Survey of Greek SMEs: Tourism (December 2020)

​Infrastructure upgrade is the key building block for Greece's new tourism model

Looking to the next summer season, tourism is front stage as the sector that has been hit hardest by the ongoing pandemic, with turnover at Greek hotels standing close to zero in the quarter April-June, while in the best two-month period of 2020 (Aug.-Sept.) it was down by around 60% (-35% for those hotels that actually opened for guests), versus an average drop of 12% across the rest of the business sector. In light of this gloomy picture, the demand of the sector is likely to record a year-on-year drop of about 75% (-80% international, and -45% domestic), leading to losses from tourism receipts of €15 billion for the Greek economy in 2020.

NBG's survey of Greek hotel SMEs focuses on the seriousness of the problem for island hotels, as well as their potential to deal with the new challenges. In particular, the high dependence of island hotels on international tourists who are seasonal and come from agencies is a source of risk, as witnessed in the summer months of this year. However, hotels on Greek islands also have the strongest defences against current challenges and are ready for the transition to a new tourism model. Specifically, they have relatively good financial health, capitalizing on the high tourism growth of the past decade, while they are already on a path of quality upgrade investments.

In addition, since the outbreak of the pandemic, new trends are emerging in the choice of tourist destinations, with health security and high-quality services now considered a priority (this is the main selection criterion for half the tourists in key countries of origin). In the context of likely tougher competition in the years ahead, this signals an opportunity for the country to lower its dependency on the model of mass tourism which is marked by strong seasonality and dependence on international travel agencies. The transformation of the industry requires a set of actions to enhance the overall quality of services:

• From an enterprise standpoint, strategic targeting is needed to boost the number of luxury hotels (4 or 5-star units account for 23% of hotels in Greece vs. an average of 65% in the Mediterranean), which can attract high-spending tourists, while they have performed better than lower ranking hotels. It is noteworthy that the upgrade trend is already evident, with the number of 5-star hotels doubling in the last decade.
• Furthermore, a critical factor for the sector's outlook is the need to address the longstanding issue of problematic connectivity of the islands with tourists' places of origin (this serves as a constraint for 60% of hotel SMEs). In particular, improvement of infrastructure at ports and airports is seen as the game-changer parameter for island hotel SMEs, thus agreeing with the conclusions of the tourism sector Growth Plan (Pissaridis Report, November 2020), where upgrade of infrastructures is identified as one of the key priorities for the future development of the sector.