Christopher Egleton is Executive Chairman of Minion Group Plc, a fast-growing AIM-listed Travel and Leisure company, which is in the process of developing a major new resort on the north eastern coast of Crete. He explains in more detail the challenges that Greek’s tourist sector faces but also the excellent opportunities for the sector as Greece returns to growth.
After six years of recession, Greece’s economy is finally showing signs of life. The EU is forecasting a welcome return to growth, of some 0.6% in GDP for 2014. One key contributor to the economic revival has been the travel and tourism industry. Tourist numbers are up and demand is growing again.
If Greece meets the 2021 target of 24 million tourists a year it would contribute significantly to GDP and create around 300,000 jobs. However, the tourism sector needs to overcome two key challenges, upgrading its infrastructure and attracting more high-end tourists, if the industry is to play a fuller role and help accelerate the country’s economic recovery.
The surge in Greece’s tourism sector this season surprised even industry experts. A total of 21 million tourists are expected to visit Greece this year, almost double the country’s population, and room revenue is already up substantially on last year. A large proportion of these visitors came and left within a period of 90 days, the peak holiday season.
However, while the number of holidaymakers coming to Greece has boomed, their spending has not. And hotels are full to capacity in the months July—September, but suffer a dearth of guests during the colder months.
17.9 million Tourists came to Greece in 2013, generating €13 billion in revenue. Yet spending per head was down 1.9% on the previous year. This year, the Association of Greek Tourism Enterprises (SETE) expects spending per head to show a ‘modest’ increase from 650 euros in 2013 to 700 this year. In 2000, by contrast, the average spend per capita was 813 euros.
In a recent report, Directions for Economic Recovery in Greece, laying down practical steps to accelerate Greece’s recovery, PwC Greece singles out tourism and infrastructure as the areas on which there should be greater focus. ‘These areas,’ the report says, ‘have the potential to increase national income through high economic multipliers.’ Tourism has a multiplier of 2x and will increase demand for an array of sectors, including restaurant and catering services, transport and construction industries.
For these multipliers to be generated, Greece would benefit from having more integrated resorts and specialised resorts – hotels and complexes based on thermal tourism or maritime tourism, for example, or which take advantage of their location in such a way as to offer unique attractions. It is by upgrading the quality of rooms and facilities, and offering particular attractions, that Greece’s holiday industry can attract more high-end tourists and help to boost their spending.
Already new hotels have been built and are being maintained by international management chains and the Greeks in turn are recognising the benefits of this foreign interest. Foreign capital is funding many of these developments: about half of the hotels and resorts planned are financed by foreign private-equity companies who are also looking at major residential developments where returns are high.
The Greek government’s decision in 2013 to grant residency to owners of property worth in excess of €250,000 has attracted further foreign investment from those keen for a point of entry into the European Union. Given that experts anticipate Greece will need to spend €3.3 billion annually to meet tourism targets, predominantly on infrastructure, the time is right for foreign public/private investment.
These luxury and residential holiday developments target the top end of the international tourism market, known as ‘ultra-high net worth individuals’ – individuals with a net worth of at least $30 million. This market is currently growing: the number of high network individuals has increased 6.3% since 2012 and has a combined wealth of $27.8 trillion.
At Minoan, we hope to set an example with our resort planned for the Cavo Sidero peninsula on Crete’s north eastern coastline. Our resort will include a number of small- to medium-sized hotels, each of which will fall into the five- and six-star category. The variety of facilities offered, including a heathland golf course, and the quality of accommodation, will ensure that the site attracts, among its clientele, the highest-paying tourists and visitors to Greece.
Our confidence in the project is based on its integration with the Cretan landscape and population. The golf course, cultural tours and other attractions fit in with our intention to create a resort which will function all year-round.
Our Cavo Sidero development is founded on principles of sustainability and generating income in the long-term. The project will create 1,200 sustainable jobs, and a further 500 during the construction period, making it a reliable employer and generator of revenues for the locality and for Greece. The resort aims to preserve the local landscape: while the site will take up 6000 acres, more than 90% of the space will be left in its natural state, and the resort will have a built footprint of only 0.5%.
Construction work should begin within the next twelve months, now that the project has been approved by the government’s Fast Track programme, which is intended to speed up approval of foreign direct investments considered as strategic projects of particular benefit to Greece.
As Greece’s future within the Eurozone looks more secure, the country must rebalance its tourism industry towards the luxury and residential holiday markets, whilst retaining its mass market appeal. If the industry can extend the holiday season by focusing on its cultural attractions as much as its excellent coasts, islands and beaches then it could play an even more important role in Greece’s gathering recovery.