Bleak season hits Europe but Iceland a bright spot

Below the Acropolis in Athens, Thomas Ntaras sits outside his empty souvenir shop watching a few tourists strolling through the usually packed alleys.

The global downturn has hit his business hard this summer and it may not survive to the end of the year, he says.

"There are very few tourists and they don't spend because they can't afford it," said Mr Ntaras, 39, who said his summer income was down 50 to 70 per cent.

All over Europe, the peak summer season looks bleak with fewer arrivals and lower revenues as those who travel do so on a budget, dragging countries like Greece, Spain and Italy, where tourism is a crucial source of income, deeper into crisis.

But the financial crisis has come with a silver lining for Iceland. "Since the Icelandic currency has weakened so much, we have seen an increase in tourism," said Olof Yrr Atladottir, general director for the Icelandic Tourist Board.

Iceland's Blue Lagoon resort, whose waters are said to have healing properties, says bookings started climbing within a month of the crisis erupting last October. "It has been a steady development since then," spokeswoman Magnea Gudmundsdottir said. Iceland is a rare bright spot.

"The decline in tourism in Europe associated with the economic downturn has been every bit as bad as had been feared," the UN World Tourism Organization said.

Europe was the world's second-worst hit region after the Middle East in the first four months of this year with a 10 per cent drop in tourist arrivals. Most tourism bodies or industry groups across Europe report similar data for the summer, with revenues seen down as much as 15 per cent in Greece and Italy.

Europe boasts 10 of the world's top 20 destinations in terms of tourism revenues and accounted last year for just over half the world's international tourist arrivals, according to the UNWTO, making how tourism fares key to many of its economies.

In times of economic crisis, its sun-drenched Mediterranean beaches, ancient monuments and fashion shops do not attract as many tourists willing to spend as in better times.

"People still have the desire to travel but might not have the means," remarked John Kester, chief of market trends at the UNWTO. "They will generally not opt out (of travelling) but may try to adjust spending."

Tourists are lured to destinations with cheaper currencies, like Turkey and Morocco, cut short their holiday plans due to the weak dollar and pound or stay at home worried about their jobs or swine flu, industry officials and businesses said.

Those who do travel look for cheaper deals, wait for hotels to slash prices and spend less on extras - including souvenirs like those Mr Ntaras sells in Athens. People tend to stick to their main holiday but cut other trips, officials say. High-end accommodation and businesses dealing with transatlantic travel suffer most as companies cut corporate travel, while many in the industry complain that Americans, Germans and Britons, top spenders who often make up a big share of their income, have stayed at home because of the crisis.

In France, where tourism accounts for just over six per cent of GDP, hotels were especially hard hit with seven consecutive months of declines in occupancy rates, but cheaper camp sites have reported relatively strong bookings.

"The price is the key thing this year, with (holiday) budgets shrinking on average €150 by comparison with last year," said Didier Arino at French tourism body Protourisme.

A survey by lastminute.com showed half of Italians asked planned to spend less on their holiday this year than last year and a third had cut back on the length of their vacation.

As tourism goes down, related industries like construction are also hit and jobs are shed, weighing on European economies. A Reuters survey of 39 economists showed GDP in the 16-nation eurozone contracting for the fifth consecutive quarter to 0.5 per cent for April-June.

The poor season is expected to be one of the main factors pushing Greece - where tourism accounts for nearly a fifth of GDP and one in five jobs - into its first recession since 1993. More than 19,000 jobs were cut in the first six months, the Association of Greek Tourism Enterprises said.

Elsewhere in Europe, the UNWTO and officials in major tourist destinations France and Spain say local tourism will help offset a lack of tourists from abroad.

Domestic tourism in Spain, where the industry accounts for just over a tenth of the economy, is forecast to grow by four per cent this year. The number of French travelling abroad on holiday was expected to fall between five and 10 per cent this year, with many travelling in France instead.

"Domestic tourism is doing OK and people are staying more within the EU," said Tim Fairhurst, Head of Group Tourism at the European Tour Operators Association.

But not everyone was unhappy.

Australian Daniel Noble, 23, was relieved he did not have to face crowds of fellow tourists in Athens. "We have not had to line up anywhere," Mr Noble said.