THE IMPACT OF ECONOMIC CRISIS ON TOURISM: A CASE STUDY OF GREECE

The Impact Of Economic Crisis On Tourism: A Case Study Of Greece

The Impact of Economic Crisis on Tourism: A Case Study of Greece

Introduction

Given the natural, cultural and human resource endowments of the country, tourism has been identified as a sunrise and globally competitive industry by the national government. An agglomeration of service-oriented industries, tourism is a major contributor to economic growth and development. The Greece tourism industry ranked second to electronics and semiconductors in export revenue generation. According to the World Travel and Tourism Council, Greece tourism contributed 9.1 percent to the gross domestic product and generated 3 million jobs directly and indirectly (10.6% of national employment) in 2008. (Association of European Airlines, Online)

Worldwide, tourism's power to reduce poverty is threatened by the current crisis. In 2008, global tourism's growth slowed down to 1.5%. For 2009, the World Tourism Organization (WTO) projected that growth will range from -2% to 0%. How has the crisis affected Greece tourism? Is the industry vulnerable to the crisis due to the contraction in demand? Or is it in a better state to absorb the impact of the global economic crunch? (Carr, W. and Kemmis, S. 2006, 126-5156)

I.Rationale of study

The volume of international arrivals (3.145 million) grew by only 1.5 percent in 2008 after posting relatively high growth from 2005 to 2007. Receipts dipped to US$4.4 billion (bn) in 2008, 11.1% lower than the earnings in 2007.

The slower growth in 2008 was due to the significant decline in arrivals from Korea, Japan and the US during the 4th quarter of the year. The traditional tourism generating powerhouses of Japan and South Korea are facing painful economic problems. Data for the first quarter of 2009 are not yet available at the time the report (and this summary) was prepared. (Carr, W. and Kemmis, S. 2006, 126-5156) Assuming all else constant, the contraction in outbound travel of our main volume-generating markets will reduce our income potentials from international tourism. The Department of Tourism projected that growth in arrivals will only range between 0% to 0.5% in 2009.

Top 12 Tourism Markets of the Greece and their Economic Performance

Country

Arrivals

GDP Growth

2008

% Share to Total

Growth (%)

2008

2009f

2010f

2011f

Korea

611,629

19.48

-6.38

4.3

-2.8

0.1

4.4

USA

578,246

18.42

-0.13

1.4

-2.0

0.6

1.5

Japan

359,306

11.44

-9.04

0.7

-3.8

-0.1

1.0

China

163,689

5.21

3.86

9.8

6.0

7.2

8.2

Australia

121,514

3.87

8.05

2.1

-1.2

0.5

1.2

Taiwan

118,782

3.78

5.86

1.7

-3.5

1.1

4.3

Hong Kong

116,653

3.72

4.20

2.8

-4.7

0.2

3.1

Canada

102,381

3.26

12.13

0.5

-2.2

0.7

1.9

Singapore

100,177

3.19

6.56

3.0

-7.2

1.8

2.9

United Kingdom

87,422

2.78

9.73

0.7

-3.8

-1.1

0.7

Malaysia

69,676

2.22

6.06

5.5

-0.3

2.8

5.1

Germany

55,303

1.76

-1.06

1.3

-5.3

-0.8

1.3

Sources: Greece's Department of Tourism; Euromonitor International; Economist Intelligence Unit

Among the providers, the most vulnerable to the global tourism slowdown is the international airline sector which carries 98% of international arrivals to the Greece. About half of international inbound passengers are tourists and the rest are returning Greece residents (e.g. tourists and Overseas Greece Workers). (Association of European Airlines, Online)In March 2009, the International Air Transport Association (IATA) revised (downward) its forecasts for passenger and cargo services and airline revenues for the global airline industry. Cargo traffic is expected to fall 13%, passenger traffic by 5.7% and airline revenues to decline by 12% or $63 billion.

In the Greece, these vulnerabilities have been evident in the reduction of flights (with the exemption of Middle East carriers), decline in passenger volumes and ...