The impact of Greece’s debt crisis on the tourism and hospitality industries
Greece entered almost a decade of difficulty, beginning in 2009 with the financial struggles that led to multiple loans and bailouts from fellow European countries. The subsequent austerity measures caused unrest and political difficulties, but what effect did the debt crisis in Greece have on tourism and hospitality?
We analyzed hotel performance, openings and closures during the country’s struggles, and whether Greece's famous hospitality could sustain tourist arrivals during this period of instability.
2009 – Greece’s credit rating is downgraded
Three leading agencies downgraded Greece’s credit rating in December 2009 amid fears that the government would default on its growing debt. As a result, Prime Minister George Papandreou announced spending cuts that the EU believed would be crucial in preventing complete financial crisis and eventual collapse. This news was poorly received, and trade unions organized strikes that were attended by thousands of workers, a sign of the social unrest that was to follow.
As financial uncertainty rumbled on through 2009, hotels in Greece reported performance decreases. At a country level, revenue per available room (RevPAR) fell 14.6% and was driven by a decline in both occupancy and average daily rate (ADR).
Unsurprisingly, Greece suffered a decrease in overnight tourist arrivals as the crisis began, and visitor numbers dropped 6.4% year over year (source: Oxford Economics). However, this was to be one of just two year-over-year decreases between 2009 and 2018.
Hotel room net openings, meanwhile, reached just 668 as 12,930 closed across Greece–the most significant closures for any year in this analysis.
2010 - Bailout package and further austerity measures
As the Eurozone countries approved emergency loans of €120 billion to prevent Greece from defaulting on debts, further austerity measures were introduced. Government officials implied that the €30 billion cuts were vital to securing the bailout package, but the increase in VAT and reduction in wages and pensions were greeted by protests outside Athens’ parliamentary buildings.
As Greece gained a greater sense of stability, so did hotel closures–decreasing to just 4,143 closures in 2010.
2011 – More of the same
Fears that Greece might default on its repayments brought another Eurozone bailout, this time to the tune of €109 billion. However, the deal included an agreement to wipe out 50.0% of debt in return for even stricter austerity measures. Papandreou’s plans for a referendum almost jeopardized these terms, but the Prime Minister subsequently announced his registration.
An unchanged economic landscape was echoed by Greece’s hotel inventory, as room openings and closures both sat below 1,000.
2012-13 – Protests and parliament in crisis
As the proposed austerity measures were implemented, protests became more frequent in early 2012 – particularly in Athens. Anti-austerity parties gained favour in May’s early parliamentary elections, yet failure to form a coalition government caused further elections the following month.
The New Democracy and the Panhellenic Socialist Movement (PASOK) successfully formed a coalition at the second time of asking and pursued the €13.5 billion austerity plan to secure the next round of International Monetary Fund (IMF) loans. The rise in taxes and reduction of pensions were, unsurprisingly, poorly received by the public in Greece.
Similarly to 2011, the chaotic political landscape was reflected within the hospitality industry. Almost 20,000 new hotel rooms were added in 2012, despite the unrest on Greek streets and ongoing financial struggles. This increase in inventory was met by a 5.5% decrease in tourist arrivals (source: Oxford Economics).
From a performance perspective, an 8.0% decline in ADR drove a RevPAR decrease of 10.8% and, subsequently, room closures outpaced openings in 2013. Greece demonstrated resilience to the decline in arrivals in 2012, and bounced back with double-digit visitor growth in both 2013 and 2014.
2014-18 – Signs of recovery
Unemployment might have reached a record high of 28.0% in 2014, but there were positive signs as Greece raised almost €3 billion in the first sale of long-term government bonds for four years. Further political changes occurred as anti-austerity Syriza party won May’s European election, before party member Alexis Tsipras’ election as Prime Minister in early 2015.
The year brought further bailouts and spending reductions to prevent a Eurozone exit, while €10.3 billion was released to Greece in 2016 to ensure July’s debt repayments were met. Hoteliers had cause for celebration in 2017 as ADR surpassed the 2008 level of EUR113.58 for the first time since the crisis began.
2018 was an important milestone in the Greece debt crisis, as credit rating agency Fitch raised its assessment as result of economic growth and increased political stability.
This four-year period also signaled the start of a trend for rising hotel room openings and a decline in closures. While inventory additions rose year-over-year between 2014 and 2018, closures have lessened for four consecutive years. Interestingly, similar trends were witnessed in the U.K. and Germany (to a lesser extent).
A more positive economic situation in Greece has facilitated RevPAR increases since 2013, a trend that has continued into 2019. Between January and October this year, RevPAR grew 7.0% as ADR increased by almost 10.0%. Occupancy, however, decreased 2.4% over the same period.