Greece frets for tourist season

Bangulzai SG

Greece frets for tourist season

By Valentina Za and Renee Maltezou

ATHENS (Reuters) - Below Athens' lofty Acropolis, tavern-owners chase after potential customers strolling along the stone-paved alleys of Plaka past empty handicraft shops.

The season hasn't started, but the tourist industry is worried.

Holiday bookings -- mainly from Britain, Germany and, lately, also eastern Europe -- are already down about 15 to 20 percent from 2008, according to the Pan-Hellenic Federation of Tourism Enterprises (POET).

If recession-hit Europeans continue to stay away from Greece's sun-bleached islands, it would threaten a vital source of income in a country where unemployment, anger at political scandals and the government's weakness in the face of the global crisis already fuel almost daily street demonstrations.

Greece relies on tourism for about one in five jobs. Its conservative government is clinging to a one-seat majority and under pressure to do more to help even though its credit rating, recently cut by Standard and Poor's, put Greece one notch below Estonia.

"I've worked here for 15 years and never seen anything like this before," said Labros Pit, busy attracting passers-by to the tables of the popular Vizantino restaurant in Plaka.

Any visitors to Athens in early 2009 risked being turned away at the gates of the Acropolis, an ancient symbol of the classical spirit and civilisation, as culture ministry employees blockaded it to protest against job cuts and pay delays.

It's a stark contrast for Greece, which since it was discovered by the international jet set in the 1950s, has evolved into a European magnet for mass-market tourism, attracting 15 million or so visitors each year.

With $15.5 billion (10.6 billion pounds) in tourist receipts in 2007, the Mediterranean country was the 12th most popular international destination in the world, immediately following Turkey and Thailand, according to the World Tourism Organisation (UNWTO).

"Business is down, with the riots in Athens and the financial crisis," said Nikos Kalyvas, 55, smoking a cigarette in his rustic tavern, nested among Plaka's Greek specialty shops and elegant 19th-century houses painted in soft cream colours. "We are at least 30-40 percent down from last year."

The first test will be the Easter season, when coastal resorts traditionally reopen after the winter.

KEY FOR STABILITY

Hotels have slashed prices to counter the drop in arrivals, hoping wary consumers may be just deferring spending decisions.

"Our hopes are now pinned on last-minute bookings," said Nikos Papalexis, head of hoteliers in Peloponnese's Achaia, a southern region still recovering from ruinous wildfires in 2007.

Tourism and related services are the economy's main driver, worth about 44 billion euros per year or 18 percent of gross domestic product (GDP), according to the Greek tourism ministry.

The strength of the euro further darkens the picture, hampering Greece's competitiveness compared with neighbouring Turkey. Bookings from Britain, Greece's top feeder market, were down 18 percent at mid-March, said UK-based Ascent-MI, mirroring a similar drop in the pound's value against the single currency.

"We are seeing a 40 percent drop from last year," said Apostolos Karvelas, 50, sitting in his shop among the tiny lidded pots that he paints in the terracotta tones of ancient Greek pottery.

"This summer will be tough. Some shops may close down in the fall, because owners won't have money to pay rent."

Conservative estimates see a 5 percent fall in arrivals this year -- which think-tank ITEP said would mean the loss of 25,000 jobs from Greece's five million workforce and cut tourism's input to GDP by nearly one percentage point.

Others double those figures -- spelling further unemployment, which the European Commission sees at 9 percent in 2009 from a late 2008 level around 8 percent.

"The worst-case scenario would be a 10 percent drop in arrivals," said Gerasimos Fokas, chairman of the Greek Chamber of Hotels, pointing to a potential loss of 50,000 jobs.

Tourism is also being dented by near-daily outbreaks of extremist violence in the capital since riots shook the country in December, after the fatal police shooting of a teenager ignited discontent amid high youth unemployment.

With a budget deficit running at about 4 percent of GDP and a large current account gap due to poor competitiveness, the government has very little fiscal wiggle-room.

Greece's central bank expects the crisis to halt the country's economic expansion after years of growth at around 4 percent annually.

The government recently pledged funds to pay a subsidy to any hotels whose workforce at end-May has not changed from 2008.

It also introduced some tax breaks, although these did not go far enough for hoteliers, who complained that Greece's 9 percent hotel occupancy tax put them at a disadvantage to Spain -- where the rate is 7 percent and visitors reached 59 million in 2007, according to the UNWTO.

Spain is the world's second most popular tourist destination after France, which had nearly 82 million visitors in 2007.

Hotels may delay opening to save money, and hire less staff. In some cases discounts have already reached 30 percent.

"Particularly if you book now there are some incredible bargains. This year the goal is not to maximise profitability but to minimise any kind of losses," said George Drakopoulos of the Association of Greek Tourist Enterprises.

Businesses that took on loans in recent years to fund renovations or expansion are more likely to suffer and the Hellenic Association of Tourist and Travel Agencies said lenders had now turned their backs on tourist enterprises.

"Banks won't lend to us," said Karvelas. "Things are difficult in Greece. If I can't make ends meet this summer I see myself feeding pigeons on Syntagma Square." (Writing by Valentina Za; Editing by Sara Ledwith)