By Noel Josephides, managing director Sunvil Holidays
Now that the Cypriot banking industry has been dismantled by the European Union the island has very little option but to develop its tourism industry even further.
Is this possible in 2013? Can Cyprus pull another rabbit out of the bag, as it did in 1974 after the Turkish invasion?
In 1974 there was no infrastructure in the south of the island. All the tourist development was in Kyrenia and Famagusta, both resorts now occupied by the Turks.
Paphos was a small provincial town with just the Paphos Beach Hotel and Limassol had only the Amathus Beach.
In Ayia Napa there was nothing other than the Nissi Beach Hotel. So, the south was ripe for development by those who had already honed their developers’ skills in the now-occupied areas.
The scale of the development in Cyprus took everyone’s breath away, even those of us who were used to the pace of development we had seen in the boom resorts of Famagusta and Kyrenia.
I remember even then how we criticised what was going on, saying that the island was being over-developed.
So, the developers were allowed to set about creating the Cyprus we know now.
There were controls only in theory – the government regarded the building industry as being just as important as the tourism sector.
A few years ago, the building industry was regarded as number two to the banking and offshore sector.
The respected Cypriot surveyors A Loizou have recently stated that there are 252,000 empty shops, apartments, offices and houses in the south of the island.
That is an incredible figure, given that the population is under a million.
To put it bluntly, the price of these units has collapsed and they have to be filled before any more are built. That means, of course, that the building industry has nowhere to go and nothing to build.
Can the tourism industry fill these empty beds, many of which are unlicensed?
In 1974 there could only be growth in Cyprus because there was no real competition from other destinations and very few beds on the island.
In 2013 we face a very different situation; there is now competition from Egypt, Turkey, Tunisia, Croatia and Dubai, resorts which simply did not exist in 1974.
If Cyprus is to generate more revenue from tourism to replace that lost from the banking sector, it needs at least another million tourists a year. That’s an increase of 50%.
To increase tourist arrivals by such a percentage will need a drop in prices of 30% to 40% and an approach to a wide variety of markets, including reaching out to a cheaper clientele which Cyprus has never previously sought.
Prices will have to drop anyway because the resident population is being forced to accept salary decreases of 25% to 30%; the economy has been ruined by Brussels.
With reduced salaries will come lower prices in shops, restaurants and hotels because local people will not be able to afford the current very high prices.
Where will the extra million visitors come from?
It is unlikely that they will come from the UK. Over the last 13 years, numbers from the UK have been steadily falling. Other destinations have become fashionable, with modern bed-stock suited to the mass market carried by Tui, Thomas Cook, Jet2 and Cosmos.
But, even more importantly, the market from the UK has been increasingly dominated by budget airlines which have been encouraged to fly to the island by the Cyprus Government and generous handouts. Let me explain.
Last year, when the crisis hit Greece, which is served by the more traditional charter market, the market was kick-started by very low prices through tour operators.
For instance, at this time last year, my own company, Sunvil, was costing Greek packages with a flight price of £80 when the actual cost to us was nearer £250; we had no option but to do this.
We could not hand our charter seats back, so we had to create very cheap packages using our charter flights and committed accommodation.
We have no committed seats to Cyprus because Sunvil now, in common with many other operators, simply puts together packages based on bought-in seats from scheduled and no-frills carriers; even in April and May, you can’t buy these seats for less than about £240.
Tour operators have steadily reduced charter capacity to Cyprus because they have been angered by the Cyprus government’s support of budget carriers.
Without charter seats it is impossible to force-feed tourists to a destination.
Additionally, there are now no mid-size tour operators left because these have been destroyed by the growth of the no-frills carriers and the increasing dominance of Tui and Thomas Cook.
Both the big two now increasingly operate to properties where they have exclusivity and which are generally all-inclusive.
For the economy of a destination like Cyprus, the all-inclusive model is harmful.
So, can the Russian and Eastern European markets create the extra million annual arrivals?
The Russians have been growing at an enormous rate because their model is still charter-based.
The Russian market is behaving as did the UK market in the golden age of Harry Goodman’s Intasun – stack them high and sell them cheap.
Other Eastern European markets like Poland are going the same way.
The million dollar question is whether the Russian market has been spooked by the financial crisis that has befallen the island and which has affected its many Russian residents.
What Cyprus has to do will not be easy.
The island has been set back 50 years and, while its weather and Mediterranean beaches remain perfect for sun-starved northern Europeans, the essential ingredients to achieve marked tourism growth are no longer there.
However, the Cypriots have done it before and I would not be surprised if they pulled the rabbit out of the bag yet again.
It’s a chance for a fresh start and, hopefully, more consideration of the long-term via sustainable tourism.
Cyprus is already working very closely with the CSTI (Cyprus Sustainable Tourism Initiative) and The Travel Foundation and the work done so far could be developed considerably to achieve the impressive savings and long-term benefits inherent in the adoption of sustainable policies.
What about a nice big EU grant to help Cyprus become a shining example of what can be achieved in terms of long-term sustainability? Now there’s an interesting thought.
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