Upgrading Tourism & Real Estate

The upgrading of the hotel industry over the recent couple of years is noticeable. Both in terms of buildings, as well as staff quality, quality and size of food and service.

You must have noticed the young, mainly foreign waiters, as well as some imaginative chefs who have made eating out more enjoyable. The older “traditional” generation is gradually fading out (with their many advantages mind you) and a new generation of tourist industry employees are created, to the extent that various local colleges that train such potential staff are running out of vacancies. Restaurants with a “theme” such as Italian, Mexican, Chinese (very few Indian we regret to say) are a preference to tourists, in addition to the local meat and fish taverns and despite the rather short tourist season they have a profitable business. One Mexican restaurant at Ayia Napa has daily 3 sittings, another hamburger place on the 5th floor of a hotel 2 sitting dining and another steak house 2 sittings, and with a booking waiting period of 7-10 days at least. Quality is the main attraction, as is the public relation of the man in charge towards the diners.

This upgrading however brought about the increase in prices, which, now, on average is approximately €30 p.p. plus drinks. The latter (drinks) is unacceptable regarding charges with the average charge being 3-4 times the supermarket acquisition cost. What is also shocking is that local Cypriot wines are sometimes difficult to be found in the wine list, with the average charge lowest at €25 per bottle (cost €8 per person at least).

Quality tourists and high income group clients seem not to be deterred by such costs (if value for money) and despite the locals initial negative reaction on the cost, it seems that the higher charges are becoming more acceptable than before for the locals. We exclude Limassol from this since there the cost is around €70-€100 p.p. Having said that, small tavern style establishments out of the tourist areas or in the suburbs, do not exceed the cost of €20-€30 p.p. (including drinks).

We write this article based on a Greek TV reporting about Mykonos and the living cost there. It compared a Bougatsa (Greek sweet) at Mykonos which sells at €47 p.p., in Athens for the sum of €7.0 p.p. and in Salonica €5 p.p. They recorded that although such Mykonos charges are unacceptable, they are in accord with the house prices which show a sales rate of €10.000 per square meter at Mykonos, for Athens €2.000/sq.m. and Salonica €1.500/sq.m.

Holiday home prices in Cyprus compare favourably with most holiday destinations which are on average (in Cyprus) €2.000-€2.500 for average quality homes save the Limassol and Larnaca seaside locations, which range from €7.000/sq.m. (Larnaca), to €15.000/sq.m. (Limassol). When one compares the infrastructure facilities provided here, the low cost of property taxes and stamp duties, as well as the other tax benefits (e.g. death duty) to go the cost is not excessive. Owning a property in cyprus is not as costly as in other tourist destinations. Staying with Greece, the property tax equals almost that of the rental income, but then very few countries have the problem of the common expenses that we have here. The problem regarding holiday homes is the lack of direct flights at airports in close proximity to large European towns. So compared with our competitors such as Spain/Portugal/Italy etc a huge part of a potential market (e.g. Germany) is lost. To have direct connections with some European/Russian destinations is a problem since we seem to think that “we have a connection” – Yes but from which town bearing in mind the distance when a potential buyer/tourist has to travel almost 3 hours to the airport and 3 hours back plus travel time to Cyprus, losing almost a whole day out of the 7 days precious holidays.

Yes, we are getting there at the end with the numerous infrastructure projects under way, such as the 2 new marinas (we do not count Pafos and Larnaca) with the casino (again in Limassol) as well as the lack of public frequent transport (governed by the taxi Mafia – unknown in other countries). Imagine if we have taxis cost from the Larnaca town airport to Nicosia of €20/trip instead of the thieving €40-€60 (similar high charges also within the towns) how more attractive the island could be.

Airbnb is coming into the market with an increasing demand and the comparative cost vis-à-vis hotel establishments are half the price (with many limitations mind you). These sort of lettings are attracting real estate buyers, since the returns on such an investment is in excess of 10% p.a.

What is important to note is the upcoming in Nicosia’s hotel industry, with 4 new small scale hotels being now erected in the centre. When one compares the ex-Cyprus Hilton charges, these hotels may be an alternative, whereas based on press reports, these boutique hotels earmark gourmet restaurants as an attraction.

So we expect that Nicosia will benefit from the expected tourist increase with a positive result for the local real estate market.