Industry Update
Press Release27 March 2009

Quality is Key to Cyprus Tourism revival says MKG

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MKG

As Cyprus’ tourism industry continues to feel the brunt of today’s challenges, namely the economic crisis and increased competition within the region, key decisions will need to be made to fight back the downturn. Industry experts suggest that a unified agenda, along with a quality product is crucial.

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Cyprus,: Despite the Cyprus’ well known competitive advantages as a destination, latest tourism performance indicators are not so positive, with figures continuing to decrease.

“However much the tourism sector has held up in 2008, and indeed it has resisted the downturn far better than other industries, the economic downturn will start to take its toll in the coming months, as consumers and companies alike continue to cut back on travelling expenses. More than ever, travellers will be seeking added-value,” stated Director of Development, MKG Hospitality, Vanguelis Panayotis.

Tourism to Cyprus in 2008 decreased by 0.5%, as did overall length-of-stay, now hovering around 10.1 days – both contributing to a decline in tourism revenue. Forecasts suggest that the situation will deteriorate even further over the next 6-9 months. Hotels in Cyprus, like most countries in the region have already started to see a decrease in Occupancy Rates (OR), signalling that demand has dropped. Hoteliers are now expected to further reduce their average prices in order to encourage more guests, which will in turn force Revenue per Available Room (RevPAR) down.

“The indicator that must be observed very carefully now is Average Daily Rate (ADR). As demand decreases, competition will increase and then the market will start to drop its prices in order to maintain occupancy rates. When ADR decreases for several months versus year-to-date, it is a clear sign of recession. Unfortunately for Cyprus, the UK – its number one feeder market is one of the worst-hit from the economic crisis. Combined with a devalued British Pound, the affects will be felt all over the island,” added Panayotis.

According to President & CEO, World Travel & Tourism Council, Jean-Claude Baumgarten, the difficultly for hoteliers now will be surviving the downturn, especially not knowing exactly how long it will last.

“These are very challenging times for Travel & Tourism (T&T), as well as for other economic sectors. It is now no longer a question of whether there will be a recession, but rather how long it will last. And there is no magic solution…no quick fix,” he said.

“It is important to remember however that T&T is a very resilient industry – people will not stop travelling for long if they can help it,” continued Baumgarten. “Travel has become a greater priority than consumables generally. And, unlike the situation after 9/11 or SARS, the desire to travel has not disappeared this time. It’s just a question of whether one can afford to travel as usual.”

Leading Low Cost airline to Cyprus is also expecting major changes, as Managing Director, First Aviation (Monarch Airlines), Alan Murray explains: “Thus far we are seeing the economic impact being to traditional booking patterns becoming much later and a definite softening in yield. As passengers seek cheap alternatives, they leave the decision on if and when they travel to the last minute – probably due to uncertainty about their own employment prospects more than anything else. This also will have a profound affect (as will the foreign exchange rate) on the numbers of people buying second homes in the sun. This will in turn affect the Cyprus market considerably along with its prospects for growth.”

“Against some competitor Islands within Greece and of course Turkey and Egypt (all around similar flying times) although appreciating the Euro effect, Cyprus is considered a more expensive destination. Possibly the product is better than some other destinations, but certainly from our experience the airport infrastructure is poorer and yet the costs paid for it and lack of consideration of what airlines are saying, will be a detriment to the Island as passengers will have (as have airlines with costs and delays) had to bear the brunt of this. They will undoubtedly tell others of their experiences, which again might make potential customers vote with their feet,” added Murray.

Despite a 3.1% decrease in arrivals in 2008 compared to 2007 (and 8.6% compared to 2006), the UK remains Cyprus’ main feeder market, with over 1.2 million arrivals. Russia has affirmed its position as the country’s second largest source market, with a 24% increase in arrivals compared to 2007, reaching almost 181,000 (since 2006, the Russian market rose almost 60%). This market is also the most significant in terms of average spending per person, at €1,024.83.

Although the government has taken steps to make Cyprus a more attractive destination, namely VAT cuts, echoes of quality service and added-value continue. “Life in Cyprus is becoming too expensive. We have to offer our visitors better quality, better service and better value-for-money,” remarked General Manager, Centrum Hotel in Nicosia, Panicos Leonidou.

Leonidou says particular attention must be given to staffing and training issues. “If we have personnel from abroad, they must be well-trained. They have to learn about Cypriot culture, and be in a better position to provide tourists with information. They have to speak English, as well as a little bit Greek. Also we have to find our traditional identity and culture.”

A fresh approach and closer collaboration between the public and private sectors have also been urged. “We need to be innovating and engage ourselves in new ideas and concepts. The public and private sectors should also be involved in the decision-making process and on a more regional level,” stated Sales Manager, Hotel-e, Constantia Efstathiadou, who is in the process of launching Cyprus’ first eco-friendly hotel.

“We are an expensive destination, there is no doubt. The main problem is the value of our product, price compared with our quality of service, in comparison with our competitive destinations (i.e. Turkey, Egypt, Croatia, Bulgaria) and there is a difference in price. So what is our next step, do we dodge and refuse to see the reality,” concluded Efstathiadou.


About MKG Group | Established in 1985, MKG Group has built a reputation for solid business expertise and substantial know-how in the fields of tourism, lodging and food service. MKG Group meets the needs of each of its clients by providing the valuable analytical and decision-making skills necessary for success.

Methodology & Innovation | With a team of over 60 experienced consultants, as well as advanced research and analytical tools and applications, MKG Hospitality provides unique savoir-faire in four major areas of expertise: Market Research; Financial Feasibility Studies; Consulting; and Sector publications.

MKG Hospitality is a global leader in tourism, hotel and catering consulting, with the largest database in the world (outside the US), representing all segments from budget to upscale hotels. MKG’s customised database, Hotel CompSet, contains a sample of over 200 brands and 11,000 corporate chain hotels, representing more than one million rooms. Hotel CompSet provides daily, monthly and yearly monitoring of hotel indicators and analyses of its sample. .

Together with other specialised brands, MKG Qualiting, OlaKala, Worldwide Hospitality Awards, Global Lodging Forum, HTR Magazine and Hotel Restau Hedbo, MKG Group supports investors, hoteliers and key tourism players improve performance, boost productivity and achieve optimal results.

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Joëlle Renno
MKG Group
Phone: +33 (0) 1 56 56 87 95
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