Spain's loss is Cyprus' gain. The rising cost of accommodations in traditional European destinations is pushing travelers to other Mediterranean options—the island of Cyprus among them, where the tourism boom and economic recovery is both boosting room rates and driving hotel renovations.
And while this could be good for Cypriot hoteliers, the price increases also threaten to put the destination’s reputation for value at risk.
Tourism and hospitality company Thomas Cook Group is reporting “strong demand” for Cyprus. “Bookings to Greece and Cyprus are up significantly, following a strong summer,” Thomas Cook CEO Peter Fankhauser said, adding that the group continued to see strong demand into the winter season.
The company, Fankhauser said, was looking to drive demand beyond Spain, which was seeing margins under pressure. He told analysts that British travelers were paying 4 percent more this winter in Spain than a year ago, while average selling prices for next summer were up 6 percent. This was attributed to “input cost inflation,” made worse by the parlous state of the pound against the euro. (Across Thomas Cook, full-year gross margin fell 1.3 percentage points to 22.1 percent.)
Supply & Demand
The attraction of Cyprus to the under-pressure Brits has already taken effect, with the number of UK tourists up 6.4 percent on last year’s total of 1.1 million by October, with global arrivals up 6.9 percent to 3.4 million, according to the Cyprus Tourism Organization.
The CTO warned that despite the rise in visitors, Cyprus was facing a fall in the amount spent per visitor. As such, the CTO announced a plan to work more closely with the tour operators to drive demand. “We have managed to convince you that we are a reliable destination to help you achieve good financial performance and high level of customer satisfaction,” CTO chairman Angelos Loizou told a gathering of industry players in Limassol last week.
Loizou added that there was a rise in demand for hotels, with supply having fallen from almost 97,000 rooms in 2004 to 85,000 in 2017, with the accommodation mix moving in favor of the higher-star categories, with the three- to five-star hotel beds share increasing from 49 percent in 2004 to 58 percent in 2017 (while the respective four star to five share grew from 32 percent to 40 percent). A number of hotels were currently under construction, increasing the total bed capacity to around 100,000.
A government incentive scheme has also meant that a several hotels are currently being upgraded.
The recovery in the country’s economy, which saw GDP rise 3.9 percent in the third quarter (according to the republic’s statistical service), is also helping to push up property prices, led by Limassol. The RICS Cyprus Property Price Index reported a 3.8-percent increase in the price of apartments and houses on the year in the first quarter, with holiday apartments in the capital up 4.2 percent.
The increase was explained in part by a shortage of housing, exacerbated by companies attracting additional staff to the capital, many of whom found themselves housed in hotels while suitable housing was sought. With prices and demand rising, how long will it be until Cyprus no longer looks like Spain’s cheap cousin?
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.