Most recently, Greek media broke the news that the world famous tour operator Thomas Cook has taken unilateral decision to pay local hotels 5% less than the amounts due for the 2010 season. GRReporter met the President of the Hellenic Chamber of Hotels George Tsakiris to give more details on the case and tell us a little more about the tourist business in times of crisis.
What exactly is the problem with the company Thomas Cook? How did it all begin and why do they want to pay 5% less than the amounts due for August and September 2010?
At the end of September this year many hoteliers in the country informed us that the tour operator Thomas Cook has requested a 5 % reduction of the invoiced amounts for August and September 2010 before signing the contracts for the next season. The company had not officially informed the Chamber, nor had it sent a letter to inform us what the reason for this reduction was. After discussing the matter, the Hellenic Chamber of Hotels as an official representative of the sector decided to advise hoteliers in the country not to agree with this proposal.
Was this requested only from Greek hotels and have other countries encountered the same problem?
It became clear at a meeting of hoteliers, restaurateurs and owners of bistros and cafes within the European Union, HOTREC, held in Budapest on October 28-29 this year, that other countries have encountered the same problem. Colleagues in Spain, Italy, Cyprus, Malta and Portugal have received the same notice that Thomas Cook wants to pay 5% less than the amounts due for the last two months of the season. We decided at the conference the concerned parties to make a joint statement refusing to agree with this delayed requirement of the tour operator for lower prices.
Do you think that the five percent levy have something to do with the difficult summer, which we all faced this year in Greece – the series of strikes, protests, fires and other similar events?
This could be the reason if this discount was requested only from Greece but there are many other countries facing the same problem. At the same time, we do not have any formal notice from the company. All we know comes from its partners (the hoteliers – author’s note) in Greece. We didn’t receive anything from the company to know exactly what they want. We recommend hoteliers not to accept the proposal. Announcing the issue in public helps support this position.
If hoteliers do not accept the proposal of Thomas Cook, won’t they risk to loose the tour agency as a partner for the next season?
I think it will be very difficult the individual hotel units to encounter similar consequences after the joint coordinated statement of the six affected countries in the European Union.
How did the crisis affect the hotel business in Greece this year? The VAT was increased twice; there were difficulties during the tourist season due to protests and other woes. Is the drop in the profit serious?
This year was definitely very difficult, but the truth is that we expected it to be much worse than it actually was. In other words, nevertheless, things turned out better than expected. VAT on hotels was increased twice but the sector absorbed these increases and did not allow them to affect the end price. We still hold the same price levels. If there is increase in the prices until the end of the year it will be 1% to 2%, not more. Revenues are definitely less because hotels have operated mainly based on best price levels this year. Generally, I could say that we managed well this year. It was not a disastrous year.
What are the prospects for 2011 in your opinion?
I think the next year will be much better for tourism and hotels in Greece. This will certainly happen if some very serious problems and socio-political upheavals don’t afflict the country. There will be no price increase and I think it will help tourism largely.
Which hotels were the least affected by the crisis during the 2010 season?
Big four and five star hotels that offer All Inclusive in certain areas like Dodecanese (Rhodes, Kos and others.), the island of Crete, which adjusted the prices to the demand and obtained good results, and also Kefalonya, suffered the least damages from the crisis. This year was more successful for all these areas than the same 2009 season and the reason was that they were more flexible in terms of package prices.
Another increase in the average indicator of VAT is expected by the end of the month, which is imposed on hotel and tourist services. Its value was 9% at the beginning of the year and then it rose first to 10% and now it is 11%. The VAT you pay will be 13% from 2011 on. What does this increase mean for the hotel business?
This is a serious problem. Prices are not so flexible. Most hotels in the country have reached the limit of their financial capabilities. Any additional burden on the expenditure side of their budgets will reflect very negatively on the hotel business. We are now only trying to earn enough for the costs to keep the business alive. Any additional increases will put many hoteliers in the red zone.
There was a message in the media this week that six old hotels in Athens have ceased activity. I would like to ask you why hotels go bankrupt in a tourist capital such as Athens?
Because of the crisis. In fact five hotels have shut down and the sixth is to close by the end of the year. The hotel business has expenditures, large though – you have to rent a building, then to repair it and of course to cover not only operating costs but also to repay the credits for this whole business. The moment the prices fall more than expected and costs can not be covered you close the hotel in order not to incur additional losses.
About 50 percent of the hotels only in Athens are in buildings not owned by the entrepreneur, but rented. Rent payments are one of the biggest costs of the hotel business in the capital. In many cases, even if the owners of the buildings are ready to make a rent rebate, it is not enough to keep the business.
Do you think the fall in turnover is due to the reduced number of tourists?
The problem is the price level. We sell cheap in Athens. Of course, we have a little less tourists this year, but they are also cheaper. The combination of these is the reason for lower revenues.
Do you support the idea of the Hellenic Chamber of Commerce a uniform VAT of 15% to be introduced? In other words, we will benefit from some things and loose from others. What do you think about the proposal for reducing the main VAT value of 23% and all goods and services which directly or indirectly affect you be charged 15% VAT?
You should ask the economists in the country. I think that 11% VAT is recommended before any other higher value. But what is most important in relation to VAT is what other countries competing Greece in tourism are doing with the VAT. VAT on tourism in Turkey is 8%, the level in Spain is almost the same as in Turkey, and hoteliers in France and Cyprus pay only 5.5% VAT. It is logical that we should do something in Greece but most likely it is not to increase VAT again
You mentioned Turkey and I would like to ask you do you think that our eastern neighbor has become a dangerous competitor to Greece over the years concerning tourism?
I don’t think so. Turkey is dollar destination and it has always been cheaper than Greece. Now things are almost equal. There is no big difference in prices and each country has its own tourist flow.
What is the role of government in tourism development? However, this sector contributes directly and indirectly about 20% of GDP each year.
Hoteliers themselves are trying to do whatever they can to compete on the market, but it is important the offered package to be attractive. So, we are not just talking about hotels. When tourists arrive in Greece they will come down at the airport, use the highway, the ferry and the public transport. This whole package should be of high quality, comfortable and attractive. The state is to guarantee the high level of these services throughout the country. Speaking of Athens, I think that measures should be taken to improve infrastructure and reduce traffic so that the city becomes more comfortable and easily accessed by tourists, and safer. Ports need to be improved. Museums need to be opened longer. The state plays an important role in tourism development and all these details together create the face of the country.
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