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Cyprus eyes golden future for tourism industry

By GlobalMarkets
07 Apr 2017

Tourism numbers are up in Cyprus and another strong year is expected. But more needs to be done, including attracting wealthy Muscovites, for example, who could get on a plane on a Thursday evening and three hours later begin a long weekend somewhere safe, sunny and warm.

Road to Cyprus — a series of articles in the run-up to the 2017 EBRD Annual Meetings in Nicosia


2016 was a spectacularly successful year for Cyprus’s tourism industry, with visitor numbers reaching an all-time high of almost 3.2m, comfortably eclipsing the previous record of 2.7m set in 2001. According to Eurostat data, tourists spent 14.8m nights in Cypriot hotels and other establishments in 2016, an increase of 10.9% over the previous year.

The healthy rise in visitor numbers in 2016 was driven largely by robust demand from the UK and Russia. Arrivals from the UK were up by 11% last year to 1.158m, consolidating the UK’s position as the most important market for tourism to Cyprus and confounding (for now) those who forecast a slide in UK numbers following late June’s EU referendum. Visitor numbers from Russia, meanwhile, soared by 49% to 782,000, with Cyprus clearly benefiting from a precipitous decline in Russian demand for holidays in Turkey.

The indicators have not been uniformly positive, with tourists to Cyprus not quite as free-spending as they used to be. According to research published by Bank of Cyprus, average receipts per tourist fell to just under €750 between January and September 2016, compared with €795 in the same period the previous year.

Nevertheless, the Cyprus Tourism Organisation (CTO) is expecting another strong year for the industry in 2017, with visitor numbers projected to rise by 5%. According to the CTO’s calculations, this will lift the industry’s contribution to GDP from 20% to 22%, and mean that 11% of the island’s workforce is employed in the tourism sector, up from 9% in 2016.

It is not just the headline numbers that are so encouraging for Cyprus’s tourism industry. Perhaps even more significant than the overall totals has been the recent data for the off-season. Arrivals were up by 12% in December and by 29% in January, turbocharged by a massive 158% rise in Russian arrivals.

The strength of the tourism sector during the winter months is critical for the Cypriot economy for a number of reasons. Aside from demonstrating that tourism is a highly diversified sector that has much more to offer than sun, sea and sand, it goes some way to addressing the challenge presented by hotel rooms that are empty for several months each year. “In simple tourism economics, the worst thing you can have is an asset that is idle for a great part of the year,” says Angelos Loizou, chairman of the CTO. “This is why we are so pleased that over the last three winters we have seen an average increase in visitor numbers of between 25% and 30%.”

Loizou says there is still plenty that could be done to persuade more visitors from some of Europe’s chillier regions to escape to Cyprus during the winter. “One area where we could do better is in attracting wealthy Muscovites, for example, who could get on a plane on a Thursday evening and three hours later begin a long weekend somewhere safe, sunny and warm,” he says. “To do this, we need more scheduled flights off-season.”

The likely direct economic impact of a rise in the number of scheduled flights touching down at Cyprus’s airports would be significant. According to their owner and operator, Hermes Airports, for every additional flight arriving at Larnaca and Paphos airports, about 100 incremental jobs are created. By Hermes’s calculations, the two airports contribute over €500m annually — or 3% of GDP — to the Cypriot economy.

So much the better, then, that Cyprus Airways, which was shut down following its bankruptcy in January 2015, has recently risen from the ashes. The new, Russian-owned Cyprus Airways took delivery of its first Airbus A-319 late last year and was awarded its air operator certificate in March.

Another group of tourists that Loizou says Cyprus should be targeting is repeat visitors. “The tourists we attracted in the 1980s and 1990s, especially from the UK, were those who typically came back two or three times a year, stayed in the same hotel and ordered their favourite drink from the same barman,” he says. “This is the type of tourist who is a better spender and who genuinely wants to see all that Cyprus has to offer.”

Loizou describes attracting return visitors as one of the cornerstones of Cyprus’s ambitious growth strategy for tourism. This projects an increase in international tourists arrivals of 82% by 2030, underpinning an expansion in revenue of 185% and a rise in employment in the sector of 64%. The new growth model for the industry aims at attracting 4.8m international visitors a year by 2030, with 40% coming to the island between November and April.

Northern Cyprus’s potential

Ercan Airport has some very striking expansion plans. The airport, which is located some 13km to the east of Nicosia in the self-declared Turkish Republic of Northern Cyprus (TRNC), is undergoing a four-year makeover, which will reportedly increase its size from 20,000 square metres to 175,000m2 by January 2018. It will also lift the airport’s capacity from four million passengers today to 10 million, according to a recent piece published by the Turkish daily, Hurriyet.

To put this total into perspective, it would represent just over a million more passengers than the airports at Larnaca and Paphos handled between them last year. Spme 8.97m passengers travelled through these two international airports in 2016, which was an exceptionally good year, especially for Larnaca, which posted a 24.5% increase in passenger numbers. Larnaca also welcomed no fewer than 10 new airlines in 2016 alone. Ercan, by contrast, is served by four in total — all of which are Turkish.

Clearly, if the upgraded Ercan airport is to avoid being filled with empty space, it will need a solution to be found to the so-called Cyprus problem which has cast its shadow over economic development on the island since 1974. If a settlement is reached, reunifying Cyprus after more than four decades, the impact on tourism to Northern Cyprus may be electrifying.

According to a report published in 2014 by the Peace Research Institute Oslo (PRIO), entitled The Cyprus Peace Dividend Revisited, in accommodation and food services, the so-called sector dividend in North Cyprus would rise from €152m in 2012 to €1.258bn in 2035 if a solution is found to the Cyprus solution. This compares to a rise to just €466m in the event of a continued stalemate.

This potential bonanza for tourism in northern Cyprus is principally a reflection of the low base from which the industry would be coming. Officially, the north has hotel capacity of 20,000 beds, compared with 85,000 in the south. But as a spokesman for the Cyprus Tourism Organisation (CTO) says, “the majority of hotels in the occupied areas belong to Greek Cypriot displaced persons who were forced to leave their properties following the Turkish invasion of 1974 or have been built illegally on properties belonging to displaced Greek Cypriots.”

This article is the fourth part of a series of six pieces on Cyprus’s economy in the run-up to the 2017 EBRD Annual Meetings in Nicosia.

Click here for part one – Cypriot economy surprises on the upside February 22, 2017

Click here for part two – Cyprus — building bridges, not walls March 7, 2017

Click here for part three – Cyprus’s game-changer: the Mighty Aphrodite March 27 2017

Click here for part fiveAccelerating the recovery in Cyprus’s banking sector March 19 2017

Click here for part six – Cyprus focuses on new FDI push May 2 2017

Click here for part six – Cyprus focuses on new FDI push May 2 2017

Click here for part six – Cyprus focuses on new FDI push May 2 2017

Click here for part six – Cyprus focuses on new FDI push May 2 2017

By GlobalMarkets
07 Apr 2017