A recently published study of Dr. Dimitris Koutoulas, an Athens-based tourism and hospitality consultant, sheds light on the relationship of Greek resort hotels with European tour operators, with the former relying for 60% of their total business on the latter's inclusive tours.

One single operator, the European market leader TUI Group, represents 2.6 million vacationers or 29% of all tourist arrivals from the twelve main source markets of Greece such as Germany, the UK, France, Austria, the Netherlands, Belgium and the Nordic countries.

Greek tourism is also highly dependent on charter flights operated by tour operators, as 75% of all West Europeans - and 58% of all international tourists - vacationing in Greece arrive on charter flights.

According to the study of D. Koutoulas, over half of the surveyed hotels accept guests from TUI and its subsidiaries such as Thomson and Nouvelles Frontières.

The average contribution of TUI Group operators to the total overnight stays of their Greek partner hotels was 30% in 2004.

The second most frequently mentioned tour operator is Thomas Cook (by 29.3% of the sample's hotels) contributing on average 34% of total overnight stays, followed by another German company, Rewe, being mentioned by 15.9% of the hotels.

Greek resort hotels are thus operating under a state of oligopsony in a marketplace largely controlled by TUI and the other big players from Germany and the UK.

The enormous market power of the major tour operators is highly affecting the way these hotels conduct their business and also how hoteliers evaluate their cooperation with them.

The main advantage of working with tour operators is that hotels secure a large part of their guests that way, as has been mentioned by 68.3% of surveyed resort hotels. Other advantages include securing significant traffic during the shoulder and low season (mentioned by 56.4% of the sample) and receiving payment on time (47.5%). Only 11.9% of respondents are satisfied with the room rates they charge to tour operators.

Five and four-star hotels have a far more positive evaluation of their cooperation with tour operators than other hotels.

The main disadvantage of working with tour operators is the constant pressure to lower room rates, as has been mentioned by 76.2% of surveyed hotels. 48.5% of respondents feel that tour operators are channelling their clients to other destinations, 33.7% have had trouble in getting paid on time, while only 6.9% complain that they get just a small number of clients through tour operators.

Midscale and economy hotels are most critical in regard to their cooperation with tour operators.

The complete survey findings comprising detailed operating data (such as room rates, occupancy and business mix) and an in-depth analysis of the Greek resort hotel industry have been included in the chapter "The Market Influence of Tour Operators on the Hospitality Industry: The Case of Greek Resort Hotels" written by Dr. Koutoulas for the book "Corporate Rivalry and Market Power: Competition Issues in the Tourism Industry" edited by Dr. Andreas Papatheodorou. This book published in 2006 by I.B. Tauris, London, contains a collection of analyses on competition issues among players in the global tourism market written by leading academics and industry experts.

"Hoteliers acknowledge the contribution of tour operators to the development of tourism in Greece," said Dr. Koutoulas during the presentation of the book. "The industry's explosive growth of the past decades would not have been possible without the immense tourist flows generated by tour operators mainly from West and North European countries. However, the Greece-bound inclusive tour market has become increasingly dominated by a handful of large tour operators following their accelerating horizontal and vertical expansion of the last ten years. The large market power gained by these operators is putting pressure on the hospitality sector to lower prices, a situation that makes it difficult for hoteliers to maintain quality."

Additional pressure stems from the constantly expanding accommodation capacity of both established and emerging destinations throughout the Mediterranean basin, especially from countries outside the European Union such as Turkey, Croatia, Bulgaria and North African countries. Both individual hotels and entire destinations have become highly substitutable due to the commoditisation of Mediterranean-bound inclusive tours.

The intensifying price competition among Mediterranean destinations has been strongly felt by Greek hoteliers especially after the introduction of the Euro in 2002. Greek resort hotels are now forced to compete against destinations with more favourable currency exchange rates and lower operating costs. This has led to a decline in inclusive tour business for these hotels over recent years as has been shown in the survey.

Greek resort hotels are predominantly orientated towards the inclusive tour market as they secure 60% of their clientele through tour operators. Most of these hotels actually outsourced the marketing function to tour operators instead of developing their own marketing capabilities. This hasn't been a problem for decades, as tour operators supplied a steady flow of tourists to resort hotels.

However, the recent drop in Greece-bound inclusive tour traffic and the increasing pressure applied by tour operators to lower room rates is now forcing Greek hoteliers to explore other markets and distribution channels, to adjust their products accordingly and to acquire new marketing skills.

Despite the growing market influence of tour operators and the recent decline in Greece-bound inclusive tour traffic, upscale hotels working with the larger operators appear to achieve better results than the average hotel according to the survey. These hotels also evaluate their cooperation with the tour operators more positively and are more optimistic in their expectations regarding tour operator-generated business in the near future when compared to the sample’s average hotel.

However, the outlook in regard to inclusive tours is one of growing competition among Mediterranean destinations combined with a clear cost disadvantage in the case of Greek resort hotels. Sooner or later, the country's industry stakeholders will face the necessity to radically reposition the destination and to decide on the markets and the competitive set most suitable to Greek tourism.

Commenting on this study by Koutoulas, Andreas Papatheodorou, Adjunct Professor at the University of the Aegean in Greece, noted the following: "It was a great pleasure for me to include Dr. Koutoulas' contribution into my edited book on competition issues in tourism. His chapter is the outcome of very industrious and thought-provoking scientific work and adds significantly to the effective and holistic treatment of competition issues in tourism. Inter alia, the chapter raises important policy issues: in case the tour operators' oligopoly acts competitively in the tourism origin markets (e.g. Germany, UK, etc.), then the local Competition Authorities may see no reason to intervene in the market as consumer interests are not harmed. A fortiori, it is possible that these Authorities may tacitly consent to the exercise of oligopsonistic power by the tour operators on the Greek hoteliers so that the latter succumb to lower rates; this would undoubtedly benefit the tourism origin consumers. It seems, therefore, that stakeholder interests are only asymmetrically safeguarded: on these grounds, tourism policymakers in Greece should rethink and eventually reform their strategies to alleviate the emerging problems and maximise tourism benefits for Greece."

The book "Corporate Rivalry and Market Power: Competition Issues in the Tourism Industry" edited by Dr. Andreas Papatheodorou and containing the complete analysis, the detailed survey findings and the proposed strategies by D. Koutoulas, can be ordered from the publisher I.B. Tauris, London (www.ibtauris.com) or from Amazon.com. The author can be contacted at: d.koutoulas@ba.aegean.gr .