Greece's woes and an ailing euro could be boon for travelers

By Kenneth Kiesnoski

Despite the havoc it has wreaked with world financial markets, the ongoing economic crisis in Greece may bear gifts for vacationers and the tour operators and travel agencies that sell to them.

The International Monetary Fund and European Union are bailing out the Greek government with a $140 billion rescue package, and it is widely expected that the country’s economy will contract by some 2% this year and a further 1% in 2011.

But as a condition of the bailout, Greece must make drastic budget cuts, which could result in lower prices for U.S. visitors.

"Greece is in a very bad situation, but for leisure travelers this might be a good thing," said Alexander Kontogouris, a spokesman for the Greek National Tourist Office in New York. "Prices are going down, and the level of competition is very high. That’s the good part to all this. Everybody’s trying their best, especially on the touristic islands, such as Mykonos, Crete, Rhodes and the Dodecanese."

Further aiding U.S. travelers throughout the euro zone is a weakened currency. Battered by the Greek crisis as well as investor worries about Spain, Portugal and Ireland, the euro has been depreciating against the dollar, hitting a 12-month low of $1.26 on May 13. The E.U. and the IMF have pledged nearly $1 trillion in stabilization funds to prop up the ailing currency.

Leftheris Papageorgiou, president of the Hellenic Adventures travel agency in Minneapolis, said, "The irony of this is that thanks to Greece, Europe has become cheaper because of the [negative] effect on the euro."

With regard to Greece itself, Papageorgiou said he thinks the destination "will be a better value this year, next year and probably the following year than it was before."

Consulting the oracles

Some stateside tour operators specializing in Greece say they haven’t yet seen a drop in prices, but they anticipate that will change soon.

"I expect that starting this summer and especially the fall, we’ll see a lot of specials and good rates for Greece," said Koray Edemen, president of Key Tours in Fairfax, Va. "So we’re already planning to run specials."

Others aren’t so sure.

"I certainly hope it will have an effect on the pricing, and one would expect there to be," said Ronen Paldi, president of Portland, Ore.-based Ya’lla Tours. A few Greek suppliers, he said, "don’t think there’s a need to reduce prices" because they assume "there will always be a demand for their product, and so they act like there’s no tomorrow."

If suppliers do begin to discount, Ya’lla’s consumers might not notice it this year, Paldi added.

"Ya’lla’s policy is that once we publish a rate — and for Greece, we usually publish rates in December or January for the rest of the year — we do not change prices," he said. "Remember, when prices went up due to [a strong] euro, we kept our own prices the same."

In contrast, at Key Tours the situation is "changing day to day," Edemen said.

"We need to work aggressively with the suppliers," he said. "And if there’s a period they need help — and I think they’ll need help even in summer, which is normally a busy time — our rates in 2010 for the rest of the season will be cheaper than when we started at the beginning of the year. It’s just supply and demand."

Hellenic Adventures’ Papageorgiou said he has already seen a few examples of discounting. For example, a four-star motor yacht in Greece that once chartered for 4,500 euros (about $5,800) a day is now going for 2,500 euros (about $3,225).

But hotels in particular are starting to add value rather than lower rates, at least for now.

"Very few among my contacts are outright reducing their rates for summer and fall this year," he said. "Hotels belatedly have gotten the message, and so now when clients stay three nights they’re getting the fourth free, or the hotels are adding [complimentary] dinners or transfers.

"But my speculation is that all this pressure will force them to eventually either reduce prices further or to add on even more freebies."

German resentment

It remains to be seen how tourist arrivals will be affected by the economic crisis, the E.U. bailout and related events on the ground, such as recent worker strikes and deadly anarchist rioting in Athens.

Greece welcomed 18.75 million tourists in 2007, according to the Hellenic Statistical Authority in Athens. Tourism and travel generates about 17% of gross national product, and altogether, affiliated industries employ some 25% of all Greek workers. So any significant dip in annual arrivals could significantly affect the success of Greece’s economic recovery.

"Tourism is major income for Greece," said Key Tours’ Edemen.

And the raw numbers suggest the sector is coming back strongly. Kontogouris of the Greek National Tourist Office said Greece had been recording an increase in foreign arrivals this year, compared with 2009. As the global recession began in 2008, the country saw a small contraction in arrivals, followed by a larger decline of nearly 10% last year.

"But we’re now approaching the numbers we saw in 2008," he said. "And we hope 2010 will turn out to be even better than 2007."

Greece’s image, however, has taken some hits on the global stage in recent weeks that could affect some people’s travel plans.

For example, Germans account for 10% to 15% of Greece’s visitors, and many now are upset at having to foot the bill in the current euro crisis. In fact, Germany’s ruling Christian Democrats lost their parliamentary majority in May 9 regional elections, and many pundits blame Chancellor Angela Merkel’s backing of the bailout for the party’s setback.

"Many Europeans are upset with the Greeks, and so they’re not traveling to Greece this year, which is bad for a Greek economy in such sad shape," Edemen said.

Some 2.3 million Germans visited Greece in 2009, according to Germany’s national tourist office. This year, German bookings to Greece are down 6% compared with 2009, having fallen 12% in April alone, Nuremberg-based research firm GfK AG reported.

But Edemen added that he thinks Americans are a "loyal clientele."

"In fact, I believe Greece will be one of our top-selling destinations for this fall. We’re just waiting for things to settle, and then we’ll begin to promote," Edeman said.

Concerns about political unrest

After austerity measures were announced at the beginning of May, Greece was rocked by several days of sometimes-violent street protests in Athens. Events culminated with the May 5 deaths of three bank branch workers in a fire set by unidentified anarchists in the Greek capital.

The highly publicized protests and deaths led to a wave of calls to the Greek tourist office and tour operators and agents from concerned travelers, as well as a few postponements and cancellations.

"We have been getting phone calls from prospective travelers concerned about what’s been going on in Greece," Kontogouris said. "I would say some media have been exaggerating a little bit in terms of the extent of the [recent] protests.

"I’m not saying that certain areas of Greece weren’t problematic [this month], but it doesn’t mean that the whole country’s been at war."

At the height of tensions, Ya’lla Tours put into action pre-existing contingency plans for customers, according to Paldi. Clients were contacted, reassured and directed to safe areas. They were also furnished with a local Greek phone number for problems.

"Everyone paid attention to what we said, and our [customers] were not exposed to anything," he said. "We’re still monitoring what’s going on very closely."

Key Tours, which received some inquiries from concerned customers, according to Edemen, gave clients departing for Greece within two weeks the option to change or postpone trips without penalty.

Papageorgiou at Hellenic Adventures said he’d had no cancellations and only one postponement. In that case, he said, "My client did not want to be caught up with strikes or be locked out of the Acropolis. He had some important and legitimate concerns."

Of greater concern to Papageorgiou is the impact the Greek crisis and ensuing unrest might have had on potential business that will now be lost.

"What I don’t know at this point," he said, "is the number of people who could possibly have called us and signed up, who instead said, 'Forget Greece this year. We’ll go in 2011 or 2012.' "

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