Greece and its surrounding islands in the Aegean, Ionian and Mediterranean seas, including the Greek-influenced part of Cyprus, have experienced a remarkable recovery from the pandemic, fueled by a surge in inbound tourism, though the trend remains uneven across the region.
Cyprus, especially, and some Greek resort markets traditionally have relied on visitors from post-Soviet countries and so far have yet to see the hospitality industry fully bounce back.
However, Greek hotels appear to have outperformed industry forecasts.
A survey conducted by the Bank of Greece showed the country enjoyed a 74.7% surge in international visitor arrivals in the first quarter of 2023 compared with the previous year. Hotel revenue shot up over the same period by an impressive 28.6%, with Athens and Thessaloniki leading the way.
Nikos Voulgaridis, owner of hotel Kókkini Porta Rossa on the island of Rhodes, said it would be wrong to see this year’s growth as post-pandemic recovery since for many hotels the operational performance had already reached 2019 levels last year.
“We have recovered from the COVID-19 impact, though there are some differences in the demographics of our clientele, and the fact that reservations are placed later than in the years before,” Voulgaridis said.
He added in 2023, hoteliers expected the key performance indicators to exceed last year’s numbers by approximately 20%.
From January through May 2023, Greek hotels saw occupancy climb to 57.8%, according to STR, CoStar's hospitality analytics division. During the same period in 2022, Greece's hotel occupancy was 44.4%, and in 2019, it was 59.9%. Cyprus is doing even better, with average occupancy for the first five months of 2023 reaching 60.6%, compared with 47.3% in 2022 and 52% in 2019 for the same period.
Average daily rate reached €156.16 ($170.54) in Greece, compared with €130 in 2022 and €111.53 in 2019. The trend was similar in Cyprus, with ADR rising to an average €208.35 across January to May 2023, up from €202.17 for the first five months of 2022 and €145.61 for the same period in 2019.
Revenue per available room for the same period was €90.31 in Greece and €126.20 in Cyprus, against €57.50 and €95.69, respectively, in 2022. RevPAR for the months January to May 2019 amounted to €66.83 in Greece and €75.76 in Cyprus.
Other hoteliers in Greece are also upbeat.
Viktoria Kouchianitze, reservations manager of the Halkidiki-based Potidea Palace Hotel, said 2022 was the best year ever for the hotel, with guests making every effort to enjoy vacation time following the lengthy pause during the pandemic.
Beyond the Curve
While the overall Greek region appears healthy tourism-wise, not all Greek markets are benefiting equally.
Voulgaridis said that the lack of visitors from post-Soviet countries has particularly affected northern Greece, which over the past 15 years had become a clear “a Russian tourist market.” Most other resorts managed to fill the gap, attracting visitors from other feeder markets, including the U.S.
Feeder markets that have suffered an impact from Russia’s invasion of Ukraine and resultant economic effects, including Russia, Ukraine and Poland, contributed to approximately 9% of Greece’s overnight stays in 2019, said Ana Ivanovic, executive vice president and head of Spain, hotel transactions and capital markets at business advisory JLL.
“The interruption of tourist flows from these markets has had a limited impact on the performance of the Greek hotel market, as evidenced by the number of arrivals and trading performance in 2022,” Ivanovic said, adding the Russia-Ukraine conflict could affect Greek market fundamentals in a more indirect way through changes in spending patterns from key source markets.
Economic headwinds in feeder markets include interest-rate hikes, record-high inflation and rising energy costs.
A lack of visitors from the post-Soviet space has also largely derailed the hospitality industry's rebound in Cyprus, said Vassos Kilanis, general manager of the St. Raphael Resort & Marina Hotel in Limassol.
Kilanis said the expectation for 2022 was for it to be a year of recovery, just like in other popular summer destinations. Fortunately, an international tourism frenzy and pent-up demand delivered a great summer of 2022 for Cyprus hotels.
But Kilanis said the Russian invasion has dented visitor numbers from traditional source markets.
“[When] the war in Ukraine broke out, we lost 60% of our expected tourism both as a hotel and in general in Cyprus. As such, we had to focus on other feeder markets, including Europe, the Middle East and the United Kingdom. The overall year ended well. We partially recovered but not as much as expected,” he said.
The lack of tourists from Russia, Ukraine and Belarus is likely to keep weighing on the Cypriot hospitality sector, Kilanis said.
He said a rise in operational costs and the general cost-of-living crisis in Europe will add further pressure.
“This year is likely to be more challenging than 2022, as the travel rush has already largely wound down, and fewer people can afford to embark on a journey overseas,” he said.
Remote Labor
JLL’s Ivanovic said the Greek hotel market has recovered demand in the past two years.
“During summer season 2022, we have observed strong demand recovery. 2022 arrivals for key resort destinations in Greece were only 2% below 2019 levels, while performance has bounced back,” she said.
Stronger-than-expected demand recovery has caused significant operational and labor challenges in the tourism industry, she added. One challenge is the high seasonality of Greek resort destinations, which often leads to the full closure of properties during low seasons.
She added the nature of labor contracts in these properties tends to be more flexible and subject to fluctuations in occupancy levels, making it less attractive to employees.
“Furthermore, the widespread adoption of hybrid and remote-work models has resulted in stronger demand during low season and an increase in the average length of stay, known as ‘workcations.’ The country’s attractive trading fundamentals are not going unnoticed by major international hotel brands, a great number of which have announced their arrival to some of the most famous leisure destinations in [Greece],” Ivanovic said, listing new hotel-brand entries such as Nobu in Santorini, Angsana in Corfu and Mandarin Oriental in Costa Navarino as a few examples.
Greece's tourism sector might be short of 80,000 employees, with country hospitality unions reaching out via international agreements with Bangladesh, Egypt, Pakistan and Syria, albeit with low success so far.
Ivanovic said further hotel and resort upgrades in seasonal destinations will play a large part in maintaining occupancy, as will fluctuations in guests’ disposable income.