Inflation and new markets propel spending close to €3 billion in 2023

Just before the end of last summer, economic analysts' projections for 2023 tourism revenue were nearing a record close to €3 billion. The official figures announced last Thursday confirmed this anticipation, setting a historic record of €2,990.6 million. This performance marked a 22.6% increase compared to the same period in 2022 and approximately 11.4% compared to the pre-pandemic reference year of 2019.

While achieving a historic high in tourism revenue signals satisfaction among operators, it's essential to note that the increase comes with certain nuances. Since the nearly €3 billion cannot solely be attributed to a rise in arrivals, which were 3.3% lower compared to 2019, analysts attribute the growth to spending patterns of tourists from emerging markets and inflationary factors.

Yannis Tirkidis, the director of Financial Research at Bank of Cyprus, explained to "K" that the €3 billion tourism revenue was a result of increased arrivals from specific markets, robust travel demand, and inflationary pressures.

A significant portion of the revenue surge is believed to stem from escalating costs of goods and services. Though the exact proportion of inflation's contribution to increased tourism spending is not specified, analysis of price index data for 2023, 2022, and 2019 reveals notable trends. Price indices for categories like Restaurants and Hotels, Leisure and Culture, Transfers, and Food and Non-alcoholic Beverages indicate substantial increases compared to previous years.

It's crucial to define tourist expenses, which encompass all costs incurred during a tourist's visit to Cyprus. These include accommodation, dining out, leisure activities, shopping, transportation, and various other expenditures.

The influx of tourists from European markets such as France and Poland has also played a pivotal role in augmenting per capita and daily spending. Notably, arrivals from Poland increased by 206% compared to 2019, while arrivals from France rose by 169%. Even the main market, the United Kingdom, saw a slight decrease in arrivals but a noteworthy 20.5% increase in tourist expenditure in August 2023 compared to 2019.

While tourism revenue has surged, hotel profitability has faced challenges. Despite increased revenues, hotels reported lower profitability in 2019 due to rising operating costs, notably energy and labor costs, and increased borrowing rates. The outlook for 2024 suggests a potential decrease in hotel occupancy by 10%-20%, reflecting a cautious industry sentiment.

The upcoming ITB international tourism exhibition in Berlin may provide clearer insights into the industry's trajectory for the current year.

[This article was translated from its Greek original]