Cyprus Faces Myriad of Challenges to Sustain Tourism Growth

Cyprus Faces Myriad of Challenges to Sustain Tourism Growth

In the past few years, Cyprus had a few tough years because of COVID-19, losing important markets like Russia and Israel, and dealing with worldwide economic issues. 

Now, the tourism industry in Cyprus needs to work hard to get back to how successful it was before all these problems happened.

Tourist arrivals dip in January

In January 2024, Cyprus saw a 2.9% decrease in the number of tourists visiting from other countries compared to the same time last year. This marks the first decline since March 2021.

According to data from the Cyprus Statistical Service (Cystat), 87,961 people visited the island last month. This number is a bit lower compared to the 90,549 visitors in January 2023.

The United Kingdom, Poland, and Greece remained the top source markets. Over 60% of visitors came for a vacation, while 21.2% arrived to see friends and relatives, and 17.2% traveled for business.

Simultaneously, 153,499 Cyprus residents returned from abroad in January, a 12.3% increase over last year.

The top destinations for locals were Greece, the UK, Poland, and Russia.

Tourism leadership pushes for EU support of island economies

In a meeting with European Union (EU) tourism ministers, Cyprus’ Deputy Minister of Tourism Kostas Koumis stressed the need for specific assistance for island destinations.

He proposed establishing a digital goal for all of Europe: to address the lack of workers in the tourism field by connecting employers with potential employees.

Koumis wants to encourage tourism businesses to be greener by offering rewards for using eco-friendly practices.

However, he contended that EU policies must align more closely with tourism industries across the bloc.

The deputy minister also proposed more collaboration between European universities and vocational training institutes to enhance the skills of the workforce.

He felt that a standardized EU recruitment platform would enable smoother hiring across borders.

Economic strife, geopolitics threaten tourism rebound

According to the Cyprus Hotel Association (Pasyxe), it is going to be challenging to meet the tourism goals set for 2023 because of uncertain global finances and conflicts in the region.

Pasyxe General Director Philokypros Roussounidis mentioned that there has been a recent drop in bookings. This is because of the economic problems in Central Europe and the conflicts between Israel and some militant groups.

He hopes to limit declines compared to last year.

Roussounidis thought that the industry would settle down but mentioned that reaching the same level of performance as in 2023 might be difficult.

He stressed that even with back-to-back challenges such as COVID-19, expensive energy, inflation, and higher interest rates, tourism has shown it can bounce back and stay strong.

Pasyxe’s main focus remains that there is enough staff, although Roussounidis maintained that it needs more help from the government to attract workers.

Tourism ministry denies steep drop in visitors this year

Responding to a warning of 500,000 fewer arrivals from the Association of Cyprus Tourist Enterprises (Stek), Deputy Minister Kostas Koumis said that losses will be limited thanks to countermeasures by his ministry.

Stek highlighted potential issues like the loss of the Israeli market due to conflict and a global airline industry crisis grounding planes. Koumis conceded these factors will significantly impact Cyprus’ tourism.

Still, he assured that steps have been taken to minimize the damage, which should fall short of half a million missing visitors. The ministry continues negotiating with carriers to add flights and capacity.

Other headwinds noted by Koumis were Germany’s recession, the UK’s contracting economy, and supply chain turmoil hurting maritime shipping critical for tourism.

Per Cystat, tourist arrivals already declined 2.9% last month, breaking a nearly three-year growth streak. If prolonged, it would further hinder the recovery.

Widening gap between arrivals and hotel stays worries sector

Despite receiving over four million visitors in 2023, a record high, more tourists are opting to lodge in short-term rentals or Northern Cyprus instead of licensed hotels, the Cyprus Hotel Association (Pasyxe) claimed.

Pasyxe President Thanos Michaelides pointed out that the increasing difference between the number of people coming in and the rooms being filled shows that there is unfair competition from rentals who are not following the rules and are not paying taxes.

He estimated that the number of tourists going to the part of Cyprus controlled by Turkey has risen to 8% of all arrivals, which is twice the previous assumption. Hotels there follow different rules, enabling lower costs.

High rental prices, mainly caused by short-term rentals like Airbnb, make it hard for people who live in the area to afford housing. This leads to a housing shortage and creates societal pressure, according to Michaelides.

He suggested copying legislative fixes other destinations have introduced.

Green transition investments ‘beyond reach’

Michaelides emphasized the importance of upgrading Cyprus’ old hotels to meet upcoming environmental standards set by the EU.

This means massive spending will be needed for these upgrades, but hotel owners cannot afford it, and they cannot just charge the guests more to cover the costs.

He cautioned that the required investments, such as cutting emissions and making energy-saving upgrades, are more than what most hotel owners can afford right now.

Michaelides explained that Cyprus holidays are more expensive because the airfares to the country are higher compared to other similar destinations. The remote island lacks mainland Europe’s transport links.

Therefore, hotels require support from the government in the form of technical guidance and financial incentives to slowly move towards the sustainability goals set by the EU.

Tourism revenues up but profits hit by costs

In 2023, tourism earnings bounced back to where it was before COVID-19 hit. However, the amount of money spent to run businesses and the interest rates on loans went up. 

This made it harder for companies to make as much profit as they did in 2022 and 2019, according to Michaelides.

Michaelides attributed last year's record income to inflation and pent-up post-lockdown travel demand. However, he cautioned against over-celebrating top-line growth when bottom-line profitability declined.

He advised stakeholders to seek new source markets to decrease reliance on the UK, Russia, and Israel.

Incentives for beach upgrades

The Tourism Ministry has rolled out a new program for 2024 aimed at encouraging local authorities to enhance the quality of beach infrastructure.

Noting Cyprus’ coastline as a standout attraction, the ministry said that beaches rank amongst Europe’s best. It serves as the national coordinator for Blue Flag certification.

Municipal and community councils have the opportunity to request funding until March 29th. This funding can be used to buy amenities like umbrellas, walkways, waste bins, and wheelchair-friendly facilities.

The ministry referenced its Tourism Strategy 2030 which envisions sustainable development of beaches. It already collaborates on reducing seashore plastic pollution.

Tourism woes could influence travel, immigration policies

With Cyprus aiming to be a part of the Schengen Area, changes in visitor numbers may influence EU debates regarding the incoming European Travel Information and Authorization System (ETIAS).

The ETIAS visa waiver program starting in mid-2025 requires pre-screening of visitors from over 60 countries.

Decreases in tourism might make EU countries adjust the rules or how they enforce them for important economic areas such as hospitality.

If trips to Cyprus sharply fall, calls may rise to recalibrate ETIAS to drive demand through eased requirements. This could enable more visa-free entries from source markets or quicker approvals.

Any changes made to immigration policies to make up for the decrease in tourism by allowing more people to enter the country would affect travelers who are registered with ETIAS and planning to visit other Schengen countries in the future.

Shifting rules unlikely to attract more EU immigrants

Considering that Cyprus depends significantly on tourists from the UK and Russia who usually do not require residency permits, changing immigration rules might not greatly impact the number of EU visitors staying long-term.

Lowering investment thresholds to appeal to more EU investors and high-net-worth individuals could help soften the blow of decreasing tourism income. However, other Mediterranean hotspots offer similar programs so competitive gains appear marginal.

Similarly, Cyprus is already seen as a cost-effective choice for digital nomads and students compared to other available options within the bloc.

Still, improving visa processes and making it easier for people to work remotely could attract more young workers.

However, the large amount of money lost from tourism suggests it might be better to concentrate on getting tourists back from important countries like the UK, Israel, and Russia instead of spending time changing immigration rules in the EU.

Plotting Cyprus tourism’s next chapter

Cyprus’ tourism industry bounced strongly after COVID-19, but it is still dealing with some major issues.

These include losing important tourist markets, the effects of climate change, labor shortages, conflicts between countries, and prices going up in different sectors.

With travelers spoilt for choice post-pandemic, competition is fierce to attract high-spending visitors.

The island nation possesses inherent advantages yet must continually enhance its tourism offering while ensuring sustainable, equitable growth.

The sector’s post-COVID resilience will be tested again. It is highly important for European institutions to help out and for public and private groups to work together closely to fix the industry that is struggling with the crisis.