By NIKI KITSANTONIS, Published: September 20, 2011,- ATHENS — Despite all the gloom surrounding Greece and its battered economy, the sun has been shining
on the country’s tourism industry, offering one of the few glimmers of hope for recovery. Greeks have cut back on vacations, prompting a 20 percent drop in domestic tourism. But the number of foreign visitors to its sun-drenched islands and ancient monuments is set to reach a record of 16.5 million this year.
That is up 12 percent from 2010, according to the Association of Greek Tourism Enterprises. Sorely needed revenue is expected to increase by the same rate, netting 11 billion euros ($15 billion).
In places like the Cretan port of Rethymno, the debt crisis seemed a distant concept at times. During a recent visit, restaurants were full all along the coastal promenade.
“Our foreign customers have always been our bread and butter,” Maria Stavroulaki, the owner of the Knossos tavern, said one late-summer night. “They saved us this year, too.”
Greece faces a long road to recovery after two years of austerity. The finance minister, in one of the more optimistic forecasts, said last month that the economy could shrink more than 5 percent this year before slowly returning to growth in 2012. With most economic indicators pointing downward, the increase in visitors is seen as a godsend.
Tourism accounts for almost a fifth of the country’s gross domestic product and one in five jobs. Exports rose 40 percent in the first half of 2011, after a 25 percent drop in 2010, but they account for a much smaller share of gross domestic product.
Coastal shipping, which feeds tourism, performed well, too. The number of passengers on cruise ships docking in Greece up 28 percent in the first eight months of the year.
“Without a doubt, tourism has already helped soften the blow of the economic crisis,” said Pavlos Geroulanos, the culture and tourism minister. “New markets keep growing and old ones are coming back with an old passion for Greece.”
The rebound, achieved despite fierce competition from regional rivals like Spain and Turkey, appears to be part luck, part planning.
The Arab Spring uprisings diverted visitors from popular tourist destinations like Egypt, Tunisia and Morocco, industry analysts say, and Greece was able to capture a share of that.
Advertising appears to have helped as well, with the central and local authorities promoting religious tourism, mountaineering and agricultural tourism. An online government video campaign called “You in Greece” showed satisfied visitors against a backdrop of tantalizing beaches and picture-perfect ports.
Meanwhile, the reduction in January of the value-added tax on hotels to 6.5 percent from 13 percent — one of the few tax breaks introduced amid several austerity measures — allowed hoteliers to reduce their prices to attract more customers.
“The first thing that the Greeks did right is drop their prices early this year,” said Toby Nicol, communications director of the World Travel and Tourism Council, an industry group based in London.
As usual, around a third of all foreign visitors this year came from Greece’s most loyal markets: Germany — despite the grumbling over having to pay for Greece’s bailout — and Britain. But there was also a surge in visitors from Russia after the lifting of visa restrictions at the end of last year; from the former Soviet states; and from Serbia, Israel, Turkey and China.
Official figures are not broken down by country of origin, according to the head of the Association of Greek Tourism Enterprises, Andreas A. Andreadis, but visitor numbers from the new markets are up sharply and show rich potential for further gains.
“Greece is more accessible to Russia and Israel than Spain, for example, so we should exploit this,” he said.
To help maintain a competitive edge, entrepreneurs want sales taxes on all tourism services cut to the base rate of 6.5 percent. Some packages are still taxed at 13 percent.
They are also lobbying for the halving of Greek airport taxes, which are among the highest in Europe, and the reversal of the near-doubling of value-added tax in restaurants and bars, to 23 percent.
Tax breaks are not enough, though. For Greece to build on this year’s success, it must also dispel its image as an unpredictable destination where labor strikes can cause transport disruption and protests can turn violent, Mr. Nicol said.
“Travelers will think twice about visiting a destination if they’re worried about missing their ferry connection,” he said.
Violent anti-austerity rallies are thought to have kept many visitors away from Athens, where arrivals have fallen 3 percent this year. About 10,000 hotel cancellations were made in one particularly riotous week in June, when tough measures were being voted on in Parliament.
There were anti-austerity protests on some of the islands, too, but hoteliers did what they could to muddle through. Yiannis Androulakis, the 64-year-old owner of a complex of bungalows near the lively port of Hania, on the island of Crete, said he used his car to shuttle several guests to and from the port during a taxi drivers’ strike in August.
“I’m not going to let a group of obnoxious taxi drivers ruin my livelihood,” he said.
Other islands, where protests were more muted, have had a phenomenal year. Arrivals increased nearly 30 percent on the islands of Rhodes and Kos. Mykonos attracted a record 750 cruise ships, each carrying an average of 3,500 visitors, after the lifting of docking restrictions last summer.
Still, experts say Greece has tapped just a fraction of the potential of its tourism industry. A report carried out by McKinsey & Company for the Federation of Hellenic Enterprises, published this month, highlighted some changes that it said would enable Greece to create 200,000 jobs by 2021.
Among the priorities listed were an overhaul of marketing efforts, steps to speed up the granting of licenses for investment in the tourism sector, revamping ports and airports and increasing flight connections to large markets like the United States, Russia and China.
The Greek Development Ministry said several investments in the tourism industry, most of them subsidized by the European Union, were being discussed. It noted that Germany had expressed interest in certain projects after bilateral meetings between government officials and industry executives this year.
Meanwhile, the Greek authorities have made steps to reach out to more affluent tourists. A law passed in August that eases the construction of luxury tourism complexes and holiday homes for long-term lease or sale aims to lure the wealthy into buying second homes in Greece.
Economists in Greece say the country needs to branch out from the old sun-and-sea formula and start catering more to specialized interests to attract visitors year-round.
This could help make a dent in unemployment, which has hit 16 percent over all and exceeds 30 percent among those younger than 30, by extending seasonal jobs that usually end in September.
“Greece has mountains, it has monasteries and hot springs,” said Yannis Stournaras, who heads the Foundation for Economic and Industrial Research in Athens. “It could be attracting visitors all year round.”
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