Business File, September-October 2018, No. 117
IBHS survey for Greek BF
In 2017 Greek tourism continued its upward trend in terms of arrivals, while returning to positive revenue, with competitive prices being identified as positive parameters along with security problems in rival Mediterranean destinations, according to a study conducted by Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst
During the first three quarters, a further rise of 10.3% in international arrivals was recorded, at 23.5 million travellers, while receipts boosted to an 11.1% rate, at €12.7bn. Actually, if cruise revenues are also included, the resulting increase amounts to 10.5%, at €13bn.
Overall for the year, the Greek Tourism Confederation (SETE) estimates that total foreign arrivals will exceed 29 million, since, according to the most recent data, during the twelve-month period of 2017, 18.3 million foreigners arrived at the country’s airports—a figure that has increased by 8.6%—whereas arrivals by road have shown an increase of 6.1%, standing at 12.8 million arrivals. At the same time, tourism expenditure recovers, which will push revenues to the level of €14bn (an increase of about 8%).
Furthermore, the number of overnight stays over the three quarter period of 2017 showed a rise of 9.6%, at €185m. If the cruise sector is also taken into account, this figure exceeds €188m.
This rise in arrivals and receipts translated into an average expenditure per journey amounting to €538.2 for the first three quarters of 2017, having risen by 0.8%, compared with 2016, lagging however significantly behind, the corresponding figure for 2015 (€602.5). This value has continued to remain at a fairly low level, compared with other Mediterranean countries (Spain: €1,075, Cyprus: €773).
Pressure from VAT rates
The sector has been under pressure since 2016, as a result of the increase in VAT rates on accommodation and catering services imposed within the framework of the country’s new refinancing programme. Thus, on 1 October 2015, VAT on accommodation rose from 6% to 13%, whereas on catering, it rose from 13% to 23%, and then (as of 1 June 2016) to 24%. Moreover, the rates that had been cut by 30% for the Aegean islands were abolished in two phases. According to SETE, this abolition did not result in any fiscal benefit, while the conditions will deteriorate in a possible expansion of the abolition to the other 32 islands, as well.
On the other hand, as of 1 January 2018, the sector will be further hit by the imposition of Overnight Stay Tax on hotels above two stars and rented rooms above two keys, which will result in a surcharge of 6%.
In addition, over the last years, many owners have been letting their houses to foreign tourists illegally, thus earning considerable income, and depriving hotel units of higher occupancy rates. This practice shows a significant growth both in Athens and in several destinations throughout the country, depriving hotels and room letting businesses of higher occupancy rates and revenues (mainly three and four-star ones).
According to estimates by the Attica-Argosaronic Hotels Association (EXAAA), in Athens in 2017, for each 100 hotel beds there were 75 beds in rented houses, while this year, each hotel bed will correspond to one house bed. Grant Thornton estimates that the size of the sharing economy in Greece stands between €1.38bn and €1.46bn, while legitimate businesses lose 12 million nights per annum.
The authorities proceeded to regulate the market of properties leased to tourists through article 84 of Law 4.472/2017, which amended article 111 of Law 4.446/2016. However, the hotel industry expressed its opposition, since the activity of short-term leases is literally and fully deregulated, as a result of the abolition of any quantitative and/or quantitative restrictions.
Furthermore, whereas POL (Ministerial Circular) No. 1.187 determined the tax treatment of this activity, the enforcement of legislation has been delayed, while until late 2017, no ministerial decision had been issued about the terms of cooperation between the government and each digital platform.
It should also be noted that platforms are not under any obligation to disclose the details and revenues of associated owners, while there exist no requirements regarding the area, lighting, ventilation, heating, etc. of the property.
Estimates for 2018
The absorption of a considerable part of over-taxation, in order for prices to remain attractive, as well as unfair competition from the leasing of homes, caused a decline in the results for the majority of the enterprises in 2016, and this characteristic is also expected to prevail in 2017.
In 2018, a new historic peak in arrivals and receipts is expected to be recorded, since early bookings from tour operators have already increased to a rate that is above 10% on average (the early bird booking period, which reaches as high as 25%, normally ends in March). At the same time, in late 2017, reservations for scheduled air flight seats showed a rise of 4%, compared with the same period in the year before, with flight schedules becoming even more frequent with new direct connections from foreign airports to Greek destinations.
However, in 2018, the progress of the domestic industry will partly rely on the degree of recovery of Turkey and Egypt, as this development will intensify rivalry, mainly affecting revenues. Already in 2017, the number of international arrivals to Turkey rose by 28% after a deep decline in 2016, while the rise in Egypt amounted to 54%. Actually, in the currentperiod, it is noticed that as these countries recover, Greek hotel owners increase the level of early bookings.
Moreover, in a number of popular Greek destinations, a trend for price cuts being made by large hotels is being noticed, and this tactic also pulls the other units downwards, in an effort to avoid losing market shares.
Regarding the main destination countries, upward trends are noticed in early bookings from the United Kingdom, in spite of the recent Brexit, while a positive momentum also seems to continue in the case of Germany. A satisfactory picture seems to prevail in the US market, as well, which also highlights the importance of the direct connection between Athens and New York that was established last year. Furthermore, a stronger interest from Spain and Russia is being recorded, while early bookings from the Netherlands have rose over 20%.
Higher tourism traffic will be followed by the entry of new international chains into the Greek market, along with the overall interest shown by both domestic and foreign investors. Within this context, the auctions of hotel complexes, which will be carried out by the banks within a year, are expected to attract a rather significant amount of interest.
Nevertheless, over-taxation and the unfair competition by property leasing platforms that hotels face will continue to act as negative parameters; as a result, the competitiveness of the sector will be undermined.
Arrivals and revenues per country
The Border Survey that was conducted by the Bank of Greece for the first three quarters of 2017 offers a clear picture of the progress of arrivals per country of origin. As illustrated in the following table, the number of tourists who arrived in Greece (excluding the cruise sector) over this period rose by 10.3% on a year-on-year basis, amounting to 23.5 million tourists. This rise resulted: a) from incoming traffic originating in the 28 EU member countries, since that traffic exceeded 16 million tourists, having risen by 8.1%, compared with the first three quarters of 2016, and b) from traffic originating in countries outside the EU, where there was a rise of 15.1%, at 7.5 million tourists.
The European market is the most important supplier of Greek tourism, since 68.2% of foreign tourists came from the EU, whereas 31.8% came from other countries.
During the aforementioned period, the biggest increase in traffic was observed from Germany with +15%, at 2.92 million tourists, while a significant boost emanated from the United Kingdom with +6.9%, at 2.62 million. Besides, arrivals from the Netherlands rose by 23.8%, at 832,630, while a remarkable increase was also noticed from Romania with +13.3%, at 1.07 million tourists.
With regard to countries outside the EU, an increase is pointed out in the number of tourists from the USA (+11.6%, at 714,900), Albania (+13.8%), and Australia (+80.5%), while arrivals from Russia showed a marginal increase, at 531,000 tourists.
According to the above figures, during the first three quarters of 2017, 12.4% of arrivals comprised tourists from Germany, followed by the United Kingdom with 11.2%, Italy with 5.6%, France with 5.5%, Romania with 4.6%, etc. Other countries in the top ten were the Netherlands, the USA, Albania, Cyprus, and Russia. Cumulatively, the top-five countries of origin of tourists accounted for 39% of total arrivals.
In terms of the geographical distribution of exchange receipts for the first three quarters of 2017, 70% out of the total, or €8.8bn, came from tourists from the EU, which highlights the importance of the European market in contributing to the country’s tourism revenues. Compared with the corresponding period in 2016, this figure showed a rise of 7.9%, with positive shifts being identified in most of the key destination countries.
Receipts from tourists from non EU countries amounted to €3.8bn, having increased by 19.5% on a year-on-year basis.
In detail, receipts from Germany increased by 17%, to €2.15bn, while revenues from the United Kingdom showed a rise of 8.6%, at €1.88bn. Furthermore, receipts from France were boosted to the level of 13%, reaching €932m, whereas the corresponding figure for Italy showed a milder rise: +3.3, at €706m. A remarkable boost of 35% in receipts from the Netherlands is also noted, to the level of €588m.
With regard to countries outside the EU, it stands out that receipts from tourists from Australia more than doubled (+119%, at €346.5m), while a rise was also identified in revenues from the USA (+9.3%), Switzerland (+4%), and Canada (+28%). On the contrary, receipts from the Russian market declined mildly by 3.3%, at €387m.
Average length of stay
Foreign tourists’ average length of stay in our country has shown a downward trend over the last years, from 9.2 days in 2011, to 6.9 days in 2016. This decline is due to the significant rise in arrivals from countries outside the eurozone, the tourists of which stay in Greece for shorter periods of time, and spend smaller amounts of money. In terms of the third quarter of 2017, this indicator stabilised, compared with the corresponding period in the year before, at 7.4 days. As illustrated in the chart, 17% of receipts were derived from Germany, 14.8% from the United Kingdom, 7.4% from France, followed by Italy with 5.6%, the USA with 5.5%, the Netherlands with 4.6%, etc.
Over time, the highest average length of stay is demonstrated by tourists from EU countries, with the relevant performance at 8.2 days in 2016, compared with the average of 10.1 days from five years ago, while the corresponding indicator for non EU countries has been 6.6 days over the last year.
In 2016, Australian tourists stayed in Greece for 12.4 days on average; the highest length of stay. Next in the rankings were travellers from Canada (12.3 days), the USA (10.5 days), Germany (10.5 days), Russia (10.2 days), Cyprus (9.8 days), etc. For the majority of the countries, the length of stay shows a downward trend.
In 2014, Canadian tourists stayed in Greece 13.7 days on average; the highest length of stay. Next in the rankings were travellers from Australia (12.7 days), Germany (12.3 days), the USA (11.5 days), Cyprus (11.1 days), etc.
Foreign tourists’ per capita expenditure shows decline over time, reaching €470.5 per each journey in 2016 (versus €541 in 2015, and €552 in 2014), including the cruise sector. Thus, over the last two years, a cumulative decline in the region of 15% was observed.
EU tourists’ average expenditure is clearly higher than that of travellers from non EU countries (€528 and €482, respectively, in 2016). Moreover, during the last two years, the average receipt from the EU dropped to a greater extent (-15%), compared with extra-community markets (-11%).
With reference to countries that show the highest average expenditure, the three top places are held by tourists from Australia (€1,076), the USA (€935), and Canada (€925), due to the high cost of the journey (at the same time, they also indicate the highest length of stay). Next, Swiss tourists spend €768 on average, Australians €919, Russians €732, Austrians €700, etc. All the main tourists’ origin countries showed a significant decline in average expenditure.
Occupancy rates and average prices
The occupancy rates of Greek hotels remained high in 2017, recording a further improvement which was also followed by a rise in revenues per room.
Country overall average revenue per room—according to a survey conducted by the Research Institute for Tourism (ITEP)—increased by 11.3%, compared with the year before. This indicator showed a rise of 8.7% in Athens, 9.2% in Thessaloniki, and 8.3 in the resorts. However, the nominal increase in gross average revenue is not followed by a boost in the corresponding net revenue, because of the major burden from both direct and indirect taxes.
During the period between January and September 2017, the occupancy rates of hotels in Athens reached historic peaks; however, the average room rate—although improved—has not returned to pre-crisis levels. According to a survey conducted by GBR Consulting in cooperation with EXAAA, the average occupancy rate increased by 4.2%, to 81.4%, average room rate (ARR) increased by 4.6%, (to €100.44), whereas revenues per available room (RevPAR) increased by 8.5% (€81.78), compared with the corresponding period in 2016.
According to Mr. Nikolas Gouzelos, Chairman & CEO of IBHS, “The performance of domestic tourism in recent years has attracted the interest of both domestic and international investment consortiums, which intend to either purchase existing facilities or build new ones. Moreover, well-known management chains have already started to enter the Greek market by undertaking the management of luxury units. This event will affect positively the progress of receipts, ensuring, at the same time, direct access to international markets, and is expected to become more intense over the following three years”.
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