Greek Culture

This time we’ll study the determinants of demand in tourism industry on the example of Greece. The general aspects we are going to inspect are income, price, exchange rate, transportation costs and geopolitical factors. The important question needs to be answered – is tourism the most dynamic sector of Greece’s economy contributing most to its gross national product and economic growth. Even though the demand for tourism in a very important sector in tourism economics, no so much attention were given to explore this area and to conduct a throughout research on it. This paper reviews and analyzes key factors that affect the demand for tourism in Greece from both positive and negative prospective. Investigating the demand for tourism is the background for the successful strategy planning in companies with tourism-related activities whereas better knowledge of demand in tourism can also be of assistance to policymakers in planning strategies for this industry. The demand of tourism can be determined either by the number of tourists coming from their countries to a destination country or by their expenditures in the destination country. It is difficult to model tourism demand because tourism involves a broad range of activities.

Tourism flows become more sensitive to number non-economic factors such as political stability, transportation costs and facilities, technological forces, socio-cultural issues, etc. in a country of destination. According to the World Tourism Organization Greece held the 16th place internationally on the list of tourist destinations in 2002, while 90% of arrivals were from Europe, which is considered to be Greece’s primary tourist market. According to Economist Intelligence Unit statistics the total number of arrivals in 2002 was closer to 12,7 mln tourists. Tourism represents about 10% of the domestic income of Greece (2003). Two-thirds of tourists are from the European Union (around 9 million), the majority of whom come from the U.K., Germany, Italy, France and Austria. Tourists from outside EU mainly are coming from the USA, Japan, Canada, Australia (WTO, 2003). Income and price factors play an important role in determining the demand for international tourism. Growth in real income provides consumers with increased spending power. As was mentioned before, main countries that are generating tourism flows for Greece are Germany, Austria, Great Britain, USA, Italy and France. Real income growth in those countries can be assumed to relate positively to real per capita demand for Greek tourism.

Another important variable here is the price of tourist services in Greece compared to relative prices in other Mediterranean destinations. The tourism sector meets an increasing competition in the face of other Mediterranean destinations like Turkey, Egypt, Tunisia and Morocco, as well as Spain and Portugal. Meanwhile the newly developed destinations like Slovenia, Croatia and Bulgaria also registered the increase of tourists compared with the previous years. This factor can affect the demand for tourism in Greece in terms of decreasing the number of international visitors who would choose the comparable sun and sea holidays at cheaper prices. Compared to last year euro had increased its exchange rate towards almost all major currencies. For travelers outside it becomes more expensive to visit tourist destinations that are in euro area. At the same time citizens of euro zone are stimulated to travel to European destinations outside it. Greece is isolated geographically from other European Union countries (where the majority if tourists comes from), therefore, the most popular transportation is airplane. The cost of transportation is one of the components of the final price the consumers have to pay for the tourism product. The high transportation costs can be the decisive variable in choosing whether to visit country or not and even may lead to substitution of a near or far destination.

Another factor that can influence demand is also the choice between domestic and foreign holidays which also comes up from the cost of transportation. The Iraq conflict and terrorist attacks caused and probably will continue to influence negatively a demand of air transportation, interregional travel and travel to destinations that are geographically close to the zone of conflict. The emergence of SARS also deceased the demand for tourism worldwide. Despite these events, Greece still managed a slight increase in total 2001-2002 traffic (GNTO Newsletter, 2003). Nevertheless, it is expected that demand for travel and tourism will continue to grow and Greece will continue to be a preferred tourist destination because of its safe, crime-free and tourist friendly environment. The distinctive feature of Greek tourism is that it has a seasonal attribute. Greek tourism had been based for more than five decades on the product of “sea and sun” and the majority of tourists arrive to Greece between mid-June and mid-September respectfully. Therefore, during the wintertime the demand for tourism significantly decreases. Official policy is to try to diversify to spread arrivals throughout the year by developing conference tourism, yachting, and golf, skiing in the mountainous area, spa and medical tourism.

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