Greece’s 2019 tourism season hints at a disastrous 2020. Unless stakeholders begin thinking outside the box, Crete and other markets may slump even further. Back in May slumping Crete bookings and retail sales were signals of a huge revenue crash when year’s end numbers are crunched. The reality is bound to sink in for many Greek hoteliers soon.
Time to Reboot Marketing
According to Gregory Tassios, President of the Panhellenic Federation of Hoteliers, there’s a 10% to 15% drop in overnight stay rates across Greece. Mr. Tassios emphasized that prices and contracts with international tour operators are already 20% lower than in 2018. The roadmap for 2020 does not look favorable beyond Greek hoteliers getting advance payments from operators. Clearly, all the stakeholders will need to rethink strategies this off-season.
Looking to find some solutions, I contacted Minas Liapakis, owner/director of EyeWide Digital Marketing. Liapakis says there are no simple answers, but hoteliers can counterbalance. The marketing executive also pointed out that Greece is not in the best negotiation situation now. Despite negative indicators, he says competitive market pressures and downward pricing can be mitigated. He also had this to say:
“Hoteliers are going to have to be tough in their negotiations with tour operators. In order to achieve a more stable balance, they will have to go back to the drawing board with keen channel management strategies and their overall marketing plans.”
EyeWide is one of Greece’s most successful hotel marketing firms. Business there is tightly focused on balancing direct, OTA, and ad booking channels for many years. Unfortunately, many larger resort concerns have leaned too heavily on the big tour companies to book their rooms in recent years.
Calling All Channels
On Crete, in particular, this imbalance is costing some hoteliers big time. Liapakis’ solution jibes with a report from Siteminder from early 2019. Tony Palmer, Country Manager for Greece at SiteMinder, had this to say about the “guest mix,” and the challenge of acquiring new business:
“HRS’s appearance shows the growing value of travelers from Germany, which remains Greece’s top source of inbound tourist arrivals, while Mr. & Mrs. Smith’s appearance shows the effectiveness of this channel for a market rich with luxury and boutique hotels.”
Back in early 2018, experts and decision-makers gathered at the World Tourism Forum Lucerne (WTFL) Think Tank 2018 at Costa Navarino. Then tourism minister Elena Kountoura created an amazing initiative. However, the wrong strategies were hammered out at this summit. The focus for everyone in Costa Navarino was the number of tourists, which only exacerbated the situation now. Greece was shooting for 30 million tourists with scarcely a mention of profitability.
The theme was Public-Private Partnerships (PPPs) for sustainable tourism growth. But, it seems unlikely there were hoteliers agreeing to 20% losses across the board. We must also factor in other variables. European economic growth Brexit, climate change, the future of Airbnb, and other factors loom large.
Now the market is in big trouble because of shortsightedness in the medium to long term. This is illustrated by another point Gregory Tassios made. When asked whether the existing Greek tourism product can generate more revenue with fewer arrivals, Tassios noted, “It takes at least a five-year period for that to happen.” Unfortunately, the Bank of Greece and other vested entities are already rushing to juggle the 2019 numbers.
Days after the report on Greece’s sagging revenues came out, a press release was drafted and published spotlighting June revenues as a positive indicator. The report throws accounting jargon and figures at the negative effects of reality. The headline +15.3% travel revenues in H1 2019 spurred major news like Kathimerini to mirror the report. The good news is, incoming Greek Tourism Minister Haris Theoharis seems to be on top of the game. In an interview on ERT TV Theoharis said corrective actions are being taken by his ministry. He went on to say revenue for 2020 will not improve much, but that the outlook for 2021 looks better:
“Once corrective actions have been taken and the government’s strategic plan can be implemented,” said Theoharis.
The minister seems to be serious about these “corrective actions” since he said on Tuesday of this week that the value-added tax (VAT) charged on tourism-related services will very soon be slashed to the 13 percent rate (from 24 percent). The minister says the measure is so Greek destinations can be tax-competitive compared to countries in the wider Mediterranean area. And this is how you innovate in a price war, in my opinion.
Looking at comparatives, Turkey retail sales mirror lost tourism showing the biggest increase since late 2016. Moodys reflects the same figures. Meanwhile, Turkey’s tourism revenues jumped by 13.2% in Q2 of 2019, which led to earnings of $12.6 billion in the first half of this year.
The situation for hoteliers is mirrored in the retail sector. According to Trading Economics, Retail Sales MoM in Greece is expected to be -0.60 percent by the end of this quarter. Furthermore, the extended retail sales forecast is pretty bleak as well with a projected growth of less than 1% into 2020. Spending is already down €1.3 billion from the last figures and consumer confidence has plummeted.
The only positive with regard to Turkey’s resurgence is that this may give Greece some leverage in negotiations on prices going forward. The other positive from these reports are the figures showing Mr. & Mrs. Smith edging the luxury segment up. In my view, this contingent holds the most promise for Greece and especially Crete.
Sustainability wise, Greek hoteliers cannot go forward boosting supply without looking to take advantage of what demand can do. Places like Santorini are already underwater, and the rest of Greece is not far behind. Greek Hoteliers do not need to be competing with Spain and Turkey head-to-head in budget all-inclusive travel either. There is a more lucrative alternative demand to be created. Gregory Tassios’ “five-year” outlook needs to be put into action starting now if a meltdown is to be averted by some operators.