Determinants of tourism for “Sun and Sea” Cyprus

Abstract

Tourism is an essential contributor of economic growth, social and cultural development. Cyprus is now an established tourist destination, which, however, is passing through a slowdown phase. The determinants of tourism have been extensively examined for other countries, but the literature regarding Cyprus is very scarce. This paper examines the factors that affect tourism in Cyprus for the period 1995-2010, using time series regression analysis. Tourism is represented by tourist arrivals and tourism expenditure, while the predictors are relative prices, the Gross Domestic Product (GDP) of Cyprus and the income of the main countries that send tourists to Cyprus. The results show that tourism expenditure is significantly affected by the GDP of Cyprus and the relative prices between Cyprus and its main competitor, Greece, while tourist arrivals are additionally affected by the level of income of the origin countries. Increased competition, high operational costs, standardization of touristic product (sun and sea), as well as the international political instability and global financial crisis, which have raised unemployment and reduced tourists’ disposable income, appear to influence tourism in Cyprus. These findings are discussed, in combination with the corresponding low or high rankings of Cyprus in various pillars of travel and tourism competitiveness.