Cyprus Tourism

Industry Performance, Challenges and Opportunities for Future Expansion

Myria Kkali considers the performance, challenges, and opportunities for expansion of Cyprus’s tourism indusry.

The tourism sector continuously proves to be one of the most important pillars of the Cyprus economy. Efforts to promote Cyprus as a holiday destination, intensified in recent years by all stakeholders, have been fruitful. According to CYSTAT, more than 2.5 million tourists had visited the island by August 2017. It is expected that more than 3.4 million tourists will have travelled to Cyprus by the end of the year. As demonstrated in Table 1 below, arrivals for the period of January–August 2017 recorded an increase of 14.7%, outnumbering the total arrivals of tourists in Cyprus during the first eight months of the year ever recorded. August 2017 had the highest volume of tourist arrivals of any August so far.

A number of factors have led to this boom. In an attempt by the government to reduce the seasonality effect in tourism, there have been successful efforts to extend the tourism period. As a result, there has been an increase in arrivals during November 2016 and March 2017 of 66% (compared to the same period in 2013-2014), amounting to half a million tourist arrivals. The tourism product that Cyprus offers has also expanded from the traditional ‘sun & sea’ destination product into other niche products. Niche tourism incentives now include cultural tourism, health and well-being, conference and events tourism, religious tourism, agrotourism, weddings and honeymoons and sports tourism. Furthermore, reacting to incentives offered by the Cypriot government, around 30 requests for hotel expansions and renovations were submitted to the Cyprus Tourism Organisation. It has been estimated that over half a billion euros have been spent in recent years on hotel renovations or hotel upgrades.
In regards to employment levels within the tourism sector, there has been an increase in employment of 16% in 2016, with the prospect of a further increase in employment numbers due to significant investments in projects. These projects, expected to be completed within the coming years, include the signing of a landmark deal for Cyprus’ first integrated casino resort, the expansion of the Agia Napa Marina and the Larnaka Marina. The latter is expected to assist in the differentiation of the Cypriot tourism product and alleviate the issue of seasonality, which is also a factor affecting the tourism labour market. According to the World Travel and Tourism Council, the total contribution of travel and tourism to employment (including wider effects from investment, the supply chain and induced income impacts) towards total employment was a staggering 22.0% (see figure 1 below). This was forecasted to rise by 3.7% in 2017. By 2027, travel and tourism is forecast to support 108,000 jobs (or 26.5% of total employment). This indicates the importance of this sector to the economy and hence shows the importance of future expansions and investments, such as the ones mentioned above, which will help further expand the employment opportunities in this sector.

Cyprus is moving ahead on multiple fronts regarding “Open Skies” policy, in an effort to extend both the number of originating airports, as well as aircraft operators, completing several new agreements with countries such as Bahrain and Oman. Efforts to expand the tourist market base and increase its share of other European and Middle Eastern and Asian countries also seem to be working, with increased numbers of arrivals from countries such as Germany, Israel and Lebanon.
The tourist product in Cyprus is, however, facing several challenges, which it must address if it is to succeed in maintaining and expanding its customer base. One such challenge is its price: the Cypriot tourist product is comparatively more expensive than other Mediterranean destinations. The quality of the tourist product needs further improvement in order to enhance the value-for-money options for tourists. Furthermore, Cyprus must face issues concerning infrastructure, preservation and utilisation of archaeological sites as well as the problem of a large number of non-licenced tourism accommodation providers limiting further growth of the industry. An additional challenge is the dependence on specific markets, namely the UK and Russian markets. Any future fluctuations in the exchange rates cannot but have a direct impact on the affordability of the Cypriot tourism product. This, in essence, emphasizes the need to expand the reach of the tourism product and its popularity to other countries even further. Finally, Cyprus can learn from challenges presented in other islands of the region, such as Santorini, presented by unsustainable tourism. In Santorini, the island’s infrastructure is under pressure due to the vast numbers of tourist arrivals and the sudden increase in its permanent population due to labour needs, which has put the island’s resources – water supply, sewage, storage, roads and other infrastructure – under increased pressure.
On the international front, the tourism industry is going through a turmoil following a number of terrorist attacks around the world, which have made travellers reluctant and very cautious when choosing their holiday destinations. However, according to the World Travel and Tourism Council, whilst terrorism-affected countries have suffered, several other destinations have profited, especially those that can be seen as ‘safe-havens’. Indicatively, countries such as Turkey, Egypt and Tunisia have had a total loss of around 22 million visitors, which have largely benefited other Mediterranean destinations, including Cyprus.
As the country recovers from the recent financial crisis, the strong tourism sector along with developments in other sectors raise the prospect of a transformation of the Cypriot economy in the medium to long term. However, whilst future prospects for the Cypriot tourism industry seem encouraging, challenges remain and should not be treated lightly. These further include the negative impact of Brexit and the weakening of the pound against the Euro, the comeback of important competitors (Turkey, Egypt and Tunisia and Greece), and Cyprus’s geographical location in a high-risk area close to many conflicts.  

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