Mediterranean Countries Hit By Downturn

European holiday destinations are suffering the economic crisis this summer as Greece, Portugal and Spain weather the brunt of one of the worst tourist seasons in years.

Arrivals at Mediterranean destinations have been down 10%, greater than the 8% slump in worldwide tourism.  Revenue is also plunging, with hotels slashing prices as visitors seek bargain holidays and shorter stays.

It is estimated that there is 10 million fewer tourists and over $20 billion in lost income forecast this year by the World Travel & Tourism Council, who believe this could cause serious financial problems for businesses that depends on the busy May-to-September tourist season for their livelihoods.

Last month, Spain announced a second plan to support the tourism sector, valued at €1.03 billion and the Italian government has thrown €1.6 billion at the struggling sector.  Greece has introduced a range of tax cuts and subsidies to its travel industry.

However many analysts say that the situation may be bad at the moment, nations are yet to see the economic effects of the crisis.

“We are seeing a multifaceted impact from the crisis on the tourism sector and there will be a variety of consequences,” said Marko Mrsnik, an associate director at credit-ratings agency Standard & Poor’s. “These include employment consequences, consequences on the creditworthiness of households and companies in the sector and their ability to pay their debts, and it will certainly have an impact on government revenues.”

Approximately 19,000 tourism-related jobs have been lost in Greece and it has been estimated to be as high as 150,000 have been lost in Italy, with many hotels keeping their doors shut in August.

Foreign exchange rates are also adding to the crisis, with the relative strength of the euro against the pound and dollar also mean that the Mediterranean countries are less competitive than destinations outside the EU.

“Looking at the Mediterranean overall, what we are seeing is that the euro-area countries are feeling the impact more than the non euro-area countries,” said John Kester, chief of market trends research at the Madrid-based UNWTO. “Certainly on a value-for-money basis, countries like Turkey, Tunisia and Morocco have done comparatively better than Southern Europe.

Thanks to the Wall Street Journal for the above quotes.