Economic Crisis in Greece and the Impact in Tourism Development


Judit Grotte

International Hospitality Management, Budapest Metropolitan University, Hungary 

Dimitrios Laloumis

Tourism Business Management, ΤΕΙ of Athens, Greece

Konstantinos Marinakos

Tourism Business Management, ΤΕΙ of Athens, Greece




The purpose of the article is to present the impact of the global economic crisis on international tourism in Greece, where tourism represents an important part of the economy. The goal is to create a brief overview of the economic situation in Greece, describe the changes that followed after the occurrence of economic crisis and to show how tourism responded to this situation. In this regard publicly, available data about tourism and other economic sectors of Greek economy were compared in order to investigate whether Greek tourism sector was less affected due to the international economic crisis than other sectors. The results show that tourism, compared to other economic sectors, represents a very flexible and dynamic sector which even in times of economic crises appears to be very resilient on the long term.

Key words: tourism, economic crisis, Greek tourism, accommodation and food service activities




Tourism is a dynamic worldwide economic activity and, on the basis of modern demand trends, choosing a trip is a key priority in the everyday life of consumers. As this global crisis has affected all countries, without exception, one could say that all sectors of the economy in all countries have been adversely affected by this crisis, including of course tourism. Despite the significant increase in the tourist sector in the world over the last few years, the emergence of the global economic crisis during this period has led to declining growth rates in this sector (Jeetesh, et al., 2015).

On the other hand, tourism undoubtedly has a significant impact on the GDP and employment of the workers, with high rates, especially in countries with high tourist activity. Although it was negatively affected during the first years of the crisis, it proved resilient to the crisis and managed to grow by presenting positive rates to date



Tourism, according to the widely accepted St. Gallen definition, represents a whole of relationships and phenomena that arise from the travel and stay of persons for whom a place of their stay is neither main or permanent residence or a place of employment (Marmot &  Bell, 2009) Tourism is comprised of a multitude of different products and services, which are used by visitors and tourists during their stay (Abubakar, 2014). This variety of activities makes the tourism sector highly involved in almost all other sectors. An economic crisis could therefore be a turning point for many sectors, including tourism and that can have a significant effect in the country from a socio-cultural perspective as well (Csapo,2012)

The shrinking economic activity at the global level has also clearly influenced the tourism market. Under the regime of redundancies in the workplace and lack of liquidity, the demand for travel has decreased significantly. In addition, fear of recession combined with higher oil prices and rising inflation have led to a decline in international demand for tourist services at holiday destinations (Steiner et al., 2011, p. 29). The crisis has led to changes in consumer trends and among those who will characterize a consumer after the recession is eclectic pleasure (advanced), green consumerism (slowing down) and the like, but the most important is the progress of Mercurial consumption , (Flatters and Willmott, 2009, pp. 108-110).

According to Gee,& Fayos-Solà (2012), modern tourists are reasonably well-informed, with the result of examining prices in detail, which is in part a consequence of the international economic crisis and its intense impact on the mindset of consumers who were never better equipped to look for more competitive bid. In this search, they use a wide range of on-line tools, from consumer-reviewed websites, to shopping group promotions on price comparison websites.Visa Global Travel Intentions Survey from 2011 reported that price was the first of the key determinants of choice even before the scene, political stability, climate and variety of activities available at the destination. But even when the financial situation finally improves, this type of consumer behavior will not disappear, as Yeoman says (2012), "smart shopping" makes too much sense to be easily abandoned. What consumers buy can definitely change, but their skills in choosing between different choices and readiness to make a change in brand confidence will remain permanent (Keller,2009)



3.1 Greek tourism during the crisis

Greece ranks among the EU countries hit hard by the international financial crisis. Greece recorded a negative real GDP growth rate (-0.2%) in 2008 and -3.1% in 2009, when the EU27 even recorded a -4.5% increase in real GDP (Figure 1) (Eurostat, 2013 ). The lowest growth rate for Greece was recorded in the fourth consecutive year of recession in 2011, when economic activity declined by 7.1%. Negative trends continued in 2015 (-3.9% decline). According to forecasts, after eight consecutive years of recession, the Greek economy could return to a weak but positive rate of growth (European Commission, 2015).

The international financial crisis that has hit the world of tourism has also had an impact on tourism in Greece, which is particularly important, given that its economy is based largely on services. In this area, mainly two major axes are mentioned: shipping and tourism (European Commission, 2015). The tourism sector, in relative terms, represents a significant part of the Greek economy, since it has direct and indirect effects on different economic activities, thus affecting the entire economy. In 2012, the total contribution of tourism to GDP amounted to € 30.3 billion or 16.4%. According to the World Travel & Tourism Council (WTTC), Greece is ranked 40th among the 184 countries by the contribution of tourism to the economy. The total contribution of tourism in employment in 2015 it represented 689,000 jobs or 18.3% of total employment, and the share of revenue from international tourist arrivals in total exports was 26.4%, equivalent to 11.4 billion €. The share of capital investment in tourism amounted to 13.7% or 3.1 billion €. These indicators show the high dependence of the Greek economy on the tourism sector (WTTC, 2015).

Figure 1 Real GDP growth (%) in EU27 and Greece for the period 2000-2015

Source: Eurostat, 2015

The movement of the four indicators in the period 2003-2015 (Figure 2) shows a decline in tourism's contribution in 2008 for all indicators, from GDP to investment.

Figure 2: Main indicators of the contribution of tourism to the Greek economy (%) for the period 2003-2015

Source: WTTC, Economic Data Search Tool, Greece – T&T Total Contribution to GDP; T&T Total Contribution to Employment; Visitor Exports; Capital Investment, 2013.

In 2013, the contribution to GDP and employment increased slightly (less than 1%), and by 2015 there was a small increase in the contribution to all sectors (WTTC, 2015). The exception was the contribution to the investment sector in the tourism sector, where the rate has fallen further. The share of investment funds in the tourism sector is the only index that has declined for the seventh consecutive year since the crisis - the other indicators have declined differently since 2008, but eventually improve over the years.

Depending on the purpose of the trip in 2013, 94.3% of the direct contribution of tourism to GDP (€ 20.5 billion) arose from leisure travel expenses, while business travel expenses accounted for 5.7% or € 1.2 billion of tourism contribution. In terms of country of origin, 55.2% is represented by foreign tourism expenditure, while domestic tourism expenditure accounted for 44.8%, which is not a negligible share (WTTC, 2015).

The international economic crisis has also influenced international tourist arrivals in Greece (Figure 5.4), which have declined in the early years crisis. Based on the number of international arrivals of tourists around the world, Greece moved from 16th of 2008 to 17th in 2011 (WTTC, 2015).

Figure 3 International arrivals of tourists in Greece (million) for the period 2003-2015

Source: WTTC, Economic Data Search Tool, Greece

The structure of international tourist arrivals has changed in recent years. Traditional market shares have fallen sharply from 2007 to 2015. Specifically, the Italian market share declined by 2.2% and dropped from 3rd to 6th in the top 10 countries from arrivals. The former Yugoslav Republic of Macedonia (FYROM) ranked third with 8.4%. The Netherlands ranked fifth in 2009, and in 2015 it was replaced by Russia with 5.6%. The US share has declined significantly since 2007, so that in 2015 the US did not join the top ten countries of the arrivals. In spite of the crisis, Germany and the United Kingdom still hold first and second positions, which represent the main source of market for Greece, although their shares have fallen during the last period (Table 1) (SETE, 2015).

Table 1 The structure of international tourist arrivals by country of origin (% of the total) - Top 10 countries from arrivals in 2009, 2012 and 2015

Source: SETE, 2015

Since 2008, there has been a decline in revenue from international tourism (Figure 4). Receipts from international tourist arrivals decreased twice in a row and in 2010 they have almost reached their level since 2003. Based on revenues from international arrivals of tourists around the world, Greece ranks 15th in 2008 and 23rd in 2015 (SETE, 2015).

Figure 4 Receipts from international tourist arrivals in Greece (€ billion) for the period 2003-2015

Source: SETE, 2015

Just as the structure of arrivals has changed, there has also been a change in the country's share of international travel expenditure (Table 2). Similarly to the decline in the traditional share market source from arrivals, there was a decline in revenue from these countries over the period 2009-2015.

Table 2 The structure of revenues from international arrivals of tourists by country of origin (% of the total) - Top 10 countries in 2009, 2012 and 2015

Source: SETE, 2015

Italy, the US and Belgium have fallen in two places in the consumer ranking, while the Netherlands has dropped three. On the other hand, there was a strong increase in Russia's share (7.3%), as in 2015 it became the third largest source of consumption for Greece after Germany and the United Kingdom.

Figure 5 shows the evolution of the five different time series relative to incoming tourism in Greece during the period 2005-2015, namely nominal arrivals, nominal receipts, per capita receipts, actual receipts and actual per capita receipts.

It is clear from the graph that while arrivals (14.7 million in 2005 compared to 17.9 million in 2015) and nominal receipts ($ 13.7 billion in 2005, compared with $ 15.9 billion in 2015) have grown over time, this is not the case in the other three series, which are vital, as they are also considered strategic issues of sustainability. For example, actual per capita receipts declined from $ 929.9 in 2005 to $ 745.6 in 2015, a decrease of 19.8%.

Figure 5: Incoming Tourism in Greece, 2005-2015

Source: UNWTO, 2015


3.2 The business environment in Greece

During a recession – which is defined as a situation where the GDP is negative for two or more consecutive quarters – the consumers are very likely to experience a change in consumption habits (Du and Kamakura, 2012, p. 229). The economic crisis as a result may affect tourism consumption due to reduction in disposable income in two ways. First is about the change, individuals or families usually face the decision of whether to travel or not. Even if they decide to travel they might change the destination they used to enjoy or the length of their holidays, for example instead of travel away for a week now they might decide to travel only for five days (Dwyer et. Al,(2009). The second effect is a result of tourism substitution due to the income elasticity. Tourism generally counts as an income elastic service, meaning that even a small change of disposable income will immediately affect the choice of destination, services and the demand for tourism (Buhalis,2001). In particular, a reduction in income is expected to affect negatively especially luxurious tourism destinations and positively destinations and services of basic standards (Stynes, 2012).

 The domestic elasticity is likely to affect among others the relationship between outbound  and domestic tourism. Domestic tourism, meaning that the residents of the given country are traveling only within the country; (Ueli, 2010). An economic crisis is likely to make individuals travel domestically instead of internationally, as international travel is more income elastic than domestic travel. According to Ueli (2010) this theory may have positive implications for the domestic tourism when it comes to employment and income. In periods of serious recession, domestic tourism is largely associated with a rise in VFR (Visiting Friends and Relatives) flow, meaning that people who previously travelled  abroad for holidays now they decide not only to stay at their home country but even to go to a relative's or friend's house to avoid spending money on tourism accommodation and services. In such a case, an economic crisis may negatively affect outbound tourism without benefiting providers at a domestic level. Moreover, the above is also a matter of spatial scale, huge difference if you are traveling domestically in USA, from traveling domestically in France, due to the size difference between the two countries

On the other hand, Tourism undoubtedly has a significant impact on the GDP and employment of the workers, with high rates, especially in countries with high tourist activity. Although it was negatively affected during the first years of the crisis, it proved resilient to the crisis and managed to grow by presenting positive rates to date.

Tourism is an important area of the global economy of services. According to the United Nations World Tourism Organization, 1,087 million international tourist arrivals were recorded in 2013, representing € 873 billion in tourist receipts, or close to € 803 per arrival (UNWTO, 2014). These figures refer exclusively to international tourism and therefore do not include the significant economic impact of domestic tourism, which is generally difficult to measure statistically. nterestingly, tourism seems to account for 9% of global GDP  and is responsible for one in every eleven jobs (UNWTO, 2015). At national level, Greece had 17.9 million international tourism arrivals, which represent 12.2 billion euros in 2015 (UNWTO, 2015). This corresponds to € 681 per arrival and 15.2% less than the world average. In any case, Greece has about 1.5% of the world tourist market and 2.9% of the European one (SETE, 2015: 9). Moreover, when all the different impacts are taken into account, tourism contributes 16.4% to Greek GDP and produces 18.3% of the country's total employment (SETE, 2015).

Unfortunately, the importance of tourism for the Greek economy has become widely accepted and understood by policymaking in the wake of the recent economic downturn, which has been the most serious of Greece over the last fifty years. In particular, Greece has experienced 8 consecutive years of recession between 2008 and 2016 as a result of the austerity measures adopted to address the sovereign debt crisis with disastrous consequences for the well-being of its citizens. In 2008, per capita GDP amounted to € 20,795, while in 2015 it was reduced to € 14,302, a decrease of 23.6% in just 7 years. In addition, the unemployment rate rose from 7.6% in 2008 to 29.9% in 2015 and the gross general government debt as a percentage of GDP from 112.9% in 2008 to 175.7% in 2015 (IMF, 2015) . Ιnbound tourism (ie foreigners visiting Greece) is now viewed as a new economic force that can generate new wealth and help the country overcome the crisis. Besides, domestic tourism has mainly repercussions on wealth redeployment within the country and has suffered a lot of pressure as a result of the economic crisis, while outbound tourism has a negative impact on the current account and limited impacts on total employment in Greece.

The Greek economy is on track to stabilize and recover after the major recession of 2008-2013, GDP growth of 0.7% in 2014 and a small decline of -0.2% in 2015.

The average annual decline of its GDP in the period 2009-2015 was at -4.2%. The adjustment program implemented by Greece in the period 2010-2015 led to a significant average annual increase in exports of goods of 4,8% despite the credit crunch of Greek exporting firms as opposed to their international competitors during the same period in which imports of goods registered an average annual fall of -3.5%. .

On the other hand, exports of services recorded an average annual fall of 0.9% in the period 2009-2015, mainly due to the large drop in the inflow of incomes from international transport (mainly from shipping). By contrast, in the period 2009-2015, travel receipts from abroad rose 35.6%. Also, payments for imports of services recorded an average annual decline of -6.2% in the period 2009-2015, again due to the large drop in incomes in the international transport sector (shipping) and also due to the decrease in domestic payments for travel abroad and also decrease payments for imports of other services

Figure 6

Source: SETE, 2018

The Business Service Expectation Index (Figure 7) was affected in February 2016 by the large fall in the stock prices of the Banks on the Stock Exchange (which today have fully recovered despite the delays in the assessment) and possibly by the negative impact on Tourism by the Refugee. However, there was little improvement in March and April despite the continuing uncertainty about the slowing down of the assessment and its ending only with the imposition of a new overly expanded package of new anti-development - and largely counter-regulatory fiscal measures.

Figure 7 The Business Service Expectation Index

Source: SETE, 2018

Economic indicators are expected to improve from May 2016 and much longer than in June 2016, with completion of the evaluation. If this happens, they may contribute to a good tourist season even in the field of domestic tourism, which is still at extremely low levels after the great recession, unemployment and a large drop in income over the period 2010-2013.



The current era is characterized by a very serious economic crisis that began in the US in 2007 and the ongoing efforts made at national and international level to overcome this crisis. As a result of the global economic crisis, the hospitality and tourism industry experienced a severe recession in sales and profitability, particularly during 2009. In 2010, tourism recovered strongly in 2011, with international tourist arrivals and revenue rising significantly. The hospitality industry is expected to show a steady recovery in 2017 and return to pre-crisis levels in terms of room prices.

The analysis of the indirect impacts of tourism, which was preceded by more chapters, shows that a dynamic mobilization of the tourist service delivery chain has extremely beneficial consequences for employment and the current payments balance. The T20 countries (Australia, Spain, Argentina, USA, China, Indonesia, South Africa, Turkey, Brazil, Italy, Mexico, France, Japan, United Kingdom, Russia, Canada, Democratic Republic of Korea, Saudi Arabia, Germany and India ) have a great responsibility to promote the economic and social role of tourism both to themselves and to the entire international community, especially the poorest countries.

It is therefore necessary that such efforts be made to promote tourism globally, so that it is a part of economic support for the domestic economies, especially at the time of the international economic crisis that has existed since 2008.

Tourism has managed to adapt to the economic crisis, estimated as economic growth in the sector by almost 8% in 2015.

It is noted that the benefits of the economic impact of the crisis on the tourism market stem from its flexibility. Thus, after a serious blow that was felt in 2009 as a direct result and a public reaction to the economic crisis, in 2010 there were positive results for the national tourist market. The crisis has a particularly strong impact and a negative impact on some countries. One of these countries is Greece, where GDP fell by 7.3%, external debt was 182.2% of GDP, unemployment jumped to 16.3% and wages of civil servants decreased by 30 -40%.

Tourism can be the driving force behind the economic recovery in Greece. Tourism brings a lot of revenue and means more jobs. For these reasons, several measures have been taken to restructure, improve and strengthen Greek tourism. These measures include: strengthening alternative forms of tourism such as agrotourism and religious tourism that encourage visitors to come all year round, protecting and managing the environment, creating quality infrastructures, developing synergies with others sectors and branches of the economy, boosting competitiveness through a quality tourism product. In addition, tourism can become the tool of the Greek government in its effort to achieve social and environmental policy goals.





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