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The influence of the accommodation sector on tourism development: lessons from Cyprus
Hospitality Management 19 (2000) 275±293
The in¯uence of the accommodation sector on tourism development: lessons from Cyprus Richard Sharpley University of Northumbria at Newcastle, Travel and Tourism, New Castle, UK
Abstract The qualitative and quantitative characteristics of the supply of accommodation have a direct in¯uence on the overall success and development of tourist destinations. Therefore, in order to ensure that the supply of accommodation contributes eectively to tourism development plans and objectives, it is logical that the development of the accommodation sector should be a fundamental element of the overall destination planning process. However, such an integrated approach to resort planning and management has rarely been adopted throughout the Mediterranean region. Based upon the experience of Cyprus, it is demonstrated that the failure to plan and control the accommodation sector has meant that the ocial policies for tourism development have not been achieved. In particular, the quality, quantity and coastal concentration of accommodation on the island have resulted in the transformation of Cyprus into a mass-market, summer sun destination. Moreover, the island is highly dependent on certain markets and, in particular, upon overseas tour operators. The paper concludes, therefore, that not only should the development of accommodation be integrated into the overall tourism planning process, but also that eective mechanisms for the implementation of accommodation development policies should exist in order to avoid or redress the challenges currently facing the Cypriot tourism industry. # 2000 Elsevier Science Ltd. All rights reserved. Keywords: Accommodation sector; Tourism planning; Tourism development; Tourism in Cyprus
1. Introduction Accommodation is a fundamental element of the tourism product. Not only is it `the largest and most ubiquitous subsector within the tourism economy' (Cooper et al., 1998, p. 313), typically accounting for around one-third of total trip expenditure, but it is also an essential ingredient of the tourism experience E-mail address: [email protected] (R. Sharpley). 0278-4319/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 0 ) 0 0 0 2 1 - 9
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(Goss-Turner, 1996). The choice of accommodation re¯ects, by and large, the needs and expectations of the tourist and, as a result, both the quantitative and qualitative characteristics of the supply of accommodation services directly in¯uence the type of tourism/tourists attracted to destination areas. At the same time, however, the growth and development of the accommodation sector in particular is also intimately related to the overall development and success of tourism destinations in general. For example, the total supply of bedspaces in relation to a destination's arrivals ®gures is a powerful in¯uence on occupancy levels, pro®tability, employment in the sector, investment and the longer-term ability of accommodation providers to retain control over pricing levels. Similarly, the physical location, density and quality of accommodation, and the extent to which it is balanced with the broader development of infrastructure and tourism-related facilities, is an important element in the overall tone or attraction of tourism destinations. This, in turn, directly in¯uences the ability of destinations to survive in an increasingly competitive international tourism market. In short, the success of tourism destinations is largely dependent upon the appropriate development of the accommodation sector. This would suggest, of course, that the development of the accommodation sector should be a fundamental and integral element of the overall destination planning process. In other words, it is logical to assume that plans and controls should be in place to ensure that the supply of accommodation re¯ects and contributes to wider tourism development plans and objectives. However, it is widely recognised that, throughout the Mediterranean region, such an integrated approach to resort planning and management has proved to be the exception rather than the rule. Many destination areas have experienced rapid, excessive or inappropriate development of the accommodation sector which, in some instances, threatens the longer-term viability of the tourism industry (for example, Barke and France, 1996; Brotherton and Himmetoglu, 1997; Cockerell, 1996; Leontidou, 1998). One such destination is Cyprus.1 Despite the rapid and remarkable increase in tourism to the island, in particular during the late 1970 s and 1980 s, recent years have witnessed the emergence of a number of signi®cant challenges to the future growth and stability of the Cypriot tourism sector, challenges which, as this paper demonstrates, have resulted largely from the failure to plan and control the development of the accommodation sector. The purpose of this paper, therefore, is to argue that not only should the powerful in¯uence of the accommodation sector on 1
Since 1974, when Turkish forces occupied the northern third of Cyprus, the great majority of tourism development has occurred in the southern, Greek sector of the island. This is not to say that the Turkish sector, self-proclaimed in 1983 as the Turkish Republic of Northern Cyprus (TRNC), has not experienced growth in its own tourism industry. In 1975, fewer than 20,000 arrivals were recorded; by 1998 the TRNC was attracting 183,300 visitors, with earnings from tourism representing 23% of GDP (Kibris, 1998; Warner, 1999). However, not only does tourism in the TRNC remain far less developed than in the Greek sector but it also represents a relatively small proportion of touristic activity on the island as a whole. For example, international (as opposed to Turkish) arrivals in the TRNC in 1998 accounted for just 2.6% of total arrivals in Cyprus. Therefore, for the purposes of this paper, the discussion focuses primarily on tourism in the (Greek) Republic of Cyprus.
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tourism development be understood, but also that eective planning and control of the development of accommodation is essential to ensure the future health of tourism on the island. In so doing it identi®es a number of implications and lessons applicable to other tourism destinations. Before considering the speci®c case of Cyprus, however, it is ®rst necessary to highlight brie¯y certain issues relevant to the tourism planning process in general. 2. Tourism and accommodation: planning issues Tourism is developed for a variety of reasons. Primarily, however, it is considered to be an eective vehicle for economic and social development in destination areas (Roche, 1992, p. 566). Indeed, most countries are now tourist destinations and many `regard tourism as an important and integral aspect of their development policies' (Jenkins, 1991, p. 61). This popularity of tourism as a developmental agent is attributable to a number of factors. For example, international tourism has demonstrated consistent growth since the 1960s and recent forecasts suggest continued growth well into the 21st Century (WTO, 1997). It is seen as an eective source of foreign exchange earnings and a signi®cant generator of employment; it is also considered to have relatively low `start-up' costs and, unlike many other forms of international business, it is relatively free of trade restrictions. More cynically, perhaps, for some countries tourism represents the only realistic development option (Brown, 1998, p. 59261). Despite these apparent attractions of tourism, however, eective planning is necessary if its potential contribution to broader development is to be realised (Gunn, 1994; WTO, 1994). Not only does tourism, if unplanned or uncontrolled, frequently generate a variety of negative economic, social and environmental consequences in destination areas, but the very nature of the tourism industry, or production system, demands eective planning and co-ordination. As an economic activity, tourism is diverse, fragmented and multi-sectoral, comprising innumerable private and primarily small enterprises involved both directly and indirectly in the supply of tourism products and services. Planning is therefore essential to `ensure that all these elements are developed in an integrated manner to serve tourism as well as general needs' (Inskeep, 1991, p. 16). Above all, however, the character, scale and rate of tourism development must be planned in order to ensure that it remains a means to an end } that is, an element of a broader socio-economic development strategy } as opposed to an end in itself. Given this necessity for planning, the primary issue, particularly in the present context, becomes the question of governance. That is, it is generally accepted that some degree of state intervention in tourism development is essential (Elliott, 1997); the extent of such intervention, however, remains the subject of intense debate. Inevitably, much depends upon the political and economic framework within which tourism is being developed. For example, in less-developed economies it is likely that the state will play a more active managerial and entrepreneurial role in tourism development (Jenkins, 1991, p. 65). Conversely, in developed countries with a
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diverse, mature private sector (and where tourism is likely to make a less signi®cant contribution to overall economic activity), the role of government will focus on support and facilitation rather than direct intervention.2 In either case, however, it is the responsibility of the state to formulate tourism development policy and to provide the appropriate legislative, administrative and planning tools in order to optimise the bene®ts of tourism to the country within an increasingly competitive global tourism environment. A full consideration of the role of the public sector in tourism is beyond the scope of this paper (see, for example, Elliot, 1997; Hall, 1994). Nevertheless, it has been argued that eective public/private sector partnerships in tourism planning and development are essential in intensively developed and competitive regions such as the Mediterranean in general, and in island contexts in particular (Poetschke, 1995). Certainly, the characteristics of islands, including distance and isolation from metropolitan centres, a limited economic base and a lack of resources, represent signi®cant challenges to the longer-term success of tourism-related development policies (MacNaught, 1982; Wilkinson, 1989; Milne, 1992). Moreover, as the following case study demonstrates, a failure to implement appropriate planning and control over tourism development in order to address these challenges, in particular with respect to the accommodation sector, may militate against the longer-term health of tourism in destination areas.
3. Methodology The following case study is based upon extensive secondary research and a number of ®eld visits to Cyprus, during which open-ended interviews were conducted with key members of the Cypriot tourism industry.3
4. Tourism and development in Cyprus The development of tourism in the Republic of Cyprus has been a remarkable and well-documented success story (Andronikou, 1979, 1987; Gillmor, 1989; Ioannides, 1992; Lockhart, 1993; Witt, 1991). In 1960, the year Cyprus gained independence from British control, just 25,000 visitor arrivals were recorded; by 1998, and despite the upheavals following the Turkish invasion in 1974, the ®gure had risen to over 2.2 million. The 1980s in particular witnessed dramatic growth (see Table 1); tourist arrivals grew annually by 16%, easily outstripping the corresponding global growth rate of 4.2%, whilst receipts from tourism increased by 22% annually. 2 Research has shown that in those European countries where there exists a more proactive state involvement in tourism policy formulation and co-ordination, in particular in France, Portugal and Ireland, tourism has grown at a signi®cantly faster rate than in other countries (Nevin and Watson, 1993). 3 The author is grateful for the contribution of a number of people, in particular Thomas Coursaris, Phedias Karis, Phoebe Katsouris, Athena Metaxa and John Wood.
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In 1998, tourist receipts were well in excess of US$1800, accounting for about 54% of invisible exports and 40% of total exports. Not surprisingly, therefore, tourism has also become the engine driving the development and growth of the Cypriot economy. In 1960, the island's economy displayed many symptoms of underdevelopment and tourism, still in its infancy, contributed just 2.5% of GDP which, in 1960, amounted to CY£94.7 million. By 1995, GDP had reached CY£3905 million, per capita GDP was CY£6142 (approximately US$11,566), ranking the country 39th in the world (Euromonitor, 1996), slightly higher than Greece (US$10,500) and signi®cantly higher than Turkey (US$2,853). As a result of this remarkable growth (see Table 2), Greek Cypriots now enjoy the third highest standard of living of all Mediterranean countries after France and Italy. Tourism has also been a major factor in the maintenance of low levels of unemployment } just 3.1% in 1996 } with over 25% of the working population employed directly or indirectly in tourism. Despite this apparently healthy picture, however, a number of potential problems, all related to tourism, challenge the future economic prosperity of Cyprus. Firstly, the relatively high levels of employment on the island combined with rapid economic growth have fuelled a growth in earnings. Between 1989 and 1993, earnings grew at an average annual rate of 9.3%, re¯ected in an average 6% increase in unit labour costs. This has led to lower pro®tability and decreased competitiveness, a factor, as discussed below, that is of particular concern to the accommodation sector. Secondly, the island continues to rely heavily on imports to meet its raw material needs and to satisfy the demands of an increasingly prosperous population. As a result, the economy has become increasingly dependent upon tourism to cover its import bill (see Table 3). Table 1 Cyprus tourist arrivals and receipts 198021990a Arrivals ('000s)
World Europe Cyprus a
1980
1990
Average annual growth (%) 1980290
285,000 196,000 353
429,000 275,000 1561
4.2 3.5 16.0
Receipts (US$mn) 1980
1990
Average annual growth (%) 1980290
102,000 62,000 203
249,000 136,000 1258
9.3 8.3 23.0
Source: CTO (1990).
Table 2 GDP and per capita GDP in Cyprus 1960±1995a
GDP (CY£mn) Per capita GDP (CY£) a
1960
1965
1970
1975
1980
1985
1990
1995
94.7 162.1
142.2 240.6
234.4 381.1
267.4 432.7
693.5 1125.5
1449.0 2661
2546.1 4466
3905.1 6142
Source: Andronikou (1987); PIO (1997).
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However, thirdly and related, the future growth of tourism is itself uncertain, potentially undermining the foundations upon which the Cypriot economy has been built over the last 25 yr. In particular: The location of the island in the eastern Mediterranean renders arrivals ®gures sensitive to regional political upheavals. At the same time, internal political instability continues to in¯uence the rate and characteristics of tourism development on the island as a whole (Lockhart, 1993; Mansfeld and Kliot, 1996; Warner, 1999). Furthermore, its distance from its core northern European markets means that, on average, holidays in Cyprus are roughly 15% more expensive than in competitor destinations. Since 1992 tourist arrivals have been erratic (Table 4), with `sharp ¯uctuations in the ®rst half of the decade followed by virtual stagnation' (Seekings, 1997; p. 39). Despite the record level of arrivals in 1998, the growth in arrivals remains ¯at, the relative expense and distance from major markets and the loss of product exclusivity being oft-quoted causes (Ayres, 1998).
*
*
Table 3 Tourism, foreign exchange and balance of payments (CY£mn)a
Exports (goods) Imports (goods) Trade balance Invis. earnings (Tourism's share) Invis. payments Invisible balance Current account balance a
1980
1984
1988
1990
1993
1994
1995
172.7 381.0 (208.3) 245.7 71.7 120.3 125.4 (82.9)
307.5 720.7 (413.2) 543.6 212.0 238.1 296.5 (116.7)
301.2 777.8 (476.6) 785.6 365.0 304.8 480.8 4.2
388.0 1030.9 (642.9) 1075.5 573.0 n/a n/a n/a
387.1 1182.9 (795.8) 1326.1 698.3 480.6 845.5 49.7
432.9 1330.5 (897.6) 1463.0 810.0 533.9 929.1 31.5
510.2 1499.4 (989.2) 1506.0 810.0 619.6 886.4 (99.4)
1996 597.1 1667.4 (1070.3) 1479.0 780.0 636.9 842.1 (228.2)
Source: CTO (1993b); Bank of Cyprus (1996, 1997); PIO (1997).
Table 4 Tourist arrivals and receipts 199021998a
1990 1991 1992 1993 1994 1995 1996 1997 1998 a
Arrivals (103)
Receipts (CYmn)
1561 1285 1991 1841 2069 2100 1950 2060 2222
573 476 694 696 810 810 780 830 880
Source: CTO (199021997); Dept. of Statistics and Research (1999).
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*
*
281
Despite eorts to the contrary, the island remains highly dependent on its traditional markets, particularly the UK which, in 1998, accounted for almost 46% of all arrivals, with Scandinavia and Germany each maintaining their traditional 10% share. Whilst it is easy to explain the attraction of the island to British visitors (it is seen as familiar and safe; English is widely spoken, cars drive on the left and the currency, the Cyprus Pound, is the `same'), such dependency leaves the island susceptible to changes in those markets. Cyprus continues to suer marked seasonality of arrivals; more than a quarter of all tourists arrive in the peak months of July and August, whilst the four trough months, November2February, account for no more than 16% of arrivals. In recent years, the average length of stay in Cyprus has declined signi®cantly from an average 12.5 days in 1991 to 10.92 days by 1996. Though not unique to Cyprus2Malta, for example, has experienced a similar decline (Cockerell, 1996) } this suggests that the total annual tourist nights spent on the island decreased from around 25 million in 1992 to roughly 21 million in 1996. In short, the real volume of tourism fell by some 16%.
Of course, some of these problems lie beyond the control of the Cypriot tourism authorities, whilst others are common to many tourism destinations. However, there is little doubt that Cyprus faces a variety of self-in¯icted challenges which, as is now argued, have emerged as a direct result of a lack of planning and control with respect to the development of tourist accommodation on the island. 5. The development of accommodation in Cyprus A principal actor in the successful development of tourism, particularly since 1975, has been the Cypriot government which, in a series of Emergency Economic Development Plans, accorded high priority to the tourism sector in terms of ®nancial incentives, training and the provision of infrastructure. At the same time, extensive government ®nancial support was, and continues to be, given to the Cyprus Tourism Organisation (CTO) to market the island abroad. However, the true foundation of the rapid growth of tourism to Cyprus has been the no less rapid expansion of the accommodation sector. In 1975 there were just 3976 available bedspaces, 27% of which were located in the hill resorts, 34% in the capital, Nicosia, and roughly 38% (or 1500 beds) in coastal resorts. Ten years later there were 38,921 licensed bedspaces and latest ®gures show that, by the end of 1997, there was a total of 84,368 licensed bedspaces. Of these, 55% were in star-rated hotels and 45% in apartments, villas, holiday villages and other forms of licensed accommodation (CTO, 1997). Table 5 shows the growth in hotel and hotelapartment accommodation provision since 1985. Of particular note is the rapid growth in apartment accommodation during the latter half of the 1980 s. More recently, and following a shift in government policy towards favouring the development of 4- and 5-star hotels, it is the higher grade hotel sector that has experienced most growth. However, since 1985 the proportion
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Table 5 Supply of accommodation in Cyprus 198521996 ('000beds)a,b Hotel apartmentsc
Hotels
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1977
5*
4*
3*
2*
1*
A
B
2.1 2.5 2.9 2.9 3.3 4.4 4.3 6.1 7.7 7.9 8.1 8.2 8.0
5.9 6.5 7.1 7.8 9.5 9.3 11.7 12.3 12.7 13.6 14.5 15.2 15.5
6.8 6.4 7.0 7.8 9.5 9.3 11.4 13.7 15.3 16.1 16.3 16.8 17.2
2.1 2.7 3.0 3.1 3.3 4.0 3.9 3.9 3.9 3.6 4.0 3.9 3.8
1.3 1.5 1.4 1.8 1.7 1.7 1.6 1.6 1.6 1.7 1.6 1.5 1.4
3.9 4.2 5.2 6.3 7.6 9.5 10.7 10.8 11.3 12.1 12.6 11.5 9.8
6.8 8.1 8.8 9.3 10.1 9.7 10.2 11.4 11.7 11.4 11.7 13.2 14.0
Total
28.9 31.9 35.4 39.0 45.0 47.9 49.2 59.8 64.2 66.4 68.8 70.3 69.7
a
Source: CTO Reports (198921997). Figures are rounded up and, therefore, approximate. c The CTO divides apartments into three categories. A and B are mostly used by overseas visitors; C properties, of a lower standard, serve the domestic market. Also not listed here are other forms of licensed accommodation, including tourist villages, traditional houses, tourist apartments, villas and guest houses totalling 10,200 beds in 1997. b
of total bedspaces provided by 4- and 5-star hotels has remained virtually unchanged. Moreover, in addition to ocial, licensed bedspaces must be added a further 3000 under construction, as well as unlicensed bedspaces which comprise privately owned apartments and homes rented to both domestic and international visitors on a self-catering basis. Estimates of the size of the unlicensed sector vary from 12,000 to 30,000 bedspaces (Seekings, 1997). Thus, the island's accommodation supply remains predominantly mid range hotels and self-catering (apartment and unlicensed) accommodation. A further important characteristic of the development of accommodation in Cyprus is its spatial concentration in coastal areas. Of the four main resorts on the island } Agia Napa, Paralimni, Limassol and Paphos } only Limassol possessed any tourist accommodation of signi®cance in 1975, totalling 1063 bedspaces. Since then, the south-east corner of Cyprus, including Agia Napa and Protaras, has been transformed from an isolated rural community `virtually unknown even to many Cypriots' (Ioannides, 1992, p. 722) into the island's most popular resort area. By 1997, it accounted for 40% of total bed capacity, followed by Paphos in the west with 24%, the latter having experienced a 50% growth in bedspaces since 1991. Even by 1992, it was observed that `virtually all prime sites for beach development have already been developed or are earmarked for future development' (EIU, 1992, p. 58), yet coastal development continues apace. For example, the 1500 bed Athena Hotel opened in Paphos in the summer of 1999.
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Such rapid and concentrated development has brought about a variety of well-documented social and environmental consequences, whilst placing enormous pressure on the island's human and natural resources (Witt, 1991; Kammas, 1993; Apostolides, 1996). It has also limited the potential for tourism diversi®cation into inland areas in order to spread the bene®ts of tourism more equitably. At the same time, although hotels are, for the most part, of a high quality, the speed of their development has resulted in associated resort infrastructure that falls below visitor expectations, thereby potentially diminishing the visitor experience. For example, the road between Larnaca (the main airport) and Agia Napa/Protaras remains dangerously unsuited to the level of tourist trac it receives. Thus, since the early 1980s, the accommodation sector has dramatically increased in size. The important question here, however, is the extent to which this has been in accordance with government policy. 5.1. Accommodation development and government policy Following the Turkish invasion in 1974 and the virtual destruction of the island's tourism industry, the Cypriot government initially provided signi®cant support, in the form of low-interest loans, free land for hotel construction and duty-free imports of necessary materials and equipment to encourage the development of accommodation (Ioannides, 1992). Lending rates capped at between 8 and 9% and the promise of rapid returns on investment were a particular incentive. For example, during the 1980 s, aided by the rapid growth in arrivals, hoteliers were able to pay o their loans within 324 yr (Wood, 1998). However, speci®c plans regarding the scale, location and quality of accommodation were not produced, a factor which also fuelled the development of accommodation. In Cyprus `the ideological orientation and socio-political structure lean heavily towards individualism, free enterprise, and capitalism' (Andronikou, 1979, p. 247). In other words, the entrepreneurial spirit of the Cypriots and the intrinsic value of land, both as a status symbol and for its potential economic return (Metaxa, 1998), have been signi®cant in¯uences on the desire of individuals and organisations to pro®t, through tourism, from land ownership and development. The church, in particular, has viewed tourism as an important source of income and has either sold o or developed many prime sites, especially in the west of the island (Katsouris, 1998). Thus, although the government initially provided incentives for accommodation development, it has apparently been unable to control or limit the extent to which advantage has been taken of such incentives. This is not to suggest that the government and the CTO have not recognised the potential impact on tourism of excessive accommodation development. Indeed, by the early 1980s it was accepted that excessive development had been accompanied by a lack of associated infrastructural development and environmental protection measures. Accordingly, a number of policies were introduced to limit further growth, particularly in coastal resorts. These included the limiting of loans and other ®nancing arrangements to accommodation projects in the hill resorts, to ancillary
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tourist projects and to high-grade hotels in the then relatively under-developed south-western region. Similarly, the 5 yr economic plan 198921993, in its tourism section, warned that `if the present course of development is continued, it will in the long run have serious adverse eects on the competitiveness of our tourist product in the international market' (CPC, 1989, p. 156). Subsequently, a short-lived moratorium on further hotel development was imposed in 1989, along with a new tourism policy designed to reduce bed density in coastal areas, to encourage the development of higher grade accommodation facilities, and to support the development of new establishments appropriate to their environment. The objective of the latter policy was to encourage the spatial and temporal diversi®cation of tourism through the development of new specialist markets, such as rural and conference tourism. A new land-use planning system was also introduced in 1990. Based upon the 1972 Town and Country Planning Law, this requires all developments to be considered within approved local plans for the ®ve urban districts of Nicosia, Limassol, Larnaca, Paphos and Polis, whilst the rest of the territory falls under the statement of policy for the countryside. As a result, no development (tourism or otherwise) can ocially go ahead without a permit, whilst larger projects } primarily those costing over CY£1 million } also require the preparation of an environmental impact assessment study (Metaxa, 1998). Tourism developments, in particular those within 3 km of the shore, are subject to particular scrutiny in order to maintain the natural and social environment, whilst the general objective of the new system is to control `the spatial distribution of major land uses, the enforcement of appropriate development densities . . . and the provision of necessary infrastructure' (PIO, 1999, p. 118). However, these policies have had little impact upon the development of accommodation. The 1989 moratorium, for example, proved ineective because it did not cover the large number of planning applications approved prior to its implementation, whilst the building of the luxury Anassa Hotel at Latsi on the edge of the Akamas National Park attracted signi®cant criticism as its development appeared to ¯out the new planning requirements. Thus, although there has been a shift towards the building of higher grade hotels, the overall number of bedspaces on the island increased by approximately 70% between 1990 and 1996. Moreover, much of this has occurred on the coast, with even `protected' areas, such as the Akamas peninsula in the north west of the island, being threatened with development. A number of reasons may be suggested for this lack of control over accommodation development. For example, the tourism industry in Cyprus comprises a large number of predominantly small, privately owned businesses, each seeking to survive within an increasingly competitive environment. Thus, short-term ®nancial considerations outweigh longer term, national tourism development considerations. However, it is primarily the lack of formal structures for the implementation of policies at the national level (re¯ected in a lack of authority invested in the CTO) and a multi-layered system of democratic government that results not only in decision-making according to local, as opposed to national,
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objectives, but also decisions that are based upon short-term political objectives (Sharpley, 1998, p. 47). An in-depth consideration of the political economy of tourism development in Cyprus is beyond the scope of this paper. However, the important point here is that, as a result of a lack of control, too many hotels and other forms of accommodation have been built (Karis, 1998). As the next section considers, this has had a number of inter-related and consequential repercussions on the development of tourism on the island. 6. The consequences of accommodation development 6.1. Mass market tourism A principle consequence of the rapid and, arguably, excessive development of accommodation in Cyprus has been the loss of the island's exclusivity. In particular, the rapid expansion in the supply of hotel-apartment and other self-catering accommodation facilities during the 1980s was a key factor in the evolution of Cyprus as a mass summer-sun tourism destination. It was the time when, despite ocial policy to the contrary, Cyprus started `playing the numbers game' (Wood, 1998), when the focus shifted from the qualitative to the quantitative characteristics of tourism on the island. This shift is evident in the trends in the demand for accommodation. Ocial tourism development policy in Cyprus, initially embodied in a series of 5 yr economic development plans and, more recently, in speci®c tourism development plans, has been to encourage the development of higher-star-rated properties in order to attract a higher-spending `quality' tourists (Andronikou, 1986, 1993a; CPC, 1989; CTO, 1990). During the 1980s, however, this did not occur. As Witt (1991) observes, the proportion of most nationalities of tourists to Cyprus staying in hotels fell slightly, whilst an increasing number stayed in self-catering units. This was undoubtedly linked to the increasing supply of apartment accommodation, which increased from a total of 10,700 beds in 1985 to 19,200 beds in 1990 (CTO, 1993b). Since the early 1990s this trend has reversed, with the proportion of guestnights spent in hotels rising from 59% of total guestnights in 1992 to 64% in 1996. Over the same period, the share of apartment guestnights fell from 34.1 to 29%. Again, this was linked to the supply of accommodation, with the number of beds in 4- and 5-star accommodation increasing most rapidly. Nevertheless, it has proved dicult for Cyprus to re-invent itself as a more up-market tourism destination. This can be partly explained by the fact that, although the majority of new hotels have been in the higher categories, the share of total bedspaces provided by 4- and 5-star hotels has changed little since 1985, with 3-star hotels remaining the most numerous. However, it is also been observed that `luxurious hotels alone do not attract [quality] tourism. It should not be forgotten that Cyprus is still a sun-and-beach destination' (Kammas, 1993, p. 85). Therefore, a variety of other factors has meant that many higher grade establishments have been attracting `guests of a lower
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``quality'' than is usually appropriate for such hotels' (Seekings, 1997, p. 47). The most signi®cant factor, again linked to the development of accommodation, has been the increasingly dominant role of tour operators. 6.2. The dominance of tour operators Associated with the increase in apartment accommodation and the consequential shift to mass market tourism in Cyprus from the mid-1980s onwards has been the dramatic expansion of the `package', or inclusive tour charter (ITC) market. Prior to 1986, no charter ¯ights were permitted to operate into Cyprus, primarily to protect the national carrier, Cyprus Airways (Wilson, 1988). The major British tour operators sought, albeit unsuccessfully, to use their own aircraft, but eventually it was pressure from hoteliers in Cyprus, particularly the developers of the new selfcatering accommodation facilities, that brought about the introduction of cheaper charter ¯ights. Since then, increasing numbers of charter operators servicing a large number of tour operators have started ¯ying to Cyprus; over 60 specialist and mainstream tour operators in the UK alone oer Cyprus holidays in their programmes. Restrictions remain, however, both on seat-only tickets on some charter ¯ights and on foreign scheduled carriers in order to continue to protect Cyprus Airways' interests. As a result, Cyprus receives an `extraordinarily high proportion of visitors travelling on inclusive tours' (Seekings, 1997, p. 42). Almost two-thirds of tourists travel on inclusive arrangements, with over 80% of the UK market and 100% of the Scandinavian market travelled on ITC holidays in 1997. Conversely, the potentially lucrative independent market remains severely limited. One result of this has been that Cyprus has become overly dependent upon a small number of overseas tour operators. Despite the large number of companies carrying tourists to the island, the market is controlled primarily by large, British-owned tour operators, three of which are dominant. Table 6 indicates the main operators' shares (representing 19% of all arrivals) of the 790,000 UK arrivals carried by British tour operators in 1997. Table 6 Tour operators share of UK arrivals 1997a Tour operator
Share of UK arrivals (%)
Thomson First choice Airtours Sunworld AGTA operatorsb Other operators (Independent travellers)
22 13 10 5 20 10 (20)
a b
Source: CTO (1998). Association of Greek-Cypriot Travel Agents } Greek-Cypriot-owned operators based in the UK.
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This has not always been the case. Indeed, prior to late 1994 the largest UK operator into Cyprus was not one of the majors, but Best Travel, a specialist operator. Under the Cypriana brand, Best had the capacity to carry up to 250,000 tourists a year to Cyprus, representing 25% of the British market. Moreover, as a Greek-Cypriot-owned operator largely dependent on tourism to Cyprus, the company had an interest in maintaining prices and, unusually, the majors were happy to allow Best to maintain its market share. However, the ever increasing supply of accommodation, combined with greater competition from other operators meant that Best had to start discounting. Unfortunately, the company was already ®nancially stretched by the expansion of its airline, Ambassador Airways; in November 1994 Best Travel collapsed, leaving the Cypriot market at the mercy of the majors. Since then, the island's dependency on British operators has been increased by their ownership of overseas operators. For example, extensive overseas acquisitions by Airtours, including the purchase of Scandinavian Leisure Group in 1994 and Spies in 1996, means that the company controls virtually all Scandinavian arrivals in Cyprus. At the same time, increasing concentration within the UK tour operating industry, such as the take-over of Unijet by First Choice in 1998, has further increased the power of British operators. As a result of their dominance, these tour operators are able not only to determine the characteristics and ¯ows of tourists to Cyprus but also, as discussed in the next section, to dictate accommodation prices on the island. This severely limits the ability of the CTO to achieve its long-held ambitions of attracting higher-spending, `quality' tourists from a variety of new markets, developing new products, reducing the problems of seasonality and, generally, divesting the island of its mass-market image. It also means that CTO's current policy of encouraging growth within the specialist operator market is likely to face signi®cant challenges. 6.3. Oversupply of accommodation It is now accepted that, owing to a lack of limits placed upon its development and growth, the supply of accommodation has outstripped demand. Indeed, a number of hotels in Limassol have recently been converted into oce blocks, whilst the CTO is now considering dierent incentives to encourage hotel owners to redevelop their properties for alternative uses (Katsouris, 1998). This oversupply of accommodation, however, has signi®cant implications for the future of tourism development. Evidently, it has been necessary for hoteliers to discount heavily in order to maintain occupancy levels; indeed, it was reported that, in 1997, some apartment owners were selling beds as cheaply as CY£1 per night (Wood, 1998). As a result, the hotel sector has experienced falling pro®tability, leading to job losses, a lack of investment and, hence, reduced quality and competitiveness. More importantly, perhaps, the excessive development of the accommodation sector has played into the hands of overseas tour operators. That is, certain hotels, such as the Annabelle in Paphos, the Anassa at Latsi and the Amathus Beach in Limassol, are able to set their own prices. However, the majority are dependent on
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tour operators who, given the excessive supply of accommodation, are able to dictate how much they will pay for rooms. As a result, prices in many establishments have remained relatively constant, and in some cases have fallen, since 1993 whilst operating costs have risen signi®cantly } wages within the hotel sector have, for example, risen by about 15% annually (Karis, 1998). As a result, although occupancy levels rose in 1997 following a poor 1996, `pro®ts vanished' (Josephides, 1997) and many observers commented that few, if any, hotels were making money (Wood, 1998; Karis, 1998). This problem continues to be compounded by the fact that many hotels are experiencing a trend away from full/half board to bed-andbreakfast arrangements, placing further pressure on income and pro®tability (Coursaris, 1998). Overall, this has brought about downward pressure on prices, a problem exacerbated not only by the dominance of the traditionally price-sensitive UK market but also by the fact that operators from other countries, such as Germany, are now seeking lower prices (Coursaris, 1998). Thus, although buoyant demand in 1999 and high expectations for the 2000 summer season have meant that prices have risen, eorts to redevelop a quality market and to diversify the Cypriot tourism product still face the signi®cant challenge of the necessity of ®lling existing bedspaces. 6.4. Hotel operating costs In addition to the problem of pressure on pricing, the pro®tability of hotels has also been squeezed by a dramatic increase in operating costs, particularly payroll costs, during the 1990s. Indeed, in the 5 yr 199221997, the average cost of labour in hotels rose by 94% (Karis, 1998). The success of the tourism sector during the 1980s, supporting virtually full employment on the island, provided the platform for high wage demands. Consequently, the two powerful trades union federations in Cyprus, the Pancyprian Federation of Labour (PEO) and the Cyprus Workers Federation (SEK), which together represent over 75% of the country's labour force, were able to negotiate wage settlements which represented an average 15% annual wage increase. For hotel operators, this meant that payroll as a percentage of gross revenue increased from between 28 and 35% in the early 1980s to well over 40% and, in some cases, to almost 50% in the 1990s (Andronikou, 1993b; Wood, 1998). Even more damaging, the unions also secured two rounds of three-year agreements for 199321995 and 199621998, restricting the ability of employers to respond to short-term changes in the market whilst, in the longer term, the only solution has been to reduce employment levels in the sector. In the period 199221997, average hotel employment fell from 91 to 64 sta per 100 rooms which, as suggested above, means that Cyprus is losing its competitive edge in terms of quality and service whilst remaining relatively expensive compared with other Mediterranean destinations. Thus, the inability of the accommodation sector to counter the power of the unions, primarily as a result of the structure and diversity of the industry, threatens not only the future of tourism in Cyprus but also employment levels within tourism. Eorts have been made to challenge the unions through the establishment of the new Association of Cyprus Tourist Enterprises (ACTE), a breakaway group set up to
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represent the interests of 25 larger hotels on the island. Previously, the Cyprus Hotels Association (CHA) had represented all licensed accommodation providers and had accepted the unions' demands. Nevertheless, the unions' position remains strong. For example, an island-wide strike was organised in May 1999 in support of workers striking over the contracting-out of services in two hotels (Molyva, 1999). 7. The impact of accommodation on tourism } lessons There is no doubt that the development of the accommodation sector has played an important role in the successful development of tourism in Cyprus. Equally, as this paper has shown, many of the challenges facing the future development of tourism on the island are related to the manner in which the accommodation sector has evolved in terms of scale, scope and location. What lessons, then, can be learnt from the Cypriot experience? Firstly, as was suggested in the introduction to this paper, a causal relationship certainly exists between the qualitative and quantitative characteristics of the accommodation sector and the type and value of tourism attracted to Cyprus. In particular, the rapid expansion of the self-catering sector during the 1980s ®rmly established the island as a mass-market, summer sun destination, whilst the excessive supply of bedspaces relative to demand has created, in eect, a buyers market dominated by tour operators. This experience is not, of course, unique to Cyprus. For example, during the late 1980s and early 1990s the island of Mallorca suered the eects of excessive accommodation supply with many hotel failing to break even, whilst on the Greek island of Rhodes, the price of half-board packages fell by 15% in 1993 as a result of supply outstripping demand (IFTO, 1994). However, it does demonstrate the necessity, particularly in resorts or destinations where tourism is the dominant economic sector, for the development of accommodation to be an integral element of wider tourism planning and management as both an initial and continual process. If not, short-term gains may be achieved at the expense of longer-term costs of low pro®tability, job losses and increasing dependency on tour operators. This suggests that, secondly, appropriate tourism development policies and, importantly, eective mechanisms for the implementation of such policies, should exist to guide and control the development of the accommodation sector. In the case of Cyprus, the prevailing economic situation in 1974 meant that the government permitted `uncontrolled and excessive tourism development as a way to reactivate the economy' (Kammas, 1993), yet the experience of other destinations including the Greek islands (Tsartas, 1992) and Spain (Oliver-Smith et al., 1989) point to the need for proactive state involvement in tourism development. Inevitably, the relationship between private sector entrepreneurial activity and local/national state intervention is dependent upon a variety of socio-economic and political factors (Bianchi, 1994). Nevertheless, despite a trend throughout Europe towards a diminishing public sector role in tourism ownership, planning and management, government guidance and control is necessary to ensure entrepreneurial activity is directed towards the achievement of national objectives.
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More usually, of course, in market-led, liberalised economies, the emphasis is increasingly placed upon self-regulation within the tourism production system. Therefore, thirdly and ®nally, the accommodation sector in tourism destinations should recognise and accept its role, and indeed responsibility, within that production system. In Cyprus, the desire to take advantage of government incentives and the opportunities presented by a rapidly growing tourism industry has resulted in excessive supply and, hence, falling pro®tability, diminishing quality and a reliance on powerful overseas tour operators. Moreover, the inability or unwillingness of the sector, through its established representative body, to negotiate appropriate agreements with trade unions, has further eroded the competitiveness of the Cypriot tourism industry. In a sense, the accommodation sector has shot itself in the foot. What then, are the practical solutions or ways forward? Within Cyprus it is generally recognised that greater co-operation should exist between the private and public sectors and moves were made by President Clerides in 1998 to establish a new committee made up of key industry players (Karis, 1998). However, this in itself is unlikely to produce anything other than policy statements and therefore, in reality, a combination of persuasion, regulation and centralised planning and decision-making are required. In particular, it would appear that a prerequisite to the future successful development of tourism on the island would be the creation of a central body equipped with both the necessary expertise and also the powers to implement development decisions and policies. The CTO is currently regarded as a relatively `toothless' organisation, its board largely comprised of political appointees and its function primarily the overseas marketing of Cyprus. With greater power and authority over all elements of national tourism planning and policy, including accommodation development, marketing, infrastructure programmes and air transport policy, the CTO would be able to devise and implement policies that favour overall tourism development, not particular sectors, and at the national scale. As the central body responsible for tourism development, the CTO would then be able to: *
*
*
*
*
Control all accommodation development (and, where necessary, re-development) within national requirements, enforcing existing planning laws. This would diminish the potential bias inherent in local decision making. Represent the accommodation sector in negotiations with national organisations, in particular the unions. Devise appropriate policies with related sectors, such as air transport. An immediate objective should be the relaxation of restrictions on seat-only sales on charter ¯ights and overseas scheduled ¯ights prior to the inevitable liberalisation of Cypriot air policy once the island joins the European Union. Initiate discussions with overseas tour operators to work towards more realistic pricing/product policies at the national level. Develop a series of seminars to raise the awareness of all sectors of the tourism industry, but especially the accommodation sector, of their role and responsibility in the longer-term development of tourism.
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Inevitably, the centralisation of tourism development planning and control in Cyprus would run contrary to the island's democratic institutions and processes. Nevertheless, whilst tourism continues to occupy such a dominant position in the island's economy, and whilst the accommodation sector in particular plays a dominant role in the scale and direction of tourism development, it would appear to be the most eective means of ensuring the longer-term sustainability of tourism in Cyprus.
References Andronikou, A., 1979. Tourism in Cyprus. In de Kadt, E. (Ed.), Tourism: Passport to Development? OUP, New York, pp. 2372264. Andronikou, A., 1986. Cyprus } Management of the tourist sector. Tourism Management 7 (2), 1272129. Andronikou, A., 1987. Development of tourism in Cyprus: harmonisation of Tourism with the Environment. Cosmos, Nicosia. Andronikou, A., 1993a. The hotel industry in Cyprus: problems and future prospects. Tourism Management 14 (1), 67270. Andronikou, A., 1993b. The prospects for Cyprus tourism in 1993. Cyprus Weekly, March 12218, 15. Apostolides, P., 1996. Tourism development policy and environmental protection in Cyprus. In: Sustainable Tourism Development, Environmental Encounters, Vol. 32. Council of Europe, Strasbourg, 31240. Ayers, R., 1998. Demand theory reconsidered: re¯ections on the demand for tourism in Cyprus. Tourism Economics 4 (4), 3532365. Bank of Cyprus, 1996. The Cyprus Economy in Figures. Bank of Cyprus, Nicosia. Bank of Cyprus, 1997. The Cyprus Economy in Figures. Bank of Cyprus, Nicosia. Barke, M., France, L., 1996. The Costa del Sol. In: Barke, M., Towner, J., Newton, M. (Eds.), Tourism in Spain: Critical Issues. CAB International, Wallingford, pp. 2652308. Brown, F., 1998. Tourism Reassessed: Blight or Blessing? Butterworth Heinemann, Oxford. Bianchi, R., 1994. Tourism development and resort dynamics: an alternative approach. In: Cooper, C., Lockwood, A. (Eds.), Progress in Tourism, Recreation and Hospitality Management, Vol. 5. Wiley, Chichester, pp. 1812193. Brotherton, B., Himmetoglu, B., 1997. Turkey. International Tourism Reports 1, 59281. Cockerell, N., 1996. Malta. International Tourism Reports 4, 71291. Cooper, C., Fletcher, J., Gilbert, D., Shepherd, R., Wanhill, S., 1998. Tourism: Principles and Practice, 2nd Edition. Longman, Harlow. Coursaris, T., 1998. General Manager, Capo Bay Hotel, Protaras, Personal communication. CPC, 1989. Five year development plan 198921993. Planning Bureau, Central Planning Commission, Nicosia. CTO, 199021997. Annual Reports. Cyprus Tourism Organisation, Nicosia. CTO, 1993b. Tourism Statistics 198821992. Planning and Organisation Department, Cyprus Tourism Organisation, Nicosia. Department of Statistics and Research, 1999. Tourism, www.kypros.org/DSR/key-®gures/tourism/ index.htm. EIU, 1992. Cyprus. International Tourism Reports (2), 43264. Elliott, J., 1997. Tourism: Politics and Public Sector Management. Routledge, London. Euromonitor, 1996. The World Economic Factbook 1996/97. Euromonitor, London. Gillmor, D., 1989. Recent tourism development in Cyprus. Geography 74 (2), 2622265. Goss-Turner, S., 1996. The accommodation sector. In: Jones, P. (Ed.), Introduction to Hospitality Operations. Cassell, London, pp. 21235.
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Gunn, C., 1994. Tourism Planning: Basics, Concepts, Cases, 3rd Edition. Taylor & Francis, London. Hall, C.M., 1994. Tourism and Politics: Policy, Power and Place. Wiley, Chichester. IFTO, 1994. Planning for sustainable tourism: The Ecomost Project. International Federation of Tour Operators, Lewes. Ioannides, D., 1992. Tourism development agents: the Cypriot resort cycle. Annals of Tourism Research 19 (4), 7112731. Inskeep, E., 1991. Tourism planning: An Integrated and Sustainable Development Approach. Van Rostrand Reinhold, New York. Jenkins, C., 1991. Tourism development strategies. In: Lickorish, L., Jeerson, A., Bodlender, J., Jenkins C. (Eds.), Developing Tourism Destinations. Longman, Harlow, pp. 61277. Josephenides, N., 1997. Cyprus `bargains' make no cents. Travel Weekly 1384, 11. Kammas, M., 1993. The positive and negative in¯uences of tourism development in Cyprus. Cyprus Review 5 (1), 70289. Karis, P., 1998. General Manager, Association of Cyprus Tourist Enterprises, Nicosia. Personal communication. Katsouris, P., 1998. Director of Tourism, Cyprus Tourism Organisation, Nicosia. Personal communication. Kibris, 1998. TRNC economy's years of progress. Northern Cyprus Monthly 4 (1), 627. Leontidou, L., 1998. Greece: hesitant policy and uneven tourism development in the 1990s. In: Williams, A., Shaw, G. (Eds.), Tourism and Economic Development: European Experiences, 3rd Edition. Wiley, Chichester, pp. 1012123. Lockhart, D., 1993. Tourism and politics: the example of Cyprus. In: Lockhart, D., Drakakis-Smith, D., Schembri, J. (Eds.), The Development Process in Small Island States. Routledge, London, pp. 2282246. MacNaught, T., 1982. Mass tourism and the dilemmas of modernization in Paci®c Island communities. Annals of Tourism Research 9 (3), 3592381. Mansfeld, Y., Kliot, N., 1996. The tourism industry in the partitioned Island of Cyprus. In: Pizam, A., Mansfeld, Y. (Eds.), Tourism, Crime and International Security Issues. Wiley, Chichester, pp. 1872202. Metaxa, A., 1998. Planning department, Cyprus tourism organisation, Nicosia. Personal communication. Milne, S., 1992. Tourism and development in South Paci®c microstates. Annals of Tourism Research 19 (2), 1912212. Molyva, D., 1999. Travel agents concerned over hotel dispute. Cyprus Weekly May 21227, 2. Nevin, M., Watson, G., 1993. Success factors in European tourism policy. In: ETB Insights, Vol 5. English Tourist Board, London, pp. A21231. Oliver-Smith, A., Arrones, F., Lison Arcal, J., 1989. Tourism development and the struggle for local resource control. Human Organisation 48, 3452351. PIO, 1997. Cyprus, Nicosia. Press and Information Oce. PIO, 1999. The republic of Cyprus: an overview. Press and Information Oce, Nicosia. Poetschke, B., 1995. Key success factors for public/private partnerships in Island Tourism Planning. In: Conlin, M., Baum, T. (Eds.), Island Tourism: Management Principles and Practice. Wiley, Chichester, pp. 53264. Roche, M., 1992. Mega-events and micro-modernisation: on the sociology of new urban tourism. British Journal of Sociology 43 (4), 5632600. Seekings, J., 1997. Cyprus. International Tourism Reports (4) 29254. Sharpley, R., 1998. Island tourism development: The Case of Cyprus. Centre for Travel and Tourism, University of Northumbria. Tsartas, P., 1992. Socioeconomic impacts of tourism on two Greek Isles. Annals of Tourism Research 19 (3), 5162533. Warner, J., 1999. North Cyprus: tourism and the challenge of non-recognition. Journal of Sustainable Tourism 7 (2), 1282145. Wilkinson, P., 1989. Strategies for tourism in island microstates. Annals of Tourism Research 16 (2), 1532177. Wilson, R., 1988. The impact of tourism on the economy of Cyprus. Manchester Papers on Development 4 (2), 2262243.
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Witt, S., 1991. Tourism in Cyprus: balancing the bene®ts and costs. Tourism Management 12 (1), 37246. Wood, J., 1998. President, Cyprus Hotel Managers Association and General Manager, Le Meridien Limassol. Personal communication. WTO, 1994. National and Regional Tourism Planning: Methodologies and Case Studies. Routledge, London. WTO, 1997. Tourism: 2020 Vision } In¯uences, Directional Flows and Key Trends. World Tourism Organisation, Madrid.
The in¯uence of the accommodation sector on tourism development: lessons from Cyprus Richard Sharpley University of Northumbria at Newcastle, Travel and Tourism, New Castle, UK
Abstract The qualitative and quantitative characteristics of the supply of accommodation have a direct in¯uence on the overall success and development of tourist destinations. Therefore, in order to ensure that the supply of accommodation contributes eectively to tourism development plans and objectives, it is logical that the development of the accommodation sector should be a fundamental element of the overall destination planning process. However, such an integrated approach to resort planning and management has rarely been adopted throughout the Mediterranean region. Based upon the experience of Cyprus, it is demonstrated that the failure to plan and control the accommodation sector has meant that the ocial policies for tourism development have not been achieved. In particular, the quality, quantity and coastal concentration of accommodation on the island have resulted in the transformation of Cyprus into a mass-market, summer sun destination. Moreover, the island is highly dependent on certain markets and, in particular, upon overseas tour operators. The paper concludes, therefore, that not only should the development of accommodation be integrated into the overall tourism planning process, but also that eective mechanisms for the implementation of accommodation development policies should exist in order to avoid or redress the challenges currently facing the Cypriot tourism industry. # 2000 Elsevier Science Ltd. All rights reserved. Keywords: Accommodation sector; Tourism planning; Tourism development; Tourism in Cyprus
1. Introduction Accommodation is a fundamental element of the tourism product. Not only is it `the largest and most ubiquitous subsector within the tourism economy' (Cooper et al., 1998, p. 313), typically accounting for around one-third of total trip expenditure, but it is also an essential ingredient of the tourism experience E-mail address: [email protected] (R. Sharpley). 0278-4319/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 8 - 4 3 1 9 ( 0 0 ) 0 0 0 2 1 - 9
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(Goss-Turner, 1996). The choice of accommodation re¯ects, by and large, the needs and expectations of the tourist and, as a result, both the quantitative and qualitative characteristics of the supply of accommodation services directly in¯uence the type of tourism/tourists attracted to destination areas. At the same time, however, the growth and development of the accommodation sector in particular is also intimately related to the overall development and success of tourism destinations in general. For example, the total supply of bedspaces in relation to a destination's arrivals ®gures is a powerful in¯uence on occupancy levels, pro®tability, employment in the sector, investment and the longer-term ability of accommodation providers to retain control over pricing levels. Similarly, the physical location, density and quality of accommodation, and the extent to which it is balanced with the broader development of infrastructure and tourism-related facilities, is an important element in the overall tone or attraction of tourism destinations. This, in turn, directly in¯uences the ability of destinations to survive in an increasingly competitive international tourism market. In short, the success of tourism destinations is largely dependent upon the appropriate development of the accommodation sector. This would suggest, of course, that the development of the accommodation sector should be a fundamental and integral element of the overall destination planning process. In other words, it is logical to assume that plans and controls should be in place to ensure that the supply of accommodation re¯ects and contributes to wider tourism development plans and objectives. However, it is widely recognised that, throughout the Mediterranean region, such an integrated approach to resort planning and management has proved to be the exception rather than the rule. Many destination areas have experienced rapid, excessive or inappropriate development of the accommodation sector which, in some instances, threatens the longer-term viability of the tourism industry (for example, Barke and France, 1996; Brotherton and Himmetoglu, 1997; Cockerell, 1996; Leontidou, 1998). One such destination is Cyprus.1 Despite the rapid and remarkable increase in tourism to the island, in particular during the late 1970 s and 1980 s, recent years have witnessed the emergence of a number of signi®cant challenges to the future growth and stability of the Cypriot tourism sector, challenges which, as this paper demonstrates, have resulted largely from the failure to plan and control the development of the accommodation sector. The purpose of this paper, therefore, is to argue that not only should the powerful in¯uence of the accommodation sector on 1
Since 1974, when Turkish forces occupied the northern third of Cyprus, the great majority of tourism development has occurred in the southern, Greek sector of the island. This is not to say that the Turkish sector, self-proclaimed in 1983 as the Turkish Republic of Northern Cyprus (TRNC), has not experienced growth in its own tourism industry. In 1975, fewer than 20,000 arrivals were recorded; by 1998 the TRNC was attracting 183,300 visitors, with earnings from tourism representing 23% of GDP (Kibris, 1998; Warner, 1999). However, not only does tourism in the TRNC remain far less developed than in the Greek sector but it also represents a relatively small proportion of touristic activity on the island as a whole. For example, international (as opposed to Turkish) arrivals in the TRNC in 1998 accounted for just 2.6% of total arrivals in Cyprus. Therefore, for the purposes of this paper, the discussion focuses primarily on tourism in the (Greek) Republic of Cyprus.
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tourism development be understood, but also that eective planning and control of the development of accommodation is essential to ensure the future health of tourism on the island. In so doing it identi®es a number of implications and lessons applicable to other tourism destinations. Before considering the speci®c case of Cyprus, however, it is ®rst necessary to highlight brie¯y certain issues relevant to the tourism planning process in general. 2. Tourism and accommodation: planning issues Tourism is developed for a variety of reasons. Primarily, however, it is considered to be an eective vehicle for economic and social development in destination areas (Roche, 1992, p. 566). Indeed, most countries are now tourist destinations and many `regard tourism as an important and integral aspect of their development policies' (Jenkins, 1991, p. 61). This popularity of tourism as a developmental agent is attributable to a number of factors. For example, international tourism has demonstrated consistent growth since the 1960s and recent forecasts suggest continued growth well into the 21st Century (WTO, 1997). It is seen as an eective source of foreign exchange earnings and a signi®cant generator of employment; it is also considered to have relatively low `start-up' costs and, unlike many other forms of international business, it is relatively free of trade restrictions. More cynically, perhaps, for some countries tourism represents the only realistic development option (Brown, 1998, p. 59261). Despite these apparent attractions of tourism, however, eective planning is necessary if its potential contribution to broader development is to be realised (Gunn, 1994; WTO, 1994). Not only does tourism, if unplanned or uncontrolled, frequently generate a variety of negative economic, social and environmental consequences in destination areas, but the very nature of the tourism industry, or production system, demands eective planning and co-ordination. As an economic activity, tourism is diverse, fragmented and multi-sectoral, comprising innumerable private and primarily small enterprises involved both directly and indirectly in the supply of tourism products and services. Planning is therefore essential to `ensure that all these elements are developed in an integrated manner to serve tourism as well as general needs' (Inskeep, 1991, p. 16). Above all, however, the character, scale and rate of tourism development must be planned in order to ensure that it remains a means to an end } that is, an element of a broader socio-economic development strategy } as opposed to an end in itself. Given this necessity for planning, the primary issue, particularly in the present context, becomes the question of governance. That is, it is generally accepted that some degree of state intervention in tourism development is essential (Elliott, 1997); the extent of such intervention, however, remains the subject of intense debate. Inevitably, much depends upon the political and economic framework within which tourism is being developed. For example, in less-developed economies it is likely that the state will play a more active managerial and entrepreneurial role in tourism development (Jenkins, 1991, p. 65). Conversely, in developed countries with a
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diverse, mature private sector (and where tourism is likely to make a less signi®cant contribution to overall economic activity), the role of government will focus on support and facilitation rather than direct intervention.2 In either case, however, it is the responsibility of the state to formulate tourism development policy and to provide the appropriate legislative, administrative and planning tools in order to optimise the bene®ts of tourism to the country within an increasingly competitive global tourism environment. A full consideration of the role of the public sector in tourism is beyond the scope of this paper (see, for example, Elliot, 1997; Hall, 1994). Nevertheless, it has been argued that eective public/private sector partnerships in tourism planning and development are essential in intensively developed and competitive regions such as the Mediterranean in general, and in island contexts in particular (Poetschke, 1995). Certainly, the characteristics of islands, including distance and isolation from metropolitan centres, a limited economic base and a lack of resources, represent signi®cant challenges to the longer-term success of tourism-related development policies (MacNaught, 1982; Wilkinson, 1989; Milne, 1992). Moreover, as the following case study demonstrates, a failure to implement appropriate planning and control over tourism development in order to address these challenges, in particular with respect to the accommodation sector, may militate against the longer-term health of tourism in destination areas.
3. Methodology The following case study is based upon extensive secondary research and a number of ®eld visits to Cyprus, during which open-ended interviews were conducted with key members of the Cypriot tourism industry.3
4. Tourism and development in Cyprus The development of tourism in the Republic of Cyprus has been a remarkable and well-documented success story (Andronikou, 1979, 1987; Gillmor, 1989; Ioannides, 1992; Lockhart, 1993; Witt, 1991). In 1960, the year Cyprus gained independence from British control, just 25,000 visitor arrivals were recorded; by 1998, and despite the upheavals following the Turkish invasion in 1974, the ®gure had risen to over 2.2 million. The 1980s in particular witnessed dramatic growth (see Table 1); tourist arrivals grew annually by 16%, easily outstripping the corresponding global growth rate of 4.2%, whilst receipts from tourism increased by 22% annually. 2 Research has shown that in those European countries where there exists a more proactive state involvement in tourism policy formulation and co-ordination, in particular in France, Portugal and Ireland, tourism has grown at a signi®cantly faster rate than in other countries (Nevin and Watson, 1993). 3 The author is grateful for the contribution of a number of people, in particular Thomas Coursaris, Phedias Karis, Phoebe Katsouris, Athena Metaxa and John Wood.
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In 1998, tourist receipts were well in excess of US$1800, accounting for about 54% of invisible exports and 40% of total exports. Not surprisingly, therefore, tourism has also become the engine driving the development and growth of the Cypriot economy. In 1960, the island's economy displayed many symptoms of underdevelopment and tourism, still in its infancy, contributed just 2.5% of GDP which, in 1960, amounted to CY£94.7 million. By 1995, GDP had reached CY£3905 million, per capita GDP was CY£6142 (approximately US$11,566), ranking the country 39th in the world (Euromonitor, 1996), slightly higher than Greece (US$10,500) and signi®cantly higher than Turkey (US$2,853). As a result of this remarkable growth (see Table 2), Greek Cypriots now enjoy the third highest standard of living of all Mediterranean countries after France and Italy. Tourism has also been a major factor in the maintenance of low levels of unemployment } just 3.1% in 1996 } with over 25% of the working population employed directly or indirectly in tourism. Despite this apparently healthy picture, however, a number of potential problems, all related to tourism, challenge the future economic prosperity of Cyprus. Firstly, the relatively high levels of employment on the island combined with rapid economic growth have fuelled a growth in earnings. Between 1989 and 1993, earnings grew at an average annual rate of 9.3%, re¯ected in an average 6% increase in unit labour costs. This has led to lower pro®tability and decreased competitiveness, a factor, as discussed below, that is of particular concern to the accommodation sector. Secondly, the island continues to rely heavily on imports to meet its raw material needs and to satisfy the demands of an increasingly prosperous population. As a result, the economy has become increasingly dependent upon tourism to cover its import bill (see Table 3). Table 1 Cyprus tourist arrivals and receipts 198021990a Arrivals ('000s)
World Europe Cyprus a
1980
1990
Average annual growth (%) 1980290
285,000 196,000 353
429,000 275,000 1561
4.2 3.5 16.0
Receipts (US$mn) 1980
1990
Average annual growth (%) 1980290
102,000 62,000 203
249,000 136,000 1258
9.3 8.3 23.0
Source: CTO (1990).
Table 2 GDP and per capita GDP in Cyprus 1960±1995a
GDP (CY£mn) Per capita GDP (CY£) a
1960
1965
1970
1975
1980
1985
1990
1995
94.7 162.1
142.2 240.6
234.4 381.1
267.4 432.7
693.5 1125.5
1449.0 2661
2546.1 4466
3905.1 6142
Source: Andronikou (1987); PIO (1997).
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However, thirdly and related, the future growth of tourism is itself uncertain, potentially undermining the foundations upon which the Cypriot economy has been built over the last 25 yr. In particular: The location of the island in the eastern Mediterranean renders arrivals ®gures sensitive to regional political upheavals. At the same time, internal political instability continues to in¯uence the rate and characteristics of tourism development on the island as a whole (Lockhart, 1993; Mansfeld and Kliot, 1996; Warner, 1999). Furthermore, its distance from its core northern European markets means that, on average, holidays in Cyprus are roughly 15% more expensive than in competitor destinations. Since 1992 tourist arrivals have been erratic (Table 4), with `sharp ¯uctuations in the ®rst half of the decade followed by virtual stagnation' (Seekings, 1997; p. 39). Despite the record level of arrivals in 1998, the growth in arrivals remains ¯at, the relative expense and distance from major markets and the loss of product exclusivity being oft-quoted causes (Ayres, 1998).
*
*
Table 3 Tourism, foreign exchange and balance of payments (CY£mn)a
Exports (goods) Imports (goods) Trade balance Invis. earnings (Tourism's share) Invis. payments Invisible balance Current account balance a
1980
1984
1988
1990
1993
1994
1995
172.7 381.0 (208.3) 245.7 71.7 120.3 125.4 (82.9)
307.5 720.7 (413.2) 543.6 212.0 238.1 296.5 (116.7)
301.2 777.8 (476.6) 785.6 365.0 304.8 480.8 4.2
388.0 1030.9 (642.9) 1075.5 573.0 n/a n/a n/a
387.1 1182.9 (795.8) 1326.1 698.3 480.6 845.5 49.7
432.9 1330.5 (897.6) 1463.0 810.0 533.9 929.1 31.5
510.2 1499.4 (989.2) 1506.0 810.0 619.6 886.4 (99.4)
1996 597.1 1667.4 (1070.3) 1479.0 780.0 636.9 842.1 (228.2)
Source: CTO (1993b); Bank of Cyprus (1996, 1997); PIO (1997).
Table 4 Tourist arrivals and receipts 199021998a
1990 1991 1992 1993 1994 1995 1996 1997 1998 a
Arrivals (103)
Receipts (CYmn)
1561 1285 1991 1841 2069 2100 1950 2060 2222
573 476 694 696 810 810 780 830 880
Source: CTO (199021997); Dept. of Statistics and Research (1999).
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*
*
281
Despite eorts to the contrary, the island remains highly dependent on its traditional markets, particularly the UK which, in 1998, accounted for almost 46% of all arrivals, with Scandinavia and Germany each maintaining their traditional 10% share. Whilst it is easy to explain the attraction of the island to British visitors (it is seen as familiar and safe; English is widely spoken, cars drive on the left and the currency, the Cyprus Pound, is the `same'), such dependency leaves the island susceptible to changes in those markets. Cyprus continues to suer marked seasonality of arrivals; more than a quarter of all tourists arrive in the peak months of July and August, whilst the four trough months, November2February, account for no more than 16% of arrivals. In recent years, the average length of stay in Cyprus has declined signi®cantly from an average 12.5 days in 1991 to 10.92 days by 1996. Though not unique to Cyprus2Malta, for example, has experienced a similar decline (Cockerell, 1996) } this suggests that the total annual tourist nights spent on the island decreased from around 25 million in 1992 to roughly 21 million in 1996. In short, the real volume of tourism fell by some 16%.
Of course, some of these problems lie beyond the control of the Cypriot tourism authorities, whilst others are common to many tourism destinations. However, there is little doubt that Cyprus faces a variety of self-in¯icted challenges which, as is now argued, have emerged as a direct result of a lack of planning and control with respect to the development of tourist accommodation on the island. 5. The development of accommodation in Cyprus A principal actor in the successful development of tourism, particularly since 1975, has been the Cypriot government which, in a series of Emergency Economic Development Plans, accorded high priority to the tourism sector in terms of ®nancial incentives, training and the provision of infrastructure. At the same time, extensive government ®nancial support was, and continues to be, given to the Cyprus Tourism Organisation (CTO) to market the island abroad. However, the true foundation of the rapid growth of tourism to Cyprus has been the no less rapid expansion of the accommodation sector. In 1975 there were just 3976 available bedspaces, 27% of which were located in the hill resorts, 34% in the capital, Nicosia, and roughly 38% (or 1500 beds) in coastal resorts. Ten years later there were 38,921 licensed bedspaces and latest ®gures show that, by the end of 1997, there was a total of 84,368 licensed bedspaces. Of these, 55% were in star-rated hotels and 45% in apartments, villas, holiday villages and other forms of licensed accommodation (CTO, 1997). Table 5 shows the growth in hotel and hotelapartment accommodation provision since 1985. Of particular note is the rapid growth in apartment accommodation during the latter half of the 1980 s. More recently, and following a shift in government policy towards favouring the development of 4- and 5-star hotels, it is the higher grade hotel sector that has experienced most growth. However, since 1985 the proportion
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R. Sharpley / Hospitality Management 19 (2000) 275±293
Table 5 Supply of accommodation in Cyprus 198521996 ('000beds)a,b Hotel apartmentsc
Hotels
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1977
5*
4*
3*
2*
1*
A
B
2.1 2.5 2.9 2.9 3.3 4.4 4.3 6.1 7.7 7.9 8.1 8.2 8.0
5.9 6.5 7.1 7.8 9.5 9.3 11.7 12.3 12.7 13.6 14.5 15.2 15.5
6.8 6.4 7.0 7.8 9.5 9.3 11.4 13.7 15.3 16.1 16.3 16.8 17.2
2.1 2.7 3.0 3.1 3.3 4.0 3.9 3.9 3.9 3.6 4.0 3.9 3.8
1.3 1.5 1.4 1.8 1.7 1.7 1.6 1.6 1.6 1.7 1.6 1.5 1.4
3.9 4.2 5.2 6.3 7.6 9.5 10.7 10.8 11.3 12.1 12.6 11.5 9.8
6.8 8.1 8.8 9.3 10.1 9.7 10.2 11.4 11.7 11.4 11.7 13.2 14.0
Total
28.9 31.9 35.4 39.0 45.0 47.9 49.2 59.8 64.2 66.4 68.8 70.3 69.7
a
Source: CTO Reports (198921997). Figures are rounded up and, therefore, approximate. c The CTO divides apartments into three categories. A and B are mostly used by overseas visitors; C properties, of a lower standard, serve the domestic market. Also not listed here are other forms of licensed accommodation, including tourist villages, traditional houses, tourist apartments, villas and guest houses totalling 10,200 beds in 1997. b
of total bedspaces provided by 4- and 5-star hotels has remained virtually unchanged. Moreover, in addition to ocial, licensed bedspaces must be added a further 3000 under construction, as well as unlicensed bedspaces which comprise privately owned apartments and homes rented to both domestic and international visitors on a self-catering basis. Estimates of the size of the unlicensed sector vary from 12,000 to 30,000 bedspaces (Seekings, 1997). Thus, the island's accommodation supply remains predominantly mid range hotels and self-catering (apartment and unlicensed) accommodation. A further important characteristic of the development of accommodation in Cyprus is its spatial concentration in coastal areas. Of the four main resorts on the island } Agia Napa, Paralimni, Limassol and Paphos } only Limassol possessed any tourist accommodation of signi®cance in 1975, totalling 1063 bedspaces. Since then, the south-east corner of Cyprus, including Agia Napa and Protaras, has been transformed from an isolated rural community `virtually unknown even to many Cypriots' (Ioannides, 1992, p. 722) into the island's most popular resort area. By 1997, it accounted for 40% of total bed capacity, followed by Paphos in the west with 24%, the latter having experienced a 50% growth in bedspaces since 1991. Even by 1992, it was observed that `virtually all prime sites for beach development have already been developed or are earmarked for future development' (EIU, 1992, p. 58), yet coastal development continues apace. For example, the 1500 bed Athena Hotel opened in Paphos in the summer of 1999.
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Such rapid and concentrated development has brought about a variety of well-documented social and environmental consequences, whilst placing enormous pressure on the island's human and natural resources (Witt, 1991; Kammas, 1993; Apostolides, 1996). It has also limited the potential for tourism diversi®cation into inland areas in order to spread the bene®ts of tourism more equitably. At the same time, although hotels are, for the most part, of a high quality, the speed of their development has resulted in associated resort infrastructure that falls below visitor expectations, thereby potentially diminishing the visitor experience. For example, the road between Larnaca (the main airport) and Agia Napa/Protaras remains dangerously unsuited to the level of tourist trac it receives. Thus, since the early 1980s, the accommodation sector has dramatically increased in size. The important question here, however, is the extent to which this has been in accordance with government policy. 5.1. Accommodation development and government policy Following the Turkish invasion in 1974 and the virtual destruction of the island's tourism industry, the Cypriot government initially provided signi®cant support, in the form of low-interest loans, free land for hotel construction and duty-free imports of necessary materials and equipment to encourage the development of accommodation (Ioannides, 1992). Lending rates capped at between 8 and 9% and the promise of rapid returns on investment were a particular incentive. For example, during the 1980 s, aided by the rapid growth in arrivals, hoteliers were able to pay o their loans within 324 yr (Wood, 1998). However, speci®c plans regarding the scale, location and quality of accommodation were not produced, a factor which also fuelled the development of accommodation. In Cyprus `the ideological orientation and socio-political structure lean heavily towards individualism, free enterprise, and capitalism' (Andronikou, 1979, p. 247). In other words, the entrepreneurial spirit of the Cypriots and the intrinsic value of land, both as a status symbol and for its potential economic return (Metaxa, 1998), have been signi®cant in¯uences on the desire of individuals and organisations to pro®t, through tourism, from land ownership and development. The church, in particular, has viewed tourism as an important source of income and has either sold o or developed many prime sites, especially in the west of the island (Katsouris, 1998). Thus, although the government initially provided incentives for accommodation development, it has apparently been unable to control or limit the extent to which advantage has been taken of such incentives. This is not to suggest that the government and the CTO have not recognised the potential impact on tourism of excessive accommodation development. Indeed, by the early 1980s it was accepted that excessive development had been accompanied by a lack of associated infrastructural development and environmental protection measures. Accordingly, a number of policies were introduced to limit further growth, particularly in coastal resorts. These included the limiting of loans and other ®nancing arrangements to accommodation projects in the hill resorts, to ancillary
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tourist projects and to high-grade hotels in the then relatively under-developed south-western region. Similarly, the 5 yr economic plan 198921993, in its tourism section, warned that `if the present course of development is continued, it will in the long run have serious adverse eects on the competitiveness of our tourist product in the international market' (CPC, 1989, p. 156). Subsequently, a short-lived moratorium on further hotel development was imposed in 1989, along with a new tourism policy designed to reduce bed density in coastal areas, to encourage the development of higher grade accommodation facilities, and to support the development of new establishments appropriate to their environment. The objective of the latter policy was to encourage the spatial and temporal diversi®cation of tourism through the development of new specialist markets, such as rural and conference tourism. A new land-use planning system was also introduced in 1990. Based upon the 1972 Town and Country Planning Law, this requires all developments to be considered within approved local plans for the ®ve urban districts of Nicosia, Limassol, Larnaca, Paphos and Polis, whilst the rest of the territory falls under the statement of policy for the countryside. As a result, no development (tourism or otherwise) can ocially go ahead without a permit, whilst larger projects } primarily those costing over CY£1 million } also require the preparation of an environmental impact assessment study (Metaxa, 1998). Tourism developments, in particular those within 3 km of the shore, are subject to particular scrutiny in order to maintain the natural and social environment, whilst the general objective of the new system is to control `the spatial distribution of major land uses, the enforcement of appropriate development densities . . . and the provision of necessary infrastructure' (PIO, 1999, p. 118). However, these policies have had little impact upon the development of accommodation. The 1989 moratorium, for example, proved ineective because it did not cover the large number of planning applications approved prior to its implementation, whilst the building of the luxury Anassa Hotel at Latsi on the edge of the Akamas National Park attracted signi®cant criticism as its development appeared to ¯out the new planning requirements. Thus, although there has been a shift towards the building of higher grade hotels, the overall number of bedspaces on the island increased by approximately 70% between 1990 and 1996. Moreover, much of this has occurred on the coast, with even `protected' areas, such as the Akamas peninsula in the north west of the island, being threatened with development. A number of reasons may be suggested for this lack of control over accommodation development. For example, the tourism industry in Cyprus comprises a large number of predominantly small, privately owned businesses, each seeking to survive within an increasingly competitive environment. Thus, short-term ®nancial considerations outweigh longer term, national tourism development considerations. However, it is primarily the lack of formal structures for the implementation of policies at the national level (re¯ected in a lack of authority invested in the CTO) and a multi-layered system of democratic government that results not only in decision-making according to local, as opposed to national,
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objectives, but also decisions that are based upon short-term political objectives (Sharpley, 1998, p. 47). An in-depth consideration of the political economy of tourism development in Cyprus is beyond the scope of this paper. However, the important point here is that, as a result of a lack of control, too many hotels and other forms of accommodation have been built (Karis, 1998). As the next section considers, this has had a number of inter-related and consequential repercussions on the development of tourism on the island. 6. The consequences of accommodation development 6.1. Mass market tourism A principle consequence of the rapid and, arguably, excessive development of accommodation in Cyprus has been the loss of the island's exclusivity. In particular, the rapid expansion in the supply of hotel-apartment and other self-catering accommodation facilities during the 1980s was a key factor in the evolution of Cyprus as a mass summer-sun tourism destination. It was the time when, despite ocial policy to the contrary, Cyprus started `playing the numbers game' (Wood, 1998), when the focus shifted from the qualitative to the quantitative characteristics of tourism on the island. This shift is evident in the trends in the demand for accommodation. Ocial tourism development policy in Cyprus, initially embodied in a series of 5 yr economic development plans and, more recently, in speci®c tourism development plans, has been to encourage the development of higher-star-rated properties in order to attract a higher-spending `quality' tourists (Andronikou, 1986, 1993a; CPC, 1989; CTO, 1990). During the 1980s, however, this did not occur. As Witt (1991) observes, the proportion of most nationalities of tourists to Cyprus staying in hotels fell slightly, whilst an increasing number stayed in self-catering units. This was undoubtedly linked to the increasing supply of apartment accommodation, which increased from a total of 10,700 beds in 1985 to 19,200 beds in 1990 (CTO, 1993b). Since the early 1990s this trend has reversed, with the proportion of guestnights spent in hotels rising from 59% of total guestnights in 1992 to 64% in 1996. Over the same period, the share of apartment guestnights fell from 34.1 to 29%. Again, this was linked to the supply of accommodation, with the number of beds in 4- and 5-star accommodation increasing most rapidly. Nevertheless, it has proved dicult for Cyprus to re-invent itself as a more up-market tourism destination. This can be partly explained by the fact that, although the majority of new hotels have been in the higher categories, the share of total bedspaces provided by 4- and 5-star hotels has changed little since 1985, with 3-star hotels remaining the most numerous. However, it is also been observed that `luxurious hotels alone do not attract [quality] tourism. It should not be forgotten that Cyprus is still a sun-and-beach destination' (Kammas, 1993, p. 85). Therefore, a variety of other factors has meant that many higher grade establishments have been attracting `guests of a lower
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``quality'' than is usually appropriate for such hotels' (Seekings, 1997, p. 47). The most signi®cant factor, again linked to the development of accommodation, has been the increasingly dominant role of tour operators. 6.2. The dominance of tour operators Associated with the increase in apartment accommodation and the consequential shift to mass market tourism in Cyprus from the mid-1980s onwards has been the dramatic expansion of the `package', or inclusive tour charter (ITC) market. Prior to 1986, no charter ¯ights were permitted to operate into Cyprus, primarily to protect the national carrier, Cyprus Airways (Wilson, 1988). The major British tour operators sought, albeit unsuccessfully, to use their own aircraft, but eventually it was pressure from hoteliers in Cyprus, particularly the developers of the new selfcatering accommodation facilities, that brought about the introduction of cheaper charter ¯ights. Since then, increasing numbers of charter operators servicing a large number of tour operators have started ¯ying to Cyprus; over 60 specialist and mainstream tour operators in the UK alone oer Cyprus holidays in their programmes. Restrictions remain, however, both on seat-only tickets on some charter ¯ights and on foreign scheduled carriers in order to continue to protect Cyprus Airways' interests. As a result, Cyprus receives an `extraordinarily high proportion of visitors travelling on inclusive tours' (Seekings, 1997, p. 42). Almost two-thirds of tourists travel on inclusive arrangements, with over 80% of the UK market and 100% of the Scandinavian market travelled on ITC holidays in 1997. Conversely, the potentially lucrative independent market remains severely limited. One result of this has been that Cyprus has become overly dependent upon a small number of overseas tour operators. Despite the large number of companies carrying tourists to the island, the market is controlled primarily by large, British-owned tour operators, three of which are dominant. Table 6 indicates the main operators' shares (representing 19% of all arrivals) of the 790,000 UK arrivals carried by British tour operators in 1997. Table 6 Tour operators share of UK arrivals 1997a Tour operator
Share of UK arrivals (%)
Thomson First choice Airtours Sunworld AGTA operatorsb Other operators (Independent travellers)
22 13 10 5 20 10 (20)
a b
Source: CTO (1998). Association of Greek-Cypriot Travel Agents } Greek-Cypriot-owned operators based in the UK.
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This has not always been the case. Indeed, prior to late 1994 the largest UK operator into Cyprus was not one of the majors, but Best Travel, a specialist operator. Under the Cypriana brand, Best had the capacity to carry up to 250,000 tourists a year to Cyprus, representing 25% of the British market. Moreover, as a Greek-Cypriot-owned operator largely dependent on tourism to Cyprus, the company had an interest in maintaining prices and, unusually, the majors were happy to allow Best to maintain its market share. However, the ever increasing supply of accommodation, combined with greater competition from other operators meant that Best had to start discounting. Unfortunately, the company was already ®nancially stretched by the expansion of its airline, Ambassador Airways; in November 1994 Best Travel collapsed, leaving the Cypriot market at the mercy of the majors. Since then, the island's dependency on British operators has been increased by their ownership of overseas operators. For example, extensive overseas acquisitions by Airtours, including the purchase of Scandinavian Leisure Group in 1994 and Spies in 1996, means that the company controls virtually all Scandinavian arrivals in Cyprus. At the same time, increasing concentration within the UK tour operating industry, such as the take-over of Unijet by First Choice in 1998, has further increased the power of British operators. As a result of their dominance, these tour operators are able not only to determine the characteristics and ¯ows of tourists to Cyprus but also, as discussed in the next section, to dictate accommodation prices on the island. This severely limits the ability of the CTO to achieve its long-held ambitions of attracting higher-spending, `quality' tourists from a variety of new markets, developing new products, reducing the problems of seasonality and, generally, divesting the island of its mass-market image. It also means that CTO's current policy of encouraging growth within the specialist operator market is likely to face signi®cant challenges. 6.3. Oversupply of accommodation It is now accepted that, owing to a lack of limits placed upon its development and growth, the supply of accommodation has outstripped demand. Indeed, a number of hotels in Limassol have recently been converted into oce blocks, whilst the CTO is now considering dierent incentives to encourage hotel owners to redevelop their properties for alternative uses (Katsouris, 1998). This oversupply of accommodation, however, has signi®cant implications for the future of tourism development. Evidently, it has been necessary for hoteliers to discount heavily in order to maintain occupancy levels; indeed, it was reported that, in 1997, some apartment owners were selling beds as cheaply as CY£1 per night (Wood, 1998). As a result, the hotel sector has experienced falling pro®tability, leading to job losses, a lack of investment and, hence, reduced quality and competitiveness. More importantly, perhaps, the excessive development of the accommodation sector has played into the hands of overseas tour operators. That is, certain hotels, such as the Annabelle in Paphos, the Anassa at Latsi and the Amathus Beach in Limassol, are able to set their own prices. However, the majority are dependent on
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tour operators who, given the excessive supply of accommodation, are able to dictate how much they will pay for rooms. As a result, prices in many establishments have remained relatively constant, and in some cases have fallen, since 1993 whilst operating costs have risen signi®cantly } wages within the hotel sector have, for example, risen by about 15% annually (Karis, 1998). As a result, although occupancy levels rose in 1997 following a poor 1996, `pro®ts vanished' (Josephides, 1997) and many observers commented that few, if any, hotels were making money (Wood, 1998; Karis, 1998). This problem continues to be compounded by the fact that many hotels are experiencing a trend away from full/half board to bed-andbreakfast arrangements, placing further pressure on income and pro®tability (Coursaris, 1998). Overall, this has brought about downward pressure on prices, a problem exacerbated not only by the dominance of the traditionally price-sensitive UK market but also by the fact that operators from other countries, such as Germany, are now seeking lower prices (Coursaris, 1998). Thus, although buoyant demand in 1999 and high expectations for the 2000 summer season have meant that prices have risen, eorts to redevelop a quality market and to diversify the Cypriot tourism product still face the signi®cant challenge of the necessity of ®lling existing bedspaces. 6.4. Hotel operating costs In addition to the problem of pressure on pricing, the pro®tability of hotels has also been squeezed by a dramatic increase in operating costs, particularly payroll costs, during the 1990s. Indeed, in the 5 yr 199221997, the average cost of labour in hotels rose by 94% (Karis, 1998). The success of the tourism sector during the 1980s, supporting virtually full employment on the island, provided the platform for high wage demands. Consequently, the two powerful trades union federations in Cyprus, the Pancyprian Federation of Labour (PEO) and the Cyprus Workers Federation (SEK), which together represent over 75% of the country's labour force, were able to negotiate wage settlements which represented an average 15% annual wage increase. For hotel operators, this meant that payroll as a percentage of gross revenue increased from between 28 and 35% in the early 1980s to well over 40% and, in some cases, to almost 50% in the 1990s (Andronikou, 1993b; Wood, 1998). Even more damaging, the unions also secured two rounds of three-year agreements for 199321995 and 199621998, restricting the ability of employers to respond to short-term changes in the market whilst, in the longer term, the only solution has been to reduce employment levels in the sector. In the period 199221997, average hotel employment fell from 91 to 64 sta per 100 rooms which, as suggested above, means that Cyprus is losing its competitive edge in terms of quality and service whilst remaining relatively expensive compared with other Mediterranean destinations. Thus, the inability of the accommodation sector to counter the power of the unions, primarily as a result of the structure and diversity of the industry, threatens not only the future of tourism in Cyprus but also employment levels within tourism. Eorts have been made to challenge the unions through the establishment of the new Association of Cyprus Tourist Enterprises (ACTE), a breakaway group set up to
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represent the interests of 25 larger hotels on the island. Previously, the Cyprus Hotels Association (CHA) had represented all licensed accommodation providers and had accepted the unions' demands. Nevertheless, the unions' position remains strong. For example, an island-wide strike was organised in May 1999 in support of workers striking over the contracting-out of services in two hotels (Molyva, 1999). 7. The impact of accommodation on tourism } lessons There is no doubt that the development of the accommodation sector has played an important role in the successful development of tourism in Cyprus. Equally, as this paper has shown, many of the challenges facing the future development of tourism on the island are related to the manner in which the accommodation sector has evolved in terms of scale, scope and location. What lessons, then, can be learnt from the Cypriot experience? Firstly, as was suggested in the introduction to this paper, a causal relationship certainly exists between the qualitative and quantitative characteristics of the accommodation sector and the type and value of tourism attracted to Cyprus. In particular, the rapid expansion of the self-catering sector during the 1980s ®rmly established the island as a mass-market, summer sun destination, whilst the excessive supply of bedspaces relative to demand has created, in eect, a buyers market dominated by tour operators. This experience is not, of course, unique to Cyprus. For example, during the late 1980s and early 1990s the island of Mallorca suered the eects of excessive accommodation supply with many hotel failing to break even, whilst on the Greek island of Rhodes, the price of half-board packages fell by 15% in 1993 as a result of supply outstripping demand (IFTO, 1994). However, it does demonstrate the necessity, particularly in resorts or destinations where tourism is the dominant economic sector, for the development of accommodation to be an integral element of wider tourism planning and management as both an initial and continual process. If not, short-term gains may be achieved at the expense of longer-term costs of low pro®tability, job losses and increasing dependency on tour operators. This suggests that, secondly, appropriate tourism development policies and, importantly, eective mechanisms for the implementation of such policies, should exist to guide and control the development of the accommodation sector. In the case of Cyprus, the prevailing economic situation in 1974 meant that the government permitted `uncontrolled and excessive tourism development as a way to reactivate the economy' (Kammas, 1993), yet the experience of other destinations including the Greek islands (Tsartas, 1992) and Spain (Oliver-Smith et al., 1989) point to the need for proactive state involvement in tourism development. Inevitably, the relationship between private sector entrepreneurial activity and local/national state intervention is dependent upon a variety of socio-economic and political factors (Bianchi, 1994). Nevertheless, despite a trend throughout Europe towards a diminishing public sector role in tourism ownership, planning and management, government guidance and control is necessary to ensure entrepreneurial activity is directed towards the achievement of national objectives.
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More usually, of course, in market-led, liberalised economies, the emphasis is increasingly placed upon self-regulation within the tourism production system. Therefore, thirdly and ®nally, the accommodation sector in tourism destinations should recognise and accept its role, and indeed responsibility, within that production system. In Cyprus, the desire to take advantage of government incentives and the opportunities presented by a rapidly growing tourism industry has resulted in excessive supply and, hence, falling pro®tability, diminishing quality and a reliance on powerful overseas tour operators. Moreover, the inability or unwillingness of the sector, through its established representative body, to negotiate appropriate agreements with trade unions, has further eroded the competitiveness of the Cypriot tourism industry. In a sense, the accommodation sector has shot itself in the foot. What then, are the practical solutions or ways forward? Within Cyprus it is generally recognised that greater co-operation should exist between the private and public sectors and moves were made by President Clerides in 1998 to establish a new committee made up of key industry players (Karis, 1998). However, this in itself is unlikely to produce anything other than policy statements and therefore, in reality, a combination of persuasion, regulation and centralised planning and decision-making are required. In particular, it would appear that a prerequisite to the future successful development of tourism on the island would be the creation of a central body equipped with both the necessary expertise and also the powers to implement development decisions and policies. The CTO is currently regarded as a relatively `toothless' organisation, its board largely comprised of political appointees and its function primarily the overseas marketing of Cyprus. With greater power and authority over all elements of national tourism planning and policy, including accommodation development, marketing, infrastructure programmes and air transport policy, the CTO would be able to devise and implement policies that favour overall tourism development, not particular sectors, and at the national scale. As the central body responsible for tourism development, the CTO would then be able to: *
*
*
*
*
Control all accommodation development (and, where necessary, re-development) within national requirements, enforcing existing planning laws. This would diminish the potential bias inherent in local decision making. Represent the accommodation sector in negotiations with national organisations, in particular the unions. Devise appropriate policies with related sectors, such as air transport. An immediate objective should be the relaxation of restrictions on seat-only sales on charter ¯ights and overseas scheduled ¯ights prior to the inevitable liberalisation of Cypriot air policy once the island joins the European Union. Initiate discussions with overseas tour operators to work towards more realistic pricing/product policies at the national level. Develop a series of seminars to raise the awareness of all sectors of the tourism industry, but especially the accommodation sector, of their role and responsibility in the longer-term development of tourism.
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Inevitably, the centralisation of tourism development planning and control in Cyprus would run contrary to the island's democratic institutions and processes. Nevertheless, whilst tourism continues to occupy such a dominant position in the island's economy, and whilst the accommodation sector in particular plays a dominant role in the scale and direction of tourism development, it would appear to be the most eective means of ensuring the longer-term sustainability of tourism in Cyprus.
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