Article Financial Crisis Kapiki
Article Financial Crisis Kapiki
Article Financial Crisis Kapiki
19-30
Abstract
The hospitality and tourism sector is experiencing numerous challenges as a result of
the global economic crisis. After a significant contraction in 2009, tourism rebounded
strongly in 2010 and in 2011 the international tourist arrivals and receipts are
projected to increase substantially. The hospitality industry is expected to show a
sustained recovery in 2012. The crisis has particularly strong impact and negative
consequences in Greece. The country is undergoing a serious political crisis, as well,
and it seems that the forthcoming elections are the only solution for the restoration of
stability and social peace. In addition, tourism can be the driving force behind
Greece’s economic recovery. However, for its achievement the country’s policy
makers should take several measures towards restructuring and improving the sector.
These measures include: enhancement of alternative forms of tourism; environmental
protection; creation of quality infrastructure; and boost of competitiveness through a
tourism product that offers value for money.
Introduction
There is no universally accepted definition of what constitutes a crisis and different
writers present their own interpretations. However, it appears that three elements must
be present: a triggering event causing significant change or having the potential to
cause significant change; the perceived inability to cope with this change; and a threat
to the existence of organizations (Keown-McMullan, 1997), as well as of tourists and
members of the tourism industry (Henderson, 2006). Every crisis is unique displaying
a remarkable range and variety (Henderson, 2006), yet characteristics generally cited
include unexpectedness, urgency and danger (Hermann, 1972). Tourism crises usually
share these attributes although certain crisis situations can be predicted and lack
immediacy.
Causes of many tourism crises can be traced to developments in the economic,
political, sociocultural and environmental domains which affect demand and supply in
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
representing a growth of 5 to 6 % over 2009; they are expected to return to the long-
term average of 4 % in 2011. The World Travel & Tourism Council (WTTC)
estimates that, from direct and indirect activities combined, the T&T sector now
accounts for 9,2 % of global GDP, 4,8 % of world exports and 9,2 % of world
investment, returning to the position it held before the crisis.
During the downturn, travellers became less engaged with the traditional sun-and-
beach destination brands and looked instead for the best value in a two-hour flight
range. This has fuelled growth along the cheaper Mediterranean countries (e.g.
Tunisia and Egypt) and left euro zone countries such as Spain, Greece, and Portugal
coping with declining tourism traffic (World Economic Forum, 2011).
However, the political turmoil in the Middle East and North Africa at the end of
2010 and in the first months of 2011 has limited the tourism business sharply. As of
mid May, 2011 tourist arrivals have declined sharply in Bahrain, Egypt, Jordan, Syria
and Tunisia. According to the World Travel and Tourism Council, first quarter tourist
arrivals in Egypt and Tunisia were off about 45% compared with the respective period
of 2010.
Of course some of these tourist arrivals and tourism spending will show up as an
increase in tourism in other countries — although for the moment data do not indicate
which developing countries might be the most significant beneficiaries (World Bank,
June 2011).
The table 1 shows the evolution of basic figures and performance indicators of the
Greek tourism for the years 2007, 2008, 2009 and 2010 (period of the global
economic crisis).
Table 1. Basic Figures of Greek Tourism for the Years 2007, 2008, 2009 & 2010
Basic Figures & YEAR
Performance Indicators 2007 2008 2009 2010
FIGURES
The above figures reveal that 2008 was a good year for the Greek tourism as it
concerns the international tourism receipts (the highest tourism receipts Greece ever
had) and the average per capita expenditure. Nevertheless, during the next two years
(2009 and 2010) the impact of economic crisis on the Greek tourism figures is evident
and resulted in the following negative rates:
The figure 1 and table 2 below show the evolution of the turnover index in the
Greek tourism sector for the period 2005-2010.
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
Figure 1. Evolution of the Turnover Index in the Greek Tourism Sector (Base
Year: 2005=100,0)
110,4 113,9
120 103,7 103,6
100 95,1 2005
100 2006
80 2007
Percentage
2008
60
2009
40
2010
20
0
Year
Table 2. Evolution of the Turnover Index in the Greek Tourism Sector (Base
Year: 2005=100)
YEAR INDEX YEAR ON YEAR
GROWTH RATES (%)
2005 100 -
2006 103,7 3,7
2007 110,4 6,5
2008 113,9 3,2
2009 103,6 -9,1
2010 95,1 -8,2
Source: Adapted from Hellenic Statistical Authority, 2011
Explanatory notes: the compilation of the turnover indices in the tourism sector
comprises enterprises with year turnovers equal to or higher than 250.000 euros,
represented by a sample of 158 enterprises. The turnover index in tourism sector
covers the country total, for the “Accommodation and Food Service Activities”
(Hellenic Statistical Authority, 2011).
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
The data above indicate that the turnover index in the tourism sector decreased by
9,1% in 2009 compared to 2008 and by 8,2% in 2010 compared to 2009.
Greece is ranked 21st in Europe and 29th overall, in the Travel & Tourism
Competitiveness Index rankings 2011, down by five positions since 2009 (World
Economic Forum, September 2011).
So far (November 2011), the tourism industry strengthened both in number of
foreign arrivals and in terms of RevPAR (http://www.traveldailynews.com/), as well
as of hotel occupancy development related to 2010 (European Tourism: Trends &
Prospects, Q3/2011). Taking into account the serious recession Greece is facing
nowadays, these developments are quite encouraging.
Tourism and politics have a close relationship in which domestic and international
political conditions and developments shape tourism flows and environment in which
the industry operates. Tourism also impacts on political structures and processes and
it is a policy making area of importance to most governments which seek to fully
exploit the economic opportunities, as well as the social and political uses it affords.
However, government actions, ideologies and political events are capable of
triggering a range of crises and political instability in a common catalyst (Sian, 2009).
It is well known that apart from the economic crisis, Greece is also undergoing a
serious political crisis. The combination of the economic and political crisis creates
an explosive mixture and the legitimacy of the political system is seriously
questioned, as a significant part of the population identifies a democratic deficit in the
management of the crisis and is confronted with a worrying image for the future
(Lyrintzis, 2011).
The Greek political system is considered very fragile at the moment and it seems
that the only way out of the crisis is the forthcoming elections which are expected to
bring back stability, optimism, prosperity and social peace to the country.
And as a nation moves into reconciliation with peace and stability beginning to
take root, tourism can provide a method to explore the healing process, rebuild
societies and reconnect nations or cultures that were separated through conflict (Levy
& Hawkins, 2010).
History has shown that Greece will manage to survive and the country will be able
to make its way out of the deep economic and political crisis.
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
The Study
Study into the Impact of Economic Downturn on the 5 Star Hotels of Thessaloniki
The study intended to identify the impact of the financial crisis on the 5 star hotels
of Thessaloniki, Greece and how the annual occupancy rate, arrivals and overnight
stays, as well as daily room rate, profitability and operating costs were affected.
1
Thessaloniki is a historical and cultural city in North Greece. It is the second largest city in Greece
and tourism is one of the city’s major assets.
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
o In the majority of the hotel sample the operating costs have increased. The
increase is mainly due to the rising prices of oil, electricity and labour costs.
o Most hotels did not make any, or, made some light investments over the last
years, such as facilities improvement; advertising; staff recruiting and training;
and collaborations with other bodies.
The main lesson that emerged from our survey is that the Greek hoteliers can
survive a recession, by offering qualitative services, by preparing careful plans
focused on guest and employee satisfaction, and by implementing a consistent pricing
policy as well as an effective revenue management.
Conclusions
We live in an era characterized by a very serious economic crisis that began in
the U.S. in 2007 and the continuous efforts made nationally and internationally to
overcome this crisis.
As a result of the global economic crisis, the hospitality and tourism industry
experienced a serious downturn in sales and profitability, especially during 2009.
In 2010, tourism rebounded strongly and in 2011 the international tourist arrivals
and receipts are projected to increase substantially.
Hotels in most parts of the world have experienced drops in occupancy, average
daily rate and revenue per available room. The drop in demand has shifted
considerable pricing power to the customer. Nevertheless, the luxury hotels are
less susceptible to the financial crisis due to the fact that the number of guests
able to afford luxury accommodations has risen dramatically over the past few
years.
The hospitality industry is expected to show a sustained recovery in 2012 and a
return to pre-financial crisis levels in terms of room rates. “Being Green” is seen
as important for increasing brand value and the use of energy-efficient materials
is widely adopted.
The crisis has particularly strong impact and negative consequences in certain
countries. One of these countries is Greece, in which the gross domestic product
(GDP) has declined by 7,3%, the foreign debt is 182,2% of the GDP,
unemployment has soared to 16,3% and wages of civil servants have been
decreased by 30-40%. Moreover, apart from the economic crisis, Greece is
undergoing a serious political crisis.
Central European Review of Economics and Finance, Vol. 2. No 1 (2012) pp. 19-30
Tourism can be the driving force behind Greece’s economic recovery. Tourism
brings in revenues and means more jobs. For these reasons, several measures
aiming to restructure, improve and boost the Greek tourism should be taken by
the country’s policy makers. These measures include: enhancement of alternative
forms of tourism, like agro tourism and religious tourism to encourage visitors to
come all year round; protection and management of the environment; creation of
quality infrastructure; development of synergies with other sectors and branches
of the economy; boost of competitiveness through a tourism product that offers
quality and value for money. Moreover, tourism can become the Greek
government’s tool, in the effort to achieve its social and environmental policy
targets.
References
Levy, E.S. & Hawkins, E.D (2010). Peace Through Tourism: Commerce Based
Principles and Practices. Journal of Business Ethics, 89:569–585 DOI
10.1007/s 10551-010-0408-2, Springer
LTC news (2011). Research GBR Consulting (in Greek). Retrieved October 20, 2011,
from http://www.ltcnews.gr/epikairotita/perifereia/erevna-gbr-consulting-
etimi-na-episkeftoun-xana-ti-thessaloniki-i-touristes/
Lyrintzis, C. (2011). Greek Politics in the Era of Economic Crisis: Reassessing
Causes and Effects. GreeSE Paper No 45, March 2011
Melvin, M. & Taylor, P.M. (2009). The global financial crisis: Causes, threats and
opportunities. Introduction and overview, Journal of International Money
and Finance 28, 1243–1245, Elsevier
Pforr, C. & Hosie, P. (2009). Crisis Management in the Tourism Industry (Eds.).
Ashgate, UK
Pizam, A. (2009). The global financial crisis and its impact on the hospitality
industry. International Journal of Hospitality Management, 28, 301
Ritchie, W.B (2009). Crisis and Disaster Management for Tourism. Channel View
Publications, UK
Sian, T.L., Subramonian, H., Tung, L., San, W.H., Hui, K., Kulampalil, T. (2009).
Fundamentals of Hospitality and Tourism Management, Open University of
Malaysia. Retrieved October 28, 2011
The World Bank ((2011). High and rising commodity prices imply varied terms of
trade effects across developing countries. Retrieved November 3, 2011, from
http://go.worldbank.org/MVZZUT9OJ0
Travel Daily News International (July 2011). The Greek tourism industry as a whole
strengthened in 2011. Retrieved November 1, 2011, from
http://www.traveldailynews.com/
UN World Tourism Organization, http://www.unwto.org/ (accessed 4 November
2011)
UNWTO (2010). International Tourism on Track for a Rebound after an
Exceptionally Challenging 2009. Retrieved November 1, 2011, from
http://www.unwto.org/media/news/en/press_det.php?id=5361
World Travel & Tourism Council, March 2011, http://www.wttc.org/ (accessed 29
October 2011).