How will Greece’s “stayover tax” affect tourists and its hospitality industry?
From January 1, 2018, foreign tourists who stay in Greece for more than a day are obliged to pay a stayover tax, the amount of which depends on the category of their accommodation. Hotel stays will cost an extra €0.5–4 per night for tourists, while renting a room or flat will cost an extra €0.25–1 per night.
The tax is one of the measures adopted by the Greek parliament in May 2016 to stabilise the country's economy. According to government estimates, the new tax will bring about €80 million a year to the treasury. Greece is also raising VAT from 23% to 24%, and introducing a special tax on cigarettes, tobacco and electronic cigarettes. Greece’s tax reforms and austerity measures are already seeing results – according to the International Monetary Fund (IMF), Greece’s GDP grew by 1.68% in 2017, and it is expected to grow by 2.5% in 2018.
On the other hand, the new tax has been widely criticised by the hospitality industry. In particular, the Hellenic Federation of Hoteliers (HFF) has expressed its fears that it would negatively affect the development of the industry and asked to limit its enforcement during the summer season. “It will also have a serious impact on any attempt to expand the tourism season, as it is known to everyone that room rates are significantly reduced as we move away from the peak summer months”, GTP Headlines edition quoted HFF as saying.
According to tax advisory company Grant Thornton, the stayover tax will negatively impact the hotel industry and the Greek economy as a whole. Profits of hoteliers, according to its estimates, will fall by €435 million, and the Greek economy stands to lose nearly €340 million. According to Greek Tourism Confederation president Yannis Rezos, the introduction of the tax will increase the average cost of hotel stays by 5-6%, and by up to 10% for small hotels prices, which will force many owners to absorb the tax.
Growth of tourism
In 2017, a record number of international tourists visited Greece – about 30 million, according to estimates by the Greek National Tourism Organization (GNTO), or 7% more than the number of international tourists in 2016. According to statistics published by the airport of Athens, the flow of international tourists in 2017 grew by 12% from the year before.
According to the Bank of Greece, tourist spending in Greece from January 2017 to September 2017 reached a record €13.02 billion – an increase of €1.24 billion compared to the same period in 2016. The average length of stays during this period increased by 1.5%, raising the average cost per trip by 1.4>#/span###
According to the Greek Statistical Service (Elstat), the number of nights spent by foreigners in hotels of Greece in first three quarters of 2017 was 63.1 million – 6.3% more than in the same period in 2016. Hotel occupancy during this period also grew from 54.1% to 55.3%. Overall, the turnover of restaurant and hotel businesses in the third quarter of 2017 grew by 13.9% compared to the same period in 2016.
Why investors should not worry too much
British company The Property Team pointed out that while Greece is highly dependent on tourism, other cities popular with tourists in Europe have similar taxes and are coping fine. According to The Guardian, the tax on accommodation in Berlin, Amsterdam and Cologne is 5% of the bill for the room; in Paris, it ranges from €0.20 to €1.5 per person per night, while in Rome, an additional fee of up to €7 per night is levied on hotel stays.
According to the Greek tour operator Mouzenidis Travel, the new tax will lead to an increase in the cost of Greek tours by an average of €40. “Rather, it is a question of temporary inconveniences, as tourists in Greece are not accustomed to paying a fee”, the Association of Tour Operators of Russia quoted a representative of Mouzenidis Travel as saying. Several five-star hotels have stated that they will not collect the tourist tax separately, but will absorb the tax as part of their operating costs.
Additional fees are unlikely to have a serious impact on the number of tourists to Greece, nor an impact on real estate in Greece. Prices there are significantly lower compared to most other European countries, so Athens property is expected to remain in high demand among tourists for short stays. According to Airbnb data and analytics provider, the average rental price in Athens is one-and-a-half times lower than in Berlin, twice lower than in Paris and Rome and in three times lower than in Amsterdam.