Greece faces bleak tourism forecast

It's been a dreary spring in the coffee shops and cobbled streets of this city's historic quarter. Instead of the normal flood of tourists, there's been a persistent trickle of unseasonable rain.

Kosta Koukios's family owns several stores here where he sells handmade, 22-carat gold replicas of ancient jewelry. But this year, with the economic crisis hitting the tourist industry hard, no one is buying.

"Jewelry is not something small that costs 50 or 100 euros," he said, as he sat in one of his empty stores. "So, we're hurting even more than hotels and restaurants. Business is down about 70 percent."

Across Europe, and especially in the sunny seaside resorts lining the Mediterranean, the mood in the tourist industry is grim as the peak summer months near.

The United Nations World Tourism Council reported May 12 that the number of international tourists traveling in the first two months of the year declined 8 percent compared with last year, with European, Middle Eastern, and Asian destinations being hit hardest. Many destinations in Europe are reporting even steeper declines.

In Athens, hotel bookings for the first quarter of 2009 were down 20 percent from last year, according to the Attica Hotel Association. In Spain, the number of foreign tourists is down 16.3 percent so far this year, while in Cyprus, revenues from tourism declined 12.8 percent.

"It's not a problem only for Greece: it's also for Spain, it's for Portugal, it's for Italy, too. All over, Europe is facing a problem from this crisis," says Lyssandros Tsilides, of the Hellenic Association of Travel and Tourist Agencies. "We hope it will go down only 10 percent, that we will pick up new business from last-minute bookings."

The big test will come during the crucial summer season. Many communities, especially around the Mediterranean rim, rely on summer tourism to support them for the entire year. And in Greece, hoteliers and tourist agencies are reporting 20 to 30 percent declines in summer bookings.

The Greek island of Rhodes is famous for its sunny beaches, medieval walled city, and pretty Cycladic villages. Last year, more than 1.2 million people visited. The economy of the entire island, home to about 120,000, depends almost entirely on tourism. Usually, the tourist season on Rhodes begins at Easter, with most hotels opening their doors in April and closing them again in October. But this year, many hotels on Rhodes are opening late, hoping to cut costs by staying open only during peak months.

"It is a very difficult year," says Adonis Cambourakis, whose family owns two five-star hotels on Rhodes. "So many hotels decide to stay closed in order to spend less money in times they don't earn money."

The tourism industry, on Rhodes and across the Mediterranean region, has exploded in recent decades. The current crisis is coming after a long period of extended expansion. On Rhodes, for example, there were only 12 hotels in the 1950s. Now, there are more than 500. This year alone, five new five-star hotels are scheduled to open on the island.

European countries like Greece are also facing increasing competition from cheaper Mediterranean destinations outside the Eurozone, like Turkey and Croatia. Some analysts predict these newer tourist destinations may benefit from the economic crisis, because their weaker currencies allow them to offer lower prices.

For Greece, tourism is a vital industry. At least 18 percent of the country's GDP comes from tourism and the industry employs 1 in 5 Greeks – more than any other industry.

Athens tour guide Alexandros Kotzamanoglou is anticipating a bleak summer. He's already had a number of groups cancel trips. And he has fewer requests for half-day and day-long tours of Athens – evidence, he says, that the tourists who are coming are trying to economize.

"We're already feeling the effects," he says.

And Mr. Koukios says he's already had to lay off employees. His family, which owns three stores and produces much of their jewelry themselves, employed 22 people last year. Now, they're down to 15 and he says further cuts could be ahead if the crisis continues. "We have already lost for this year," he said. "But we don't think things will recover for another two years."

"We are just hoping to survive."