case in their premises. The pandemic this year will change the landscape of tourist sector in Cyprus.”
Hoteliers want the state to continue to provide support to owners even after the end of the special allowances provided to their staff on June 12, and to allow them to operate on a flexible system, using only the amount of staff they need based on their customers.
Business owners also seek to restructure loan repayments, Leptos said. “Instalments, suspended for part of 2020, should also be suspended through 2021 as well, to allow more breathing space to business owners who still have running costs and continue to pay ten per cent of their employees’ salary.”
Banks, for their part, feel that not all businesses are in a condition to survive the crisis.
“I expect a lot of restructuring and I think banks at some level have to intervene in the free market in the sense that we, for emotional or other reasons, are holding alive some businesses that perhaps remain alive artificially and should close to allow other healthier businesses to grow,” warned AstroBank CEO Loizides.
Papachristophorou added: “In this respect, the coronavirus is the ideal excuse for banks to correct some mistakes they made four or five years ago by effecting certain debt-for-assets swaps at unsustainable valuations.”
Overall, it is only with a determinedly realistic review of tourism and investment conditions that Cyprus can make the upgrade it needs to attract new tourists, he said.
“Realism will lead us on a beneficial course,” he concluded.
