2016 GSTC European Regional Meeting:
Presentation of Dimitris Malliaropulos, Chief economist, Bank of Greece

It is a great pleasure to be with you today and I would like to thank the organizers for inviting me. I will share with you my thoughts on sustainability in European tourism with particular emphasis on challenges related to climate change and the role of sustainable tourism in Greece’s new growth model. I will also report on a number of initiatives of the Bank of Greece which aim at addressing risks resulting from the changing climate and promoting adaptation strategies in affected sectors, including tourism.

Sustainability building is the key to the long-term success of tourism as a product and as a sector which is important in Greece both in terms of value added and employment. Creating the conditions for sustainable development is more than evident in the current context in order to ensure that we meet the needs of the present without compromising the ability of future generations to meet their own needs — thus creating what we call in Greek «αειφορία», the condition of ever- bearing resources.

The current situation
Following six years of painful adjustment, the Greek economy is currently recovering from a deep and long-lasting recession which has led to a drop in GDP by 25% and a rise in unemployment to more than 23% currently, most of which is long-term unemployment. Recently we have seen signs of positive growth and we expect this recovery to gather momentum over the next quarters.
The Greek economy needs to be rebalanced towards a new extrovert and sustainable growth model which will focus on the production of tradable goods and services, exports and investment.
The economic and social challenges related to this rebalancing of the economy are combined with the environmental challenge of climate change, which will have a considerable negative impact on many sectors in Greece, including tourism.

According to estimates of the Bank of Greece, climate change will lead to lower productivity, loss of capital and additional expenditure for damage repair.

Biodiversity, ecosystems and human health will all be negatively affected. In particular, under a scenario of no action, the cost of climate change for the Greek economy until the end of the century is estimated to reach 700 billion euro, which is four times current GDP.

Consequently, given the environmental, economic and social challenges, we urgently need a holistic approach to strategic sustainability building.

The role of tourism in the Greek economy
In this context, tourism has a key role to play. Tourism is by definition an extrovert industry, has been comparatively less hit by the recession and has thus preserved its productive capacity, while from 2013 onwards, it has also shown remarkable growth performance.

The tourism sector in Greece represents a sizeable share of income. In 2015, Greece welcomed 26 million tourists and travel receipts contributed directly about 8% of GDP, compared with 5% in 2008. In terms of macroeconomic multipliers, various studies estimate that every euro in tourist spending adds between 2.2 and 2.6 euro to GDP, suggesting that the total (direct and indirect) impact of the sector on the economy is much larger than 8%. Research also suggests that the sectors which benefit the most from the development of the tourism product are trade, financial services, property management, construction and manufacturing.

Today, tourism as a business activity is being modernised, and the quality of the tourism product is being improved: search for new markets, promotion and exploitation of the cultural product of Greece, new innovative units, promotion and development of the country’s cities.

Yet there is still a lot to be done in the direction of sustainability building.

Studies and surveys conducted by the Bank of Greece
The Bank of Greece recognizes the importance of tourism to the Greek economy and understands that timely and objective information on the development of tourism- related aggregates is essential for fulfilling its mandate. We attach great importance to the collection of reliable and comparable statistics over time on the tourism sector.
Since 2002 the Bank of Greece conducts the Border Survey, aiming to record traveler flows and to calculate travel expenditure in Greece.

Along the Border Survey, in 2012, the Bank of Greece launched a more focused Cruise Survey. This survey, unique in Europe, relies mainly on administrative data from 16 major ports that account for about 85% of total cruise traffic, which – starting from this year – will be enriched with data from targeted sample surveys.

Further to these regular surveys, in 2009, the Bank of Greece has set up the Climate Change Impacts Study Committee, which has been working since then on the impact of climate change and the adaptation strategy for the country as a whole and the tourism sector in particular.

As shown by the 2011 report of this committee, climate change is gradually shaping a new environment for Greek tourism. Its physical impact is expected to significantly affect the tourism industry both in the medium and long term, aggravating some of its chronic weaknesses, yet also highlighting new growth possibilities.

In October 2014, the Climate Change Impacts Study Committee published a second report entitled “Greek Tourism and Climate Change: Adaptation Policies and New Growth Strategy”. This report investigates the implications of climate change for sustainable growth and total quality management in tourism. It also attempts to quantify the cost of climate change on tourism, by considering alternative sea level rise scenarios.

The findings show that climate change has both direct impacts (such as the rise in temperature) and indirect impacts (such as the damage to coastal tourism infrastructure) on the sector. Some of the various negative impacts of climate change could lead not only to a drop in the number of tourist arrivals, due to increased thermal discomfort during the summer months, but also to higher operating costs for tourism businesses, as a result of greater energy needs, new infrastructure construction, etc.

Finally, the Report presents the sector’s strategy and action plan for addressing the impacts of climate change, with a focus on growth policies and the challenges faced by Greek tourism, especially in the islands.

Against this background, it is clear that any long-term tourism strategies need to address, among other factors, climate change, which is emerging as a key parameter for the sustainability building of the sector. To this effect, the “National Adaptation Strategy to Climate Change”, drafted in 2015 by the Climate Change Impacts Study Committee, sets out the general objectives, guiding principles and implementation tools of a modern, effective and growth-oriented adaptation strategy in line with EU directives and international experience. This strategy went under public consultation and was voted into law by the Greek Parliament in August 2016.

Recent developments
In 2016, Greek tourism faced a number of external challenges after a number of record years in terms of arrivals and receipts. Economic weakness in Europe, the refugee crisis, the British referendum and increased fears of terrorism have somehow discouraged visitors.

Tourism stakeholders in our country have tried to respond to these external challenges by redoubling efforts to attract visitors. The number of arrivals has thus remained on an upward trend in 2016 as well. To some extent, however, this was achieved by highly competitive pricing, something that ultimately had a negative effect on total travel receipts.

New growth strategy
The decline in tourism receipts despite the growing numbers of visitors is partly attributed to lower prices, as I just mentioned. But it also relates to a longer-term trend, namely the decline in spending per visitor and per night of stay, observed in the past few years. This is a result of changes in both the income situation of visitors (as Greece attracts fewer high-income visitors) and the geographical mix of visitors’ countries of origin. But it is also the result of long-term trends in the global economy, such as the entry of new competitor countries and the use of the Ιnternet that allows price comparisons and intensifies competition.

This means that the tourism growth model has to be adapted, aiming towards a further improvement in product quality, higher diversification and sustainability building.

This can be achieved through product enhancement, improved services and a focus on intensive rather than extensive development (by seeking, for instance, to increase visitor per capita spending rather than to increase the total number of arrivals) and by reducing the pronounced seasonality of Greek tourism.

Extending the tourist season throughout the year can be achieved by developing the tourism product beyond the traditional “sun and sea” model, creating diversified products and focusing on alternative forms of tourism such as cultural, conference, religious and medical tourism.

Of utmost importance is to safeguard natural and cultural variety. We need to minimize cultural and environmental impacts, including consumption of resources, reduce pollution, maintain biodiversity and protect landscapes.
Finally, sustainable tourism requires social responsibility that goes beyond the logic of short-term personal profit. This concerns all stakeholders, including tourists and businesses that need to be well-informed, aware and educated to sustainable tourism decisions, tools and strategies.

The role of the banking system in supporting sustainability building will be instrumental. Against this backdrop, the initiatives taken by the Bank of Greece and the Climate Change Impacts Study Committee can serve as a valuable basis that can help Greece enhance its tourism product.

It is clear however that a lot more must be done in order to address sustainable tourism as a whole. I expect that this meeting of GSTC will shed some new light on current policies and best practices and that it will also showcase tourism as an example of how Greece can exploit its competitive advantages to get into a sustainable growth path.