WITH UK bookings down 29 per cent, two of Britain’s biggest tour operators, which between them bring in 40 per cent of British arrivals, yesterday warned that Cyprus tourism needed a reality check.
“The industry needs to get its head out of the sand. You have to realise that the industry is on its knees right across the eurozone. When we renegotiate rates, it’s not to try to trick you, it’s based on the new reality,” said Jez Clarke the General Manager – Overseas Purchasing for TUI Travel.
Clarke was speaking at the annual conference of the Cyprus Hotels Association (PASYXE) in Nicosia.
He said the global crisis had resulted in extreme economic volatility and significant currency fluctuations. This meant that every industry player would have to make decisions based on these harsh new conditions, in which every relationship and performance would come under close scrutiny.
“Capacity will move from poor-selling countries to destinations that sell well, like Egypt,” Clarke said. “Cyprus has allowed Egypt and Turkey to take its holiday crown,” he added, referring to “complacency and a conservative attitude”.
This is reflected in sales figures for Summer 2009: Egypt and Turkey are slightly up on already-strong performances, despite the industry average being down 16 per cent, while Cyprus is down by 29 per cent – almost twice the industry average.
Len Mina, Head of Purchasing for Thomas Cook UK and Ireland, said their customers were also adapting to the new reality: “Customer loyalty to specific destinations is more fragile these days. People are more driven by price,” he said.
When a UK tourist can get an all-in package in Turkey for the same price as a self-catering deal in Cyprus, price determines the choice, Mina said.
Clarke put it more strongly: “Sales are not moving. We’ve been discounting Cyprus [prices] by 10 to 15 per cent since April 2008, but it’s not worked. Egypt and Turkey sales are up, Turkey by 22 per cent.”
He added: “Right now you have a six-week window [up to April] for selling at full price. In April you will be competing with 2-star accommodation in Turkey, Mallorca and Ibiza, and it will be a bun-fight.”
The recent support measures by the Cyprus government for the tourism industry are welcome, but “this support needs to be extended well into 2010”, said Clarke.
The Cyprus Tourism Organisation (CTO) also needs to co-ordinate its advertising strategy better with the tour operators, to give them more time to maximise its effectiveness. “We must work as a team”, said Clarke.
The Cyprus Mail asked both men about the lines of communication between the tour operators and the Cyprus government. Mina replied: “This year, the CTO is really listening”. Clarke was less positive: “We’ve been saying for years that our customers aren’t interested in marinas and so on, they want the right mass product at the right price. TUI accounts for 20 per cent of the Cyprus market, and Thomas Cook another 20 per cent. What we have to say should count.”
Britain remains the main source of tourism to Cyprus with around 1.5 million arrivals out of a total 2.4 million last year. Numbers have been slipping over the past 12 months and latest figures this week showed the year off to bad start with arrivals from the UK down 8.5 per cent in January over the same month last year.
What is Cyprus doing wrong?
When asked how Cyprus needs to be improved generally as a tourist destination, TUI Travel’s Jez Clarke said: “There is a huge gap in infrastructure. Someone pays €4,000 to stay in a 5-star hotel, and outside it’s mayhem. No visitor is just going to stay in a hotel all the time, they want to go out and sample some of the local colour. Right now, that’s not in place.”
And this is the crux of the matter. A comparison of similar self-catering products across the Mediterranean plus the Canaries shows that Cyprus is £100 sterling more expensive than its competitors. When it comes to half-board products, the gap jumps to £200.
This gap is only partly accounted for by the drop in the pound’s value against the euro (almost 30 per cent since 2007) and the increases in airport charges [77 per cent in 2008, 9.0 per cent in January 2009 alone].
Thomas Cook’s Len Mina said: “In general, accommodation costs in Cyprus are higher, not only in non-euro destinations like Turkey and Egypt, but also higher than euro destinations like Greece or the Canaries.”
Another important factor in customer choice is quality, what he/she gets for the money. In TUI Travel’s comparison of overall quality scores for accommodation, Egypt is ahead of Cyprus, and Turkey is rapidly catching up with Egypt.
Clarke believes that product differentiation is the key to success: the Thomson and First Choice brands now offer sports-oriented and Club Med-style venues in Corfu, Rhodes, Crete and Turkey which target the more “up-market” families. This is one segment of the tourism market.
Mina said the crucial factor was not quality on its own, it was the offered price/rate in relation to quality.
Cyprus has a strong position at the high end of the market. Five-star accommodation was 7 per cent of the market at the end of the summer of 2008 (up from 5 per cent in 2007), and four-star accommodation was up from 42 per cent to 46 per cent of the market.
This good supply of 4-star and 5-star hotels, together with good regional flying options and multi-duration options, makes Cyprus a desirable destination for the high-end market segments.
However, when it comes to offering enough board options and a broad range of differentiated products to the other, bigger segments, Cyprus falls behind its competitors. Clarke said: “Too much accommodation is on a self-catering or B&B basis, and instead of differentiation we see the same old thing repeatedly”.
Mina agrees that Cyprus needs more 3-star and 4-star properties to cater for the demand from the mass market. He pointed out that the tendency in the mass market is towards all-inclusive deals. “Cost plus quality needs to be made more attractive if the family holiday market in Cyprus is to compete successfully with other destinations such as the Canaries.
