If Greece defaults on its debts and exits the euro, a scenario that’s become increasingly likely over the past week, one of the world’s biggest summer travel destinations will suddenly find itself mired in economic chaos. At first blush, the timing couldn’t seem worse. July and August constitute the high season in Greece, with well over half of all foreign visits occurring during the three months between July and September, according to a 2013 report from Greece’s Research Institute for Tourism. If the 2015 season is compromised by a default in early July, the blow could come on top of a slew of others for the beleaguered birthplace of democracy.
But at second glance, the timing may be fortuitous. That’s because so far, few people are canceling their trips. Last minute bookings, which account for about 20 percent of all visits, are way down, but the 80 percent of visitors who plan ahead are following through on their vacations.
If the default materializes, tourism could prove to be the most stable sector in a post-euro Greek economy. Tourism currently accounts for about 17 percent of the country’s GDP, and employs about a fifth of Greece’s working population. Greece knows it needs to keep its tourism industry afloat, and will likely go to great lengths to do so. Greece’s Ministry of Tourism has been aggressive in assuring visitors that they’ll have no problems, and so far, consensus holds that as long as you arrive with a sizable chunk of euros already in hand, you’ll be fine. Foreigners aren’t bound by the 60 euro-per-day withdrawal limit that’s currently hampering Greek residents, but reports of long lines and cash running out at ATMs make relying on them risky.
Looking at precedent in a country like Argentina, which defaulted on $132 billion of its sovereign debt in late 2001, suggests there may be a dip in tourism to Greece in the very short term followed by a spike when potential visitors see that not only is the country still a perfectly safe place to visit, it’s also never been cheaper. In Argentina’s case, foreign visits fell from 2.9 million in 1999 to 2.6 million leading up to the default, according to data from the World Bank. By 2004, that number had spiked to 3.5 million and has only soared further from there, with 5.3 million foreigners visiting the country in 2010. They were lured in large part by their increased purchasing power after the devaluing of the Argentine peso. Greece could very well follow a similar trajectory.
That spike won’t necessarily translate into more revenue—if prices plummet, more visitors will be required to bring in the same amount of money—but it could provide a reliable pillar in a shaky economy. Greece doesn’t have the export potential in other areas that helped bring Argentina’s economy back from the brink, which means that tourism could prove even more crucial.
There’s no good time to default on national debt, and exiting from the euro would be a move so unprecedented that most analysts don’t even know where to start predicting how it would unfold. But if it has to happen, the first days of the tourism high season might counterintuitively prove the best time. Most of this season’s trips are already booked and, come October, Greece will have a long cold winter to get its ducks in a row for 2016.
–by Sarah Stodola
Feature image credit Pedro Szekely from Los Angeles, USA (Santorini Uploaded by russavia) [CC BY-SA 2.0], via Wikimedia Commons.