News in the past week has been bleak for the Cyprus tourism sector. Even the cautious predictions of a 75% decline in arrivals this year will not be met. The “quick fix” of offering free Covid-19 tests upon arrival is sensible and should be adopted. But it will not fix the longer-term problem, namely that the tourism market has changed in ways that Cyprus is not quite ready for.

The first hard truth is that “bucket shop tourism”, aimed at low- to middle-income tourists, is probably dead. The entire business model depends on high volumes and low prices. While many businesses will continue slashing prices to maintain some business this year, the low-cost model is not financially sustainable when the volumes are simply not there. When the state aid runs out, many more airlines, car rental companies and travel operators will go bust.


Wave good bye to the bargain-basement tourist

Fewer players in the international travel market means less competition; less competition means higher prices. Throw in the cost of Covid-19 tests, which we should assume are here to stay for a long time, and it is clear that the whole business of travel just got more expensive.

Higher prices will therefore squeeze out the bargain-basement tourist. This matters a great deal for Cyprus, because more than half of all tourist arrivals come on package holidays according to the Statistical Service, Cystat. Larnaca and Ayia Napa are especially vulnerable. According to the latest data from Cystat (2016), hotels of 3 stars and below accounted for 83.4% of all tourists to Larnaca and 68.7% of all tourists to Ayia Napa.

So how do we get out of this? Answer: the only way is up. Reliable tourists for the next few years are going to be those on higher incomes. I do not mean millionaires. But I do mean the kind of traveller who picks an airline for the convenience of the airport, not the price of the ticket; who would happily pay for private Covid-19 tests if it means a sunny half-term holiday in October; who will probably enjoy travelling more in future because they no longer have to mingle with their rowdier compatriots.

I have plenty of self-made UK friends who would fit this category. They will holiday frequently in Greece, they will have Christmas in Dubai, they will even fly for a long weekend to shop in New York. But while they might come alone to Cyprus to see me, they don’t bring their families to holiday here.

Why is this? After bugging them with questions, I think I have come up with the answer. It seems that, despite the millions of euros spent on building marinas and upgrading the hotel offering over the past 5-10 years, despite the great cuisine, the charming people and the Mediterranean sunsets, Cyprus still doesn’t quite conjure up the “posh resort” image. Maybe it is simply a matter of marketing: adverts targeting Mumsnet, The Times and The Guardian, instead of the Daily Mail, The Sun and Daily Express.

Reorient to the well-heeled tourist

But they also gave me some other tips on what the resorts they visit do offer. Many of these can be implemented in Cyprus right now. The one that struck me most was the recommendation for childcare. Importantly, this does not mean poorly paid domestic workers on €330 per month. It means fully qualified nannies, so that parents can confidently get some time out: go surfing, go shopping, have a romantic meal.

High-quality beachwear and souvenirs

A second recommendation was “posh” beach shops. Interestingly, they did not mean designer-label handbags and they certainly did not mean those same-old-shop malls with their cacophinic acoustics. They meant boutiques with floaty white tops, kaftans and authentic-looking basket bags, not the “pile ‘em high and sell ‘em cheap” stores.

This also suggests that on every beachfront we should have a Cyprus Handicraft Centre (or shops licensed to sell their products from exclusive glass cases). The Handicraft Centre offers really high quality souvenirs but you can only find them on a busy road in a non-beach town.

The third recommendation is the one that will make me unpopular: the need to deal with the bad publicity that came with the Ayia Napa rape case. It struck a chord. It made a country with one of the lowest crime rates in Europe feel unsafe. My friends said they would not let a teenage daughter holiday in Cyprus. I do not know how one undoes a bad reputation like that. But perhaps one could offer a tourist hotline/app, with guarantees that the person who will interview you will be a woman highly trained in dealing with abuse cases.

A fourth personal recommendation is to stop demonising those who rent out private accommodation. Make it easy to register as an establishment and pay tax online. Treat it as a proper business with proper taxation and deductions, instead of an outdated rental income model that takes no account of running costs.

Finally, for the longer term, as I have spoken about elsewhere, we need to get ready for the Greta generation – the ones who will expect to stay in zero-carbon buildings, take public transport powered by green energy and to eat locally sourced, sustainable food.


The role of the government

Some of these recommendations could be implemented right now, by diverting advertising funds to the right kind of demographic, or licensing high-quality shops to sell Cyprus Handicraft Centre souvenirs. Training policewomen will take longer but ought to take months, not years, to get in place.

Other measures, like converting the beer-and-English breakfast joints to authentic organic cuisine,  getting more establishments listed on Scott Dunn or getting any at all listed on Neilsen, could in theory be done fairly quickly, but will require encouragement and government support.

The funds are there to do this. The government has issued €2.75 billion in long-term bonds since April, or around 13% of GDP. Data to the end of May suggest it has so far spent very little of it. A rapid upgrade of small establishments while there are few tourists anyway will help lay the foundation for recovering lost tax revenues.

Let’s pinch some ideas from the posh Greek resorts. This island has so much to offer the well-heeled tourist. It is an opportunity that should not be missed.

Fiona Mullen is the Director of Sapienta Economics.