Based on data from the Association of Greek Tourism Enterprises (SETE), the number of tourists arriving at the 13 largest airports in Greece during January-October 2011 was up by around 9.6% year-on-year (yo- y). Unsurprisingly, given the extensive bad publicity focused on Athens due to strikes and demonstations, growth in arrivals at the countrys largest airport, Athens International Airport (AIA), was negative. The main tourist destinations in Greece were the islands of Rhodes and Kos, with visitor numbers up by well over 20% y-o-y on both islands. Tourist arrivals to Thessaloniki increased by over 11% y-o-y.

Source Markets

In H111, according to the Hellenic Statistical Authority (ELSTAT), there was a 13.9% y-o-y increase in non-resident arrivals to Greece. Visitors from the EU rose by a reasonable 7.8% y-o-y. However, from two of the most important source markets, Germany and the UK, growth in the number of arrivals was unimpressive, up by just 0.1% and 3.5% y-o-y respectively. By contrast, visitors from Europe as a whole increased by a relatively strong 13% y-o-y, with arrivals from France (the third largest source market in H111) increasing by 60% y-o-y to over 420,000 visitors. Also of note, arrivals from Russia increased by 78% to well over 200,000, while the number of visitors from the US and Turkey rose by more than 10% and 49% y-o-y respectively.

Forecast Scenario

After a disappointing year for foreign arrivals in 2010, we revised up our recovery scenario for 2011 and now expect growth in arrivals of around 9% y-o-y. A slowdown in growth, however, is forecast in 2012, though it will pick up the following year. Due to the full-blown economic depression in Greece, domestic tourism is expected to remain extremely weak in 2011 and 2012. The outlook for foreign visitors over the forecast period is strongly influenced by real GDP growth in the eurozone – the key source region for tourists – which we have revised down this quarter to 1.7% and 1.2% (from 1.9% and 1.7%) in 2011 and 2012 respectively, although growth should accelerate slightly in 2013. Economic growth in two major source markets, the UK and Germany, is also expected to constrain inbound tourism. In the UK, our revised down economic growth forecasts are 1.1% and 1.6% in 2011 and 2012 respectively, while our growth forecasts for Germany have also been lowered, to 3.1% in 2011 and 1.3% in 2012. Strikes and protests, eroding Greeces risk profile, and uncertainty over the sovereign debt crisis in the eurozone will also hamper the tourism sector.

Olympic Air

KLM Royal Dutch Airlines and Greeces Olympic Airs code-share agreement became effective in September 2011. The agreement offers eight destinations to KLM passengers in the Greek domestic market between AIA and Alexandroupoli, Santorini, Chania, Heraklion, Ioannina, Kos, Rhodes and Thessaloniki, for connecting services operated by Olympic Air.

Athens International Airport

Following negative annual growth in international and domestic passenger numbers at AIA in 2010, the data for 2011 suggest another difficult year for the airport. After a turnaround in international traffic in Q211, with positive y-o-y growth (following sharp negative growth in Q111), the outturn for the third quarter was poor. Overall, during the first nine months of 2011 total passenger numbers fell by 5% y-o-y, with international and domestic traffic down by 1% and 11% y-o-y respectively.