Filenews 18 June 2022 - by Adamos Adamou
A positive sign, both in tourist arrivals and in revenues from tourism, is expected compared to last year, further considering that the situation is such that no massive closures of businesses in the sector should be expected this year.
The estimates of the Fiscal Board (BoD) are recorded in its interim report, published on Thursday, in which there is a separate annex on tourism. Specifically, the Board of Directors, although it recognizes that safe predictions... are precarious, it says, however, that, based on qualitative analyses, information from competent authorities and economic operators and older statistics, high booking rates are recorded compared to 2020, "with initial estimates converging towards the conclusion that the year will move better than 2021, in spite of the losses in demand from the Russian and Ukrainian markets."
It records, however, in turn, as does the Deputy Ministry of Tourism, that the losses resulting from the Russian and Ukrainian markets will be impossible to cover and limits their replacement to a maximum of 30%, as a result of high inflation abroad. "While quantitatively the replacement of the loss of arrivals from Russia and Ukraine could potentially exceed 30% compared to the 'normal' years preceding the pandemic, we expect that the actual replenishment will remain below potential, for a number of reasons, including the high pressures on markets such as the British one, where macroeconomic forecasts are currently negative to encourage a broad tourist flow, in defiance of the declared unsatisfied demand after the lifting of the measures against the pandemic," he says in his report. As far as the formation of new routes is concerned, according to the Board of Directors, this is a significant positive development and is recorded as a significant success, which Cyprus will be able to capitalize on in the coming years, as the routes mature and the demand from the secondary markets of Cyprus is consolidated. "The new routes from Great Britain, Israel, Eastern Europe and France are more an investment for future benefits than an immediate solution to the problems and it would be legitimate to treat them as such," he notes.
Revenue moderation
As the Board estimates, inflationary pressures in Cypriot tourism markets will keep tourism revenues in addition to making up for losses from Russia. However, it is estimated, as has been said, that these, too, will be closed on a positive note. "Apart from the cancellations, the increased pressures on inflation and growth in the countries of origin are expected to cause a decrease, both in the average length of stay and in the per capita and daily expenditure of tourists," he says. It is reported, however, that it is a cautious estimate that tourism revenues will move higher by 2023. He also recalls that his assessment is also in line with the estimates of the Ministry of Finance, as these are recorded in the Stability Programme. He further says that the estimate of the Deputy Ministry of Tourism for direct revenues of the order of €1.7 billion euros is not judged to be excessive.
We note that last year the revenue from tourism was limited to €1.5 billion. In 2020, due to the pandemic, revenue was only €392 million, while in 2019, the record year for tourism, this had risen to €2.6 billion. Tourist arrivals last year amounted to 1,936,931, compared to 631,609 in the corresponding period of 2020, marking an increase of 206.7% and a decrease of 51.3% compared to 2019 (3,976,777 arrivals). Based on estimates, however, for a better tourism year this year, the Board does not expect massive business failures in the tourism industry, despite the fact that this year's pressures follow two years of reduced revenues. "The monitoring of the uncertainties and general data relating to the sector's obligations justify the assessment that the financial endurance remains capable of overtaking, in general, the difficulties of 2022," he adds. He adds, however, that generalized loan restructurings have already taken place preventively in 2020 and 2021, resulting in new moves to facilitate the servicing of the debt of hotel units entailing the formation of NPLs. "This phenomenon is expected to be recorded, but to an extent that will not be a generalized problem for the tourism industry or the financial system," he concludes.
Intervention of the Fiscal Board and for fuel prices
A noteworthy intervention of the Board of Directors is also the references to fuels, with which it implicitly but clearly makes recommendations to the oil companies. In particular, it notes that fare prices in air navigation have not yet increased due, he says, to the prudent management of fuel reserves carried out by aviation companies before the start of the war in Ukraine. In his note on this, he characteristically mentions that "the management of fuel reserves by air transport companies is noted as an example to be emulated for Cypriot oil companies, but mainly for final fuel consumers" and that "the timely purchase of goods for the future remains a common international practice, which is not used for reasons that remain unclear".
