(Bloomberg) -- For Yiannis Retsos, what’s holding the Greek tourism industry back is a lack of investment.
The country—the European Union’s sixth-most visited destination in 2016 based on Eurostat figures for nights spent by travellers—could take the industry to an all-new level if more resources are poured into it and if the state removed barriers that block the entry of new capital, the president of the Greek Tourism Confederation, known as SETE, says.
“While having almost 30 million tourists from May to September is a huge number, it could reach 40 million in a nine-month period if the tourism season were extended,” Retsos said in an interview in Athens. “The bet now is to enrich the tourism product and have added value that will attract not necessarily more, but richer tourists, so we can have more receipts.”
Tourism is Greece’s biggest industry, with arrivals rising 10 percent in 2017 from the previous year to 27.2 million and generating revenue of just over 14.5 billion euros ($18 billion), according to Bank of Greece data. Travel and tourism contributed 32.8 billion euros to Greek economic output in 2016, accounting for 18.6 percent of Greek gross domestic product that year, according to the World Travel & Tourism Council. The London-based body expects that figure to rise to 23.8 percent of Greek output in 2027.
In order to increase arrivals to 36 million and revenues to 20 billion euros by 2021, Greece needs investments worth 6 billion euros a year, Retsos said. “While this is a large number, there is foreign interest to invest,” he said, also calling for public investments.
Investors are interested in current tourist units and vacant buildings, according to Retsos. “There are many publicly owned buildings that could be used for tourism purposes such as in Athens where pension funds own properties that are empty and where there are plans to exploit them,” he said.
In October, for example, the Hellenic Air Force’s social security fund leased for 40 years a building in central Athens’s Omonoia Square. The structure housed a hotel until 2008—when the collapse of Lehman Brothers set off a global financial crisis—and has been empty since. It may reopen as a hotel.
Foreign investors are also looking at properties held by banks, Retsos said. Deals are already happening. In June last year, the Athens Ledra Hotel, operated by Marriott Hotels, was auctioned off by Alpha Bank AE and was acquired by a company controlled by U.S. property firm Hines for 33 million euros.
For its part, the state needs to improve infrastructure such as ports, marinas and regional airports which will create added value, mainly for the Greek islands, Retsos said.
“Infrastructure on the islands is still in the era of the 1960s and there is also a need to rejuvenate sewage and water provision systems,” he said.
Investments are often delayed because of over-taxation, spatial planning and the insecurity that some investors feel when they come to Greece, Retsos said. That’s especially given the permits that may be needed for projects from bodies such as the archaeological council or forestry authority, he said.
“In any other European countries such issues are solved before the beginning of the investment,” he said.
The Hellinikon project, a landmark development included in Greece’s privatization plan since the country’s first bailout program in 2010, is an example of such delays. The investment was slowed by environmental concerns and deliberations over whether the site is archaeologically significant. In February, eight years after the site was put on the block, Greece’s Council of State finally ruled that the presidential decree for the planned investment at the site of the former Athens airport is both legal and constitutional.
The higher sales tax in Greece also puts it at a competitive disadvantage, the official said. “It’s much more important for the tourism industry to cut the sales-tax rate rather than the corporate-tax rate,” Retsos said. The sales-tax rate is now at 13 percent for hotels, up from six percent in 2015, and at 24 percent for restaurants, increased from 13 percent previously. In contrast, Portugal applies a rate of six percent on hotels and 13 percent on restaurants.
For Retsos, Greece now has to focus on changing its growth model so it can get more bang for its buck in quality tourism.
“We have seen the bottom of the barrel and we have begun an upward trend, but Greece has to shift its growth model to focus on production,” he said.
©2018 Bloomberg L.P.