Greek tourism hit by recession but still seen as recovery hope

Country's economic troubles and taxi drivers' strike result in fall in visitors, crippling the important tourism sector

Helena Smith in Zakynthos guardian.co.uk, Thursday 4 August 2011 19.03 BST

Greece's tourism industry has been hit by economic troubles and a strike by taxi drivers over deregulation plans. Photograph: Thanasssis Stavrakis/AP

It's 10pm on a Friday and the main drag of Laganas – party resort, hedonists' delight, Greek playground par excellence – is alive with the sound of music. Above the hubbub, a group of inebriated young Britons – many in "I love Zante" hotpants and T-shirts – unsteadily make their way up the street chanting: "It's full of shit, it's full of shit."

It seems hard to believe that this is what they are screaming until my eye catches a rep at the head of the pack who, arms flailing, is clearly encouraging the shouting. Further down the neon-lit drag, another Briton, in schoolboy's shirt and tie, lies in a drunken heap outside a bar. He smiles helplessly as a Gypsy girl, selling trinkets, chastises him.

Surveying the scene from the ceramics shop she has run for the past 25 years, Vasso Georgiadou heaves a sigh of resignation. "When they don't drink they are such good kids," she says, adding that by the time the sun rises "there'll be hundreds of them" wandering the resort in a drunken stupor. "But it's not only their fault. Unfortunately, this is the tourism we Greeks have tolerated, we Greeks have gone out of our way to create, even at a time when we are in such economic difficulty."

Just as in Corfu, Rhodes, Kos and Crete, the once peaceful village of Laganas has managed to scale new heights in debauchery. This year, the holiday season opened not only with predictable lewdness but with the murder of a British teenager stabbed to death by a local taxi driver. Though deeply remorseful, the 21-year-old says he was driven partly by rage over the behaviour of Britons visiting the island they call Zante but which Greeks know as Zakynthos.

"This is not the best image, but then Laganas is not Greece," says George Nikitiadis, deputy minister of culture and tourism. "Many times it is the system, the tour operators who co-ordinate these bar crawls, which makes these kids act in this way. It's a pity because we don't want tourists to leave with this experience. Our country has so much more to offer."

So where has the tourism industry in Greece gone wrong? Without a moment's hesitation, Nikitiadis – born in New York to a Greek waiter and babysitter mother before settling in Athens – shoots back. "The sector went wrong in every way that Greece went wrong," he counters, looking up at the Acropolis framed in the window of his sixth-floor Athens office. "There was no strategy, no methodology, no preparation, no business plan. The markets, the tour operators, the travel agencies, the airlines, they all came to us. We didn't go to them. I am not even sure we knew how to."

This year, debt-ridden Athens has gone to them, acutely aware that the 12 million tourists who annually visit Greece will offer the single biggest relief to a recession-hit economy hobbled by draconian austerity.

With tourism accounting for 18% of gross domestic product and one in five Greeks working in the field, Prime Minister George Papandreou has frequently declared it will be the motor to drive the economy forward. At 16% and climbing, joblessness has fast become Greece's biggest problem as the EU and International Monetary Fund have pressured the government to enact deficit-reducing reforms in return for an unprecedented €219bn in emergency aid.

"We haven't achieved even 20% of what we are able to achieve as a country, which makes me optimistic," says Nikitiadis. "If we work hard we can easily reach 25m arrivals per year which, in turn, will bring in revenues and mean more work for everyone."

But, first, there is the little problem of Laganas – and the hoary image of sun, sand, sea and sex that Greece, since the onset of mass tourism in the 1960s, has all too often come to be associated with.

Unlike Egypt, across the Mediterranean, or Turkey, across the Aegean, Greece attracts some 52% of its visitors between July and September – with numbers of Britons second only to those of Germans. From January to March, a mere 7% descend on the country, according to figures released by the tourism ministry, compared with 24% in Egypt.

In the 35 years since democracy was reintroduced with the collapse of military rule – a time in which even the most far-flung Greek isle has come to be discovered – the overload has put immense strain on an infrastructure that is finding it increasingly hard to cope.

On the Cycladic isle of Koufonisia tourists were left stranded last month, not because the local boat failed to show up but because its one and only cash machine at the outpost's only bank had run out of money.

Nikitiadis does not disagree. For too long, he sighs, the industry was dominated by political patronage which didn't help. "It was all about party influence and political favours. If someone had a kid studying in London they'd be given a job at the offices of EOT, the Greek Tourism Organisation, there. It was crazy. Now, little by little, we are trying to make that system disappear but it's not easy. Similarly we're trying to prioritise alternative forms of tourism, like agro tourism and religious tourism, to encourage visitors to come all year round."

With this in mind, the ruling socialists have waived landing and take-off fees for aircraft and taken steps to facilitate foreign investment in the sector which, because of its prominence, has also been afflicted by corruption and lack of competitiveness – the very ills that helped bring Greece to its knees. Visa restrictions for non-EU citizens, including fellow Orthodox Russians, have also been lifted.

But despite these measures – and what at the beginning of the summer was gleefully projected as a 10% increase in arrivals after several lean years – officials have also discovered that tourism is far from immune to fallout from reforms in other areas now needed to overhaul Greece.

The penny may finally have dropped that, blessed with the longest coastline in Europe, the country's beauty is there to be exploited. But some fear it may also be too late.

In recent weeks the sector has been pummelled by striking taxi drivers protesting against the government deregulating their profession – part of efforts to liberalise restricted business sectors.

During the 20-day furore, which finally showed signs of coming to a halt on Thursday, holidaymakers have been forced to drag luggage to blockaded airports and ports, locked out of archaeological sites and, in Crete, pushed, shoved and teargassed as cabbies fought pitched battles outside the island's aerodrome with riot police.

This week, tourist agencies announced that the strike was about to kill any hopes of the sector contributing to the country's economic recovery – after thousands of tourists not only cancelled trips but made bookings elsewhere. Satirists retorted that finally tourists were living "their myth in Greece" – the slogan used in the country's latest advertising campaign.

"The damage that could be dealt [to the sector] is such that it will never be repaired," despaired the Hellenic association of travel and tourist agencies.

In the cool of his air-conditioned office, Nikitiadis concedes that the summer months were perhaps not "the best time" to pick a fight with the cabbies. "But," he adds almost in the same breath, "it is just one of the reforms that we are determined to pass. Some people won't like it, but in the end it will all be part of the revolution that will change Greece."

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