Not an easy job – Tourist Industry
Those who deal directly with the tourist industry (worldwide) have a most difficult job and many dilemmas to take a decision upon.
According to the Deputy Minister of Tourism Mr Perdios, he expects at best (if the virus “goes away” over the next 2-3 months) the tourist arrivals will be reduced from the last year (4 mil.) to now best at 2.4 mil. foreign visitors. The direct hit will be borne by the hotels, at first instance, and restaurants etc to follow and of course all the others who base their business primarily on tourism, including the sale of agricultural produce and down the line industry to our own business, that of the building industry.
The easy part for the hotels is to apply to the Government to cover some of their losses, including the payment of salaries for non-working staff (for all), but then who is the Government dear readers? All of us tax- payers and others. Where is then the Government going to find this huge amount of compensation money (in addition to the hotels and all the other business). Yes the Government can secure E.U. loans and issue of bonds, but then these must be paid back at some point of time, which means, in addition to the possible increase in taxation (the main attraction of our tax system for local and foreign business) whereas, as if this is not the end of it, we have the Russian Government threatening us to cancel our double taxation agreement. We will replace the hotels income to the extent possible, using the locals as part of internal tourism heavily subsidised, but then with the employees and business running in the red will they have enough money to support summer holiday? Our previous article on the subject was referred to a cap on the internal tourist visitors to be 60% for the beach hotels and 40% for the mountain resorts (so the latter might have a chance to survive).
Unlike other countries, where tourists can drive from one country to another in Europe, we only have one means of connection that of the air transport. Yet even these Cos (airlines) are running into trouble and we note that one after another airlines go bust and we will have many more going down this route?
So, let us come to the various dilemmas:
• Any sort of business who lets its staff go, when business comes back to some sort of normal levels, will the staff be there? (this applies especially to the tourist industry which in any case we had a problem with staff finding at all levels of their business even during the year 2019).
• We now have the hoteliers suggesting that the pre-paid reservation fees (some of which are given as a loan to extend/upgrade the hotels) that those pre-paid reservations should be discounted for future bookings, but then the hoteliers will have the cash to absorb these future discounts? Others suggest that these reservation fees should be guaranteed by the Government for their obligation for the refund (why?). So here we are with only one hotelier having obtained a loan (called free bookings) for €15 mil., so in total with others and as a rough estimate we expect the guarantees to be around €80 mil., why should they rest of us pay?
For those who want Governmental guarantees, even if we are to accept this, they must place their properties under mortgage for the benefit of the Government (huge problems if they do not pay, will any Government undertake their forced sale?).
• Then we come to a more serious dilemma, that of the virus. If a hotelier/restaurant etc guest infected by the virus (not due to the hoteliers’ lack of measures – but then how do you establish this?) within the establishment will he be entitled for compensation? (see compensation appetite especially by the British tourists in Spain as an example). The answer is, get an insurance, but then what insurance Co will cover say €100 mil. damages/ compensation demands? At this point of time there is not an insurance Co who can undertake this (one of many reasons why hoteliers will not operate this year is the fear of these compensation payments to their guests – even if they have the virus prior to their Cyprus visit – all sorts of scams – see recent food poisoning by some con-artists.
• At the end of the day we must bear in mind the banks’ situation regarding their NPLs which will increase, whereas the much-expected sale of bad loans to foreign investment Cos will not happen. The situation brings us, we hope not, to the Bail In of the disastrous 2013 year and more recently that of the Co-Op (a near miss).
As a “light” suggestion, but with some substance, where is one keep his money safe of confiscation? We wonder if it is the time to have these insurance Cos considering the construction of safe boxes, duly secured, and insured and with a separate ownership title (similar to the private stores/parking for apartments). Far-fetched you may say, but the facts of life are there. Sending one’s deposits abroad (if you can) is an option, but do these foreign banks have the sustainability of protection?