The latest data on tourism revenues for the month of May has brought encouraging news for the tourism sector, signaling positive effects on the Cypriot economy. According to reports released by the Statistical Office in recent days, May recorded tourism spending of €311 million, marking the highest figure seen in at least the past two decades. Additionally, total revenue for the first five months of the year amounted to an impressive €728.6 million, boasting a substantial 12% increase compared to the corresponding performance in 2019 - the last healthy year before the pandemic outbreak and Russia's invasion of Ukraine, both of which had significant economic repercussions, inevitably impacting the tourism sector.
Economic analysts estimate that this year's annual tourism revenues are set to exceed those of 2019 by around 8%, potentially reaching nearly €3 billion. The observed trend of a return to pre-pandemic performance, particularly with reduced levels of arrivals (-3.34% between 2019 and 2023 for May), has understandably generated satisfaction within the tourism sector - at least initially. However, delving deeper into the statistics raises an important question: What exactly is driving the increase in revenue, and to what extent is it a result of a more diverse range of tourist markets and a new visitor profile, versus the overall rise in the cost of living?
May recorded tourism spending of €311 million...Additionally, total revenue for the first five months of the year amounted to an impressive €728.6 million,
The Role of Inflation
Analyzing the data, a representative from the Statistical Office highlighted that recent months have seen an increase in spending, largely attributed to rising inflation. As the cost of goods and services rises, tourists end up spending more during their visits. Similarly, financial analyst Ioannis Trikkidis of the Bank of Cyprus notes that while there is a nominal increase in tourism revenues when adjusted for inflation, the real revenues have remained relatively stable since 2019. Nonetheless, the fact that the losses experienced in 2019 are now being covered is viewed as a crucial development. PASYXE President, Thanos Michaelides, predicts continued growth in tourism revenues, albeit at a slower pace, due to price stabilization resulting from inflation. While the previous two years saw the resurgence of tourism revenues driven by travel demand after the pandemic, the current surge is largely attributed to the rising cost of living.
The Breakdown of Expenses
Turning to the research on tourist expenses, the Statistical Office defines tourism spending as all the costs incurred by tourists during their visits to the destination. This includes expenditures on accommodation, dining and entertainment venues (such as restaurants, cafes, bars, nightclubs, and discos), purchases from supermarkets, in-home delivery, ready-to-eat meals, clothing and footwear (including dry cleaning), car, motorcycle, or bicycle rentals, and other transport within Cyprus - taxis, buses, fuel, sports services, guided tours, casinos, theaters, opera, museums, concerts, music venues, books, maps, newspapers, cards, and games, as well as medical expenses. It is noteworthy that the Consumer Price Index for the first five months of 2023, compared to the corresponding period last year, increased by 5.21%, by 7.26% in the Restaurants and Hotels category, and by 8.6% in the Food and Non-Alcoholic Beverages category.
Emerging Markets and Individual Tourists
At the same time, it is essential to acknowledge that new European markets have contributed to the rise in tourist numbers. Moreover, there has been an increase in tourists from existing countries such as Poland, Germany, Switzerland, and Sweden, as well as from new markets like France - with double the number of visitors this year. Additionally, there has been a doubling (compared to May last year) in the number of arrivals from markets with smaller shares. Concurrently, the share of individual tourists has increased compared to those who come through organized travel agencies, who typically pre-pay for more specialized and all-inclusive packages at hotels. When comparing statistics, it is evident that in many cases, any cutbacks in tourists' expenses do not directly affect their spending but rather manifest indirectly through a reduction in the duration of their vacations.
[This article was first published in Kathimerini's Sunday edition and translated from its Greek original]
