The summer doldrums in Southeast Europe

By bne IntelliNews September 1, 2009

Nikolai Frank in Berlin -

The global economic crisis has caused a financial nuclear winter for most countries in Southeast Europe, but governments with beaches were hoping for a long hot summer as the tourist season got under way. They've been disappointed.

While the full statistics will only be available after the end of the summer, preliminary figures are grim. The hardest-hit are those countries in the region with the euro, whose appreciation over the past year means many tourists are opting for cheaper destinations. Cyprus saw 15.1% fewer arrivals in the first six months of 2009 than in the same period last year, according to the island's Statistical Service. Similarly, Greece is having a harsh summer: the Research Institute for Tourism in Athens is resigned to a roughly 10% drop in arrivals compared with 2008. The strong euro is proving a repellent for tourists from the UK and Russia, usually some of the most eager travellers, but currently amongst the hardest hit by the crisis.

This ought to be good news for Croatia, which offers greater opportunities for budget holidays. Its currency, the kuna, has fluctuated in recent months and remains favourable for visitors bearing euros, as well as pounds and rubles. Yet the Adriatic republic has also seen a marked slowdown in tourism this year. Data released by the Croatian Bureau of Statistics show a 6% drop in arrivals in June compared with the same month last year: 7% fewer tourists visited the country between January and June than over the equivalent period in 2008.

Turkey, one of the region's biggest tourist destinations, seems to have come off relatively well, no doubt in part thanks to the weak Turkish lira as well as to its more diversified tourist base (it boasts spectacular cultural heritage sites, colourful holiday resorts and one of the most vibrant party scenes in Europe for young holiday-makers). Arrivals were down a mere 1.3% in June over the same month last year, according to figures published by the Ministry of Culture and Tourism. But while the numbers held up, the party goers were in a frugal frame of mind: the Turkish Statistical Institute reckons the first six months of this year produced a revenue shortfall of 9.6% from tourism versus the same period in 2008. Ata Invest, an Istanbul-based financial advisory group, described the results as "worse than market anticipations."

Bulgaria and Montenegro, both with young tourist sectors with a lot of growth potential, haven't yet released figures for the start of the season. Bulgaria is increasingly popular with budget-loving German holidaymakers and likely to benefit from heightened price sensitivity. Meanwhile, Montenegro's unilateral adoption of the euro in 2002 is now making it a more expensive destination, especially for the many Russians who have been the mainstays of the country's tourism and construction boom in previous years.

Stimulating tourism

Governments and tourism agencies recognise the need for drastic measures, but also see that to a great extent the situation is beyond their control. "Tourism and travelling are not the first priority for families who have other issues to worry about as a result of the crisis," says a spokesperson for the Cyprus Tourism Organisation.

Nevertheless, somewhat as with bank bailouts elsewhere, governments in the region have passed stimulus packages to boost their tourism industries. As well as launching unprecedented advertising campaigns (Croatia spent €28m on promotion in July alone), emergency measures include lowering value-added tax, reducing airport fees and scrapping supplementary hotel charges.

While the figures - and the corresponding shortfall in revenue for the economies - may appear forebidding, they are not necessarily a cause for panic, as the lull may have a positive aftereffect. "It's the paradox of thrift: people are less willing to spend, so they save much more," says Jon Levy, Europe analyst at Eurasia Group. "That isn't going to last for ever. If some people forgo their vacation this year, they'll be doubly in need of it next year."

More expensive tourist destinations that are feeling the pain can take solace in this fact, yet the larger question is where those tourists will decide to spend their next holiday. The crisis may cause a paradigm shift in the industry, whereby Turkey, Croatia and Bulgaria may emerge as net beneficiaries of the drive for thrift at the expense of places like Greece and Cyprus. So while this summer is a bit of a washout for Southeast Europe, sunnier times could be ahead.

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