| 5 March 2024, Tuesday |

Southern Europe grapples with changing face of tourism

Even with bookings flooding in, Dimitris Diavatis’ expectations that his Greek summer resort would be able to return to pre-pandemic health this year were dashed by a single electrical bill.

It was more than double what he had spent at this time last year, when the hotel was not yet open. The irony was not lost on him after two slow summers: “We won’t make a profit in a good year,” he added. “Inflation will eat it up.”

After two essentially lost years, Greece, like the other tourism-dependent nations on the eurozone’s Mediterranean border, is seeing signs of a much-needed resurgence in visitor numbers in 2022. The sector, like in Spain, Portugal, and Italy, employs a large number of people and contributes significantly to governmental income.

However, the epidemic has altered the face of tourism throughout the region. Hotels were already dealing with increasing fuel expenditures and inflation, which a further increase in energy prices as a result of Russia’s invasion of Ukraine will further exacerbate.

The dislocation of labor markets caused by COVID-19 has left entrenched staffing shortages, while Italian tourist officials concede that pandemic-era holidaying – with its emphasis on hygiene, cleanliness and space – is a big challenge for its ageing infrastructure.

Meanwhile, a market for more modest, small-scale vacations is opening up: In Spain and Portugal, a reluctance among many tourists to travel far is accentuating the trend for stays in rural areas in tents, campers or motorhomes. Industry and government officials in Greece are forecasting revenues will reach 80-90% of the record seen in 2019, when 33 million tourists brought in 18 billion euros in revenues, worth a fifth of national output.

Yet a bumper season is unlikely to offer much relief to struggling businesses which emerged from a decade-long financial crisis in 2018 only to have the pandemic bring global travel to a halt two years later.

So acute is the problem of soaring heating oil, gas and electricity prices that the president of the Greek tourism confederation SETE, Yiannis Retsos, wrote to ministers in January urging them to provide financial support, saying it was “objectively impossible” for year-round hotels to the cover their costs, especially after the quieter winter months.

The highly indebted countries of Europe’s south were also bracing for the European Central Bank to remove the stimulus that has kept their borrowing costs down.

Although the Ukraine war has left the interest rate outlook uncertain, the southern fringe still badly needs its tourism sectors to get back to work given the economic hit the conflict is set to deliver.

Speaking a day after the invasion, which Russia calls a “special operation”, Greece’s Retsos said it was too early to gauge its impact on the tourism sector.

More than a week into the conflict, there has been no noticeable increase in cancellations across the region.

Russian tourists only make up a very small proportion of the sector in southern Europe – 2% of revenues in Greece in 2019 and around 1% of nightly hotel bookings in Portugal. Turkey – outside the European Union – is a more popular destination.

But with European gas prices already at record highs, and this likely to feed into inflation globally, the concern in countries like Greece is the conflict will only worsen an already bleak outlook, further crimping guests’ spending power and increasing providers’ costs.

  • Reuters