Greek Riots Threaten to Scare Tourists Key to Economy

www.bloomberg.com | By Armorel Kenna, Natalie Weeks and Mary Childs

May 6 (Bloomberg) -- The protests and riots in Athens threaten to undermine tourism, one of Greece’s few growth industries and the country’s best hope of easing the pain of its unprecedented austerity program.

“People will think twice about going to Greece,” said Ian Gamse, a director at London-based Otus & Co., which advises Marriott International Inc. and Hilton Worldwide. “People who have booked are going to start calling their tour operators. If Greece can’t get the situation under control, it is going to be a big problem.” 

The demonstrations, which left three people dead and four buildings burned yesterday, come as the spring tourist season is getting under way. Tourism accounts for about 16 percent of Greece’s gross domestic product and about one in five jobs, according to estimates by the London-based World Travel and Tourism Council.

Greece’s GDP will decline 4 percent this year and 2.6 percent next year, according to the Finance Ministry. European Union Economic and Monetary Affairs Commissioner Olli Rehn said yesterday that the austerity measures Greece agreed to for its May 2 bailout package will deepen the contraction by 1 percentage point this year and by 2 percentage points next year.

Wage, Pension Cuts

Prime Minister George Papandreou accepted the measures in return for 110 billion euros ($141 billion) in funding from the European Union and the International Monetary Fund. Union groups have called the austerity plan “savage.” 

Three people died in a fire in Athens set by breakaway self-styled anarchists yesterday during a general strike, the third this year, called against a second set of wage cuts and tax increases. Demonstrators trying to gain access to the parliament building clashed with helmeted and padded riot police. Tear gas was fired at another crowd that threw rocks and set trashcans on fire at the central bank building. 

The violence made Megan McCulla, a 24-year-old who works in marketing at West Virginia Junior College in Morgantown, West Virginia, consider canceling her vacation plans. She and her husband had bought tickets to spend 10 days on the island of Patmos. 

“My mom’s called me, my dad’s called,” McCulla said in a telephone interview. Her husband was worried, she said, that “if we do go there and it heats up again we might get stuck. We may not go.”

Wooing Germany

Even before yesterday’s riots, the Association of Greek Tourism Enterprises was planning a public-relations initiative to counter the effect of weeks of strikes and protests. Its first target: Germany, where public resentment has been rising against the government’s contribution to the bailout package. 

Nikolaos Kanellopoulos, head of Greece’s National Tourism Organization, will lead a committee to monitor the country’s image as a holiday destination and booking levels, according to an e-mailed statement from the Athens-based tourism and culture ministry today. The committee will also keep the media informed. 

Deputy Culture and Tourism Minister Angela Gerekou asked the EU to ease visa requirements on April 15, according to the state-run Athens News Agency. The next week, Gerekou called for a freeze on hotel prices. Greece may lift the ban on non-EU flagged cruise ships docking at its island ports, Gerekou said on April 21, according to ANA.

Safety Concerns?

While hotel rates across Western Europe are up from last year, Greece has increased 4 percent while France is up 14 percent, according to Dan Toporek, a spokesman for Travelocity.com Inc., an online travel agency based in Southlake, Texas. 

The negative headlines may be an initial deterrent for travelers concerned about safety, said Drew Patterson, chief executive officer of Jetsetter, a private luxury discount agency based in New York. 

“Consumers do read things in the press and they do respond,” Patterson said in a telephone interview. “When things blow up, when there’s negative news in the press, that will slow down the booking pace.”

The dollar has gained 11 percent against the euro this year, making it cheaper for Americans to travel to Greece. The euro, which last year strengthened to as much as $1.51, dropped below $1.29 yesterday for the first time in more than a year. 

The yield-premium investors demand to buy Greek 10-year bonds comparable to German debt widened to 776 basis points today. The ASE general benchmark index rose 1.4 percent to 1,685.45 at 4:52 p.m. in Athens trading.

Falling Occupancy

The violence came as tourism was showing indications of increasing. Passenger arrivals at Athens International Airport SA rose 10 percent in the first quarter. Revenue from tourism climbed 1 percent in the first two months of the year to 202.9 million euros, according to Bank of Greece data. 

In Athens, though, there were signs the crisis was keeping tourists away. Hotel occupancy in the city fell 1.4 percent in the year through March, according to STR Global, a London-based research company. 

Travel providers are cutting prices to Greece. STA Travel, the world’s largest student travel agency, reduced prices for its Greece packages as much as 30 percent. 

German “bookings for Greece are underperforming other summer bookings and this trend has accelerated in April,” said Doerte Nordbeck of the market research institute GfK AG in Nuremberg. 

GfK analyzes data collected from 1,200 representative German travel agencies. Summer bookings are down 6 percent for Greece and fell 12 percent in April, both compared with the same period a year earlier. 

Alexander Rusch, a 57-year-old worker at a Kerrygold Co Ltd. factory near Dusseldorf, said in an interview that he and his wife had considered vacationing in Greece for the first time this year. 

“We decided to go to Mallorca once again because of all the frightening news we saw on TV,” he said.