VAT Reduction Keynote At Philoxenia 2010

“We would have had to change the overall tourism strategy of the country even if we were not in a crisis,” Deputy Culture and Tourism Minister George Nikitiadis (center) said at a press conference during Philoxenia. Mr. Nikitiadis referred to the ministry’s new strategy for Greek tourism and emphasized in particular on the development of alternative forms of tourism. He is pictured with President and CEO of Helexpo Paris Mavridis and President of the Greek National Tourism Organization Nicolas Kanellopoulos.

The 26th Philoxenia International Tourism Exhibition, held this year on 18-21 November at Helexpo in Thessaloniki, roughly hosted 500 exhibitors from Greece and 12 other countries (Egypt, Albania, Brazil, Bulgaria, Ghana, India, Cyprus, Russia, Serbia, Syria, Turkey, and Tunisia).

“Helexpo’s goal for this year’s Philoxenia is to give participants the opportunity to promote their destinations and services internationally and to come into direct contact with leading companies in the industry that aim for direct business agreements in the midst of the economic crisis,” according to President and CEO of Helexpo Paris Mavridis.

In an unexpected turn of events, the 26th Philoxenia International Tourism Exhibition in Thessaloniki coincided with the economy ministry’s recent announcement that accommodation facilities are to receive a VAT cut from 11 percent to the low rate of 6.5 percent. The VAT cut was a provision in the new state budget for 2011 tabled in parliament on 18 November.

“The reduction of the Value Added Tax on accommodation facilities is an investment of 200 million euros of which Greece must now capitalize on,” Culture and Tourism Minister Pavlos Geroulanos said during the exhibition’s official inauguration.

Tourism professionals said the VAT cut was perhaps the best news the Greek tourism sector had heard in years.

“The VAT reduction will make Greek tourism much more competitive, bring people to Greece and fill hotels,” the culture and tourism minister told the audience.

During his speech at the inauguration of the 26th Philoxenia, Culture and Tourism Minister Pavlos Geroulanos said the VAT reduction from 11 percent to the low rate of 6.5 percent on accommodation facilities must be accompanied by the improvement of services offered to visitors of Greece. “We have a way to get out of the crisis and the VAT reduction will help us buy time, but it will not solve our structural problems as this depends on us and only us,” he stressed.

However, the minister emphasized that the VAT reduction would not solve all of tourism’s problems and he urged the sector to help the government “inform customers of the reduction to increase tourist arrivals.” He added that professionals must ensure that their services would bring visitors back to Greece and that the visitor experience in Greece be unique and worthy of the money spent.

“We must build a strong identity for our country and support it in any way with everything we do,” he added.

According to the first estimation of the Institute of Tourism Research and Forecasting (ITEP), the recently announced VAT reduction would contribute at least 630 million euros in revenue from incoming tourism to Greece.

As expected, the announcement of the VAT cut on accommodation facilities (from 11 percent to the low rate of 6.5 percent) was the main topic of discussion at Philoxenia and was mentioned throughout all parallel events.

“The VAT reduction is a major ‘weapon’ to enhance the competitiveness of Greek tourism and make Greece equal with other countries which already have a low VAT rate,” Deputy Culture and Tourism Minister George Nikitiadis said during a press conference for Greek journalists.

GTP’s Publisher Maria Theofanopoulou brought important issues concerning the travel industry to the attention of Deputy Culture and Tourism Minister George Nikitiadis who agreed on their significance. Among them, the submission and approval of ferry schedules in a timely manner and the necessity of replacing paper tickets with electronic tickets.

However, the deputy minister clarified that “unfortunately” the VAT would not be reduced on other sectors of tourism (travel agencies for example). He added that he hoped hoteliers would properly take advantage of the VAT reduction and improve their competitiveness.

Throughout the press conference, the deputy minister appeared very optimistic in regards to figures for Greek tourism in 2011.

When asked to give an estimate for next year, Mr. Nikitiadis referred to a five percent increase in arrivals and overnights, as well as an increase in revenue.

The deputy minister made special reference to agritourism and noted that, in cooperation with the Agricultural Development and Food Ministry, a bill is under preparation for the long-awaited development of this form of tourism.

He also referred to the tourism potential of Thessaloniki as “a city of culture staging” and focused on plans to promote and advertize Greece to target markets.

At this point he analyzed the ministry’s new promotion program entitled “Thessaloniki Cultural Crossroads,” which is still in its planning phase.

The program sees the Greek city hosting a geographical region every year for five years. The first culture to be featured will be that of the Middle East in 2011 followed by Eastern Europe (2012), China (2013), Russia (2014) and USA (2015).

With the mention of Russia, one of Greece’s major target markets, Mr. Nikitiadis emphasized that if visa procedures are simplified a sharp increase of Russian tourists to Greece would be noticed.

“Some 300,000 Russians visited Greece this year and this number could increase significantly if visa centers are set up in 10 major Russian cities,” he stressed.

Travelport-Worldspan’s Country Manager for Greece Leonidas Zotos (center) with his team. Visitors were informed in regards to Travelport’s plans for direct services to travel agencies connected to the Galileo system in Greece and Cyprus as the distribution agreement it currently has with Galileo Hellas will end on 31 December 2010. Travelport’s stand won a special award by Helexpo.

In addition, he said measures for the development of marine tourism are in the works to facilitate cruise ship access to the Greek islands. Legislative initiatives for the development of religious tourism, mountain climbing tourism and spa tourism are also under discussion.

The deputy minister also focused on the lack of legislation in regards to seaplanes and informed that he was in contact with the appropriate ministry on the matter.

During the press conference, a journalist questioned the deputy minister’s optimism and pointed out that some hotels have already suspended their operations as a result of the crisis.

Mr. Nikitiadis said that this was “a sign of the times” and added that there are applications for the opening of at least 100 new hotel units with even more beds than those already lost.

According to research by the Institute of Tourism Research and Forecasting (ITEP), during the first 10 months of the year, Greek hotels presented an 11 percent decline in turnover compared with the corresponding period of last year, during which the percentage reduction reached some 12.6 percent compared to 2008.

ITEP’s recent study on “Developments in the fundamentals of the Greek hotel market for the years 2009-2010” showed that the global tourism market “bounced back” during the first half of 2010.

Data from the World Tourism Organization showed that international arrivals increased by seven percent during the January-June period and said the trend was expected to continue during the second half of 2010.

The best tourism performance was achieved by the Middle East, Southeast Asia, North Africa and the United States.

Olympic Air’s Sales Manager Greece Panagis Vassilatos (fourth from right) and his staff welcomed Deputy Minister George Nikitiadis, GNTO President Nicolas Kanellopoulos and Helexpo President Paris Mavridis during their tour of hall 15 at Philoxenia. The airline’s stand won an award for best creation.

In Europe the increase was some two percent and 2.5 percent in Mediterranean countries.

Data showed that Greece’s competitors benefited from the recovery of the international tourism market. Turkey recorded an increase in arrivals of 5.1 percent during the first eight months of 2010 while Italy and Croatia saw a 3.3 percent and 2.7 percent increase, respectively, in arrivals during the first seven months of the year.

As for tourism revenue, Portugal saw an increase of 8.6 percent.

“In Greece the market once again moved downwards,” according to ITEP. Foreign arrivals at Greek airports were slightly lower by 0.3 percent in the first 10 months but revenue dropped 7.3 percent according to the Bank of Greece. According to ITEP, this resulted in a price reduction in Greek hotels in 2010.