‘Greece 10 Years Ahead’ Defining Greece’s new …...610 810 720 780 2.800 +520 (+23%) 2021Ε 870 80 100 2016Ε 2.430 770 80 60 2010 2.280 650 80 240 30 GVA (€ billion at 2010

‘Greece 10 Years Ahead’Defining Greece’s new growth model and strategy: Tourism and Growth Conference

Athens, November 2011

|McKinsey & Company Proprietary & Confidential 1

Contents

Overview of ‘Greece 10 Years Ahead’

Overview of Tourism sector deep-dive


Overview of McKinsey & Company

▪ Founded in 1926

▪ ~8.000 consultants and 99 offices in 56 countries around the world

▪ Cooperation with 90 of the top 100 companies of Forbes Global 2000

▪ Specialization in 11 sectors and 7 functions with an annual investment on knowledge development over $300 million

▪ ~1,100 studies in the last five years for national and local governments, charities and non-profit organizations. ~400 studies for economic growth for more than 70 national and local governments

McKinsey globally

▪ Economics and Research Institute - think tank of McKinsey, which conducts completely independent research studies that combine academic economic thinking with the specialization in business aspects and sectors of the economic activity

McKinsey Global Institute

▪ Active in Greece since 1997

▪ Working with 12 of the 15 and 23 of the 40 leading companies in Greece based on market capitalisation

McKinsey in Greece


‘Greece 10 Years Ahead’ has been a Pan-Hellenic effort to develop Greece’s new economic growth strategy for the next 5 and 10 years

Develop an objective analytical perspective on productivity and competitiveness challenges at a macro/cross-sector level

Select the sectors that will form the ‘nucleus of growth’ (both current ‘giants’ and ‘rising stars’)

Analyze in detail the competitiveness and productivity challenges for the selected sectors

Identify action options for enhancing productivity and boosting growth both at macro/cross-sector and sectoral levels

‘Greece 10 Years Ahead’ scope Parties involvedGreek Government▪ Prime Minister▪ Ministry of Economy▪ Ministry of Development▪ Ministry of State▪ Other Ministries (e.g., Tourism, HC, Energy,

Agriculture)

McKinsey & Company▪ McKinsey Athens Office▪ McKinsey Global Sector Practices▪ McKinsey Global Institute (as advisor)

▪ ΟΚΕ▪ ΓΣΕΕ▪ ΓΣΕΒΕ

▪ ΕΣΕΕ▪ ΣΕΤΕ▪ ΚΕΕ

▪ ΣΕΒ▪ ΕΕΤ▪ ΤτΕ

Business, Regulatory and Social Partners

International and local Senior Experts and Academics

|McKinsey & Company Proprietary & Confidential 4SOURCE: WIS Global Insight; EU KLEMS 2009; Eurostat

Other 6Land transport 5Utilities excl. energy 6Post and telco 6Business services 7Shipping 8Agriculture 9Energy3 9Tourism 14Manufacturing2 17Retail & Wholesale1 38

185147

9348

29253

55149

356492

783

Direct employmentThousands, 2010 Share

Direct GVA of sector at basic prices€ billions, 2010 Share

Public Admin

Health 12Education 15

18

228310370

Real estate 20 6

Construction 7Financial Services 9

319116

‘Production ’€125 billion

‘Input cost’€45 billion

‘Imputed Returns’€20 billion

‘Derived demand’€16 billion

19%8%7%4%4%4%3%3%3%2%3%

18%11%8%1%

13%1%7%1%2%3%4%

9%7%6%

8%7%6%

10% <1%

5%3%

3%7%

Mapping the economic sectors of Greece in terms of GVAand employment

1 Excluding fuel retail; 2 Excluding pharma manufacturing and ship building; 3 Extraction, processing and retail of fuels; electricityNote: Figures include only direct GVA and employment of each sector and are therefore not comparable with figures that include indirect effects

Analyzed sectors

ESTIMATES

Rising Stars

Aquaculture

Special food categories

1

2

Regional cargo hub

4

Generics manufacturing

Medical tourism

Elderly care

6

78

Classical studies5

Waste management

3


13

15

19

8

10

13

20

22

24

9132

+491

(+59%)

2021Ε

45

22

2016Ε

104

34

18

5

2010

83

27

13

2

280360470

520610

810720

780

2.800

+520 (+23%)

2021Ε

870

80

100

2016Ε

2.430

770

80

60

2010

2.280

650

80240

30

GVA (€ billion at 2010 prices) Employment (thousand jobs)

Food manufacturing

Agriculture

Energy

Retail

Tourism

‘Rising stars’

Potential for €49 billion new economic output and 520 thousandnew jobs in the next decade

Note: Tourism and Retail are depicted in 2009 figures instead of 20101 ~€ 55 billion in GDP terms

ESTIMATES


Contents

Overview of ‘Greece 10 Years Ahead’

Overview of Tourism sector deep-dive


2009

9.9

2008

10.8

2005

9.0

2000

6.1

10.213.110.99.5

Decomposing the Tourism sector demand reveals four critical growth levers to act upon

Source: World Travel and Tourism Council; World Tourism Organization

XX CAGR 2000–2009

€ billions, nominal

Capital investment

Number ofVisitors (million)

Other exports(to non-visitors)

Total demand

Visitorsdemand

Otherdemand

Domestic demand

Governmentexpenditure

2009

38.9

2008

42.8

2005

35.4

2000

25.8

29.032.026.419.7

18.818.915.510.2

5.66.85.93.8

2009

1.0

2008

1.2

2005

0.8

2000

1.0

13.316.614.813.1

5.45.45.56.0

142146134121

2009

3.3

2008

2.8

2005

2.3

2000

1.3

Average spend/day (€/day)

Average stay (days)

2

1

34

6.5%

6.2%

8.0%

7.5%

10.1%

3.0%

XX%-1.3%

2.4%

2.3%

7.4%

Foreigndemand 4.1%

XX CAGR 2000–2008

0.0%

4.7%

5.5%

10.9%

7.0% 0.2%

1.8%

XX%-1.2%

4.4%

4.4%

0.8%


Capital investment4.1 Low demand generated per tourism employee

Weak presence of hotel chains and international brands 4.2


Spend focused heavily on accommodation and food3.1

Average stay (days) 2.1 Minimal contribution of distant (long-haul) visits

2.2 Low penetration in 2nd home market5.45.45.56.0

142146134121

2009

5.6

2008

6.8

2005

5.9

2000

3.8

Number of visitors (million)

A number of important observations could explain Greece’sperformance across four main growth levers

Source: World Travel and Tourism Council; World Tourism Organization

13.316.614.813.1

1.1 Minimal or negative market share growth in traditional markets

1.2 Weak penetration in emerging source markets

1.3 Condensed tourist season

1.4 Low awareness-to-purchase conversion rate in sun and beach segment

1.5 Weak loyalty in the culture segment

NOT EXHAUSTIVE


Greece’s source market and product focus driven by fundamentals

Departures growth; % CAGR 2005-201013

12

6

5

4

3

2

1

0

-1

-2

-3

43210

AustralasiaTurkey

Austria

SpainBelgium

India

Switzerland

Mexico

Singapore

UkraineNetherlands

-5France

0.9

Italy

Canada

1.3

Scandinavia

Russia

China

1.7

-4

-6

Percent of departures; 20101110987

United Kingdom

United States

2.2

Germany

0.7

Number of arrivals in Greece; million

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20European market growth; % CAGR 2004–09

Market size; € billion1101009080703020

Medical

Sailing and yachting

WellnessGolf

City break

Touring

Sun & Beach

MICE1

0 10

Cruises

1 Meetings, Incentives, Conferences, Exhibition

SOURCE: Euromonitor; WTCC


Market share, %, 2009

3.4

3.1

1.8

0.6

0.4

1.2

USA China

5.2

6.6

0.9

1.2

0.9

0.7

Russia

~0

~0

0.9

~0

~0

~0

~60 ~35~33

0.3 0.2

Millions of departures

∆ percentage points market share, 2004-09

SOURCE: Euromonitor

2

4

3

14

16

~22

0.8

1

4

13

5

3

20

UK Italy

0

2

5

5

9

4

Scandi-navia

5

11

4

N/A

28

~59 ~23~32

-1.4 -0.2

1

5

7

10

12

3

Germany ~81

0.1

France

-0.2

A challenging competitive position for Greek tourism


1 Excluding shipbuilding2 Including shipbuilding

Cruise passenger visitsMillions of passengers

Cruise industry direct expenditures1

€ billions

Cruise industry employment2

Thousands of jobs

Spain

Italy

Greece

Rest of Europe

21%35%

30% 32%

17%21%

12% 8%

41%34%

52% 56%

296.3

4%

9.4

6%

4.9

10%

23.8

21%

2009 Cruise passenger embarkationsMillions of passengers

Opportunity for boosting revenues and employment in the cruiseindustry by capturing a ‘fair leadership share’ in embarkations

ESTIMATES

SOURCE: G. P. Wild


2

5

9

10

x5Greece

Italy

Turkey

Croatia

Marinas per thousand kilometers of coastline

58

68

36

32

Significantly lower Marinas capacity compared to the country’s real potential

Source: National tourism offices; local maritime authorities; CIA World Factbook; press

Total number of marinas

|McKinsey & Company Proprietary & Confidential 13Source: IATA

Comparison of charges at local and international airports€ per pax1

Athens

Lisbon

Regional Greek airports

Milan (Malpensa)

Rome (FCO)

Istanbul

Madrid

Barcelona

Majorca

1 Charges for an Airbus A320 with 100 pax – International EU flights

8

9

10

11

12

12

15

15

32


Possible priorities and measures to further develop Tourism

Developing quality infrastructure while accelerating investments

Facilitating access and transportation

Re-defining and re-focusing the commercial strategy

Developing capabilities and know how

▪ Systematically target core mature and emerging markets while improving the mass-affluent mix– Defend and reinforce share (>3.5-4%) in mature markets: Top Tier - UK, Germany, Scandinavia, Tier 1 -

France, Italy, Netherlands– Aggressively penetrate and gain share in North America (>1%), Russia (>1%), and China (>0.5%)

▪ Upgrade and selectively expand the product portfolio– Upgrade ‘Sun & Beach’ to increase value for money and establish a ‘healthier’ mass/affluent mix (~55/45)– Develop ‘City Break’ themes in Athens/Thessaloniki with global events, MICE1, culture and leisure offers– Aggressively build ‘Cruises’ and ‘Sailing/Yachting’ themes for European leadership (25% embarkation and

visits share compared to 10% and 21% share today)– Develop a systematically planned network of LIRs2 and vacation homes (15-20 LIRs, ~50K homes)

▪ Deepen destination marketing sophistication, while bringing Greece’s brand ‘back-to-basics’▪ Introduce multi-channel platforms for a distinctive pre-visit experience (e.g., ‘Visit Greece’ portal)

▪ Revamp Tourism zoning and planning legislation and lift excessive restrictions– Facilitate the development of quality accommodation, including LIRs and vacation homes– Enable the productive utilization of existing dormant tourism assets

▪ Pursue growth-relevant public infrastructure investments: upgrading 3-4 ports (for cruise embarkations), building 30-35 new marinas (to reach 60-65); investigate regional airport expansions

▪ Upgrade cultural sites’ infrastructure (prioritized by cultural importance and traffic) while developing 2-3 new major conference facilities to reinforce ‘City-Break’ and MICE value proposition

▪ Leverage the ‘fast-track’ framework (including the introduction of leaner licensing processes and the introduction of a legal pre-clearance team) to accelerate tourism investments

▪ Increase flight connectivity with US, Russia and China; facilitate Schengen procedures▪ Re-plan and re-schedule capacity, connectivity and quality/cost offering for island transportation; consider

the development of 2-3 local hubs (e.g., in Cyclades, Dodecanese, Ionian islands) ▪ Review pricing at access points (ports and airports) against demand elasticity

▪ Build Greece’s University Department for Tourism Studies (undergraduate and graduate); upgrade existing curriculum for technical education; introduce extensive international exchange programs

▪ Step-improve central sector planning and management capabilities; establish eight critical functions (e.g., strategic planning, product/customer management, marketing execution, channel/sales support); inject talent into the Ministry and GNTO; create a market driven PPP for selected critical functions

A

B

C

D

1

2

3

5

910

6

7

11

12

13

Possible priorities and measures

1 Meetings, Incentives, Conferences, Exhibitions; 2 Large Integrated Resorts

High priority

4

8




















A

B

C

D

1

2

3

5

910

6

7

11

12

13



High priority

4

8




















A

B

C

D

1

2

3

5

910

6

7

11

12

13



High priority

4

8

















D 12

13



High priority



A

B

1

2

3

5

6

7

4

8


C910

11


Possible components of Greece’s Tourism commercial strategy

▪ Sharpen targeting, focusing on core mature and emerging markets and higher spend visitors

Source markets

1

▪ Upgrade ‘sun & beach’ and complement with ‘City Break’

▪ Actively develop cruises and sailing/yachting to claim European leadership

▪ Develop a properly planned network of large integrated resorts and vacation homes

Product Development

2a

2b

2c

▪ Refresh positioning and brand while boosting destination marketing sophistication

Marketing strategy3

▪ Introduce multi channel platforms to step-improve pre-visit experience

Pre-visit experience4


Number of passenger visits

Spend per passenger visit

€ 60

Number of passenger embarkations

Spend per passenger embarking

~ € 120

Number of ship turnarounds/trips

Spend per turnaround*

~ € 0.5 mil

Passenger spend

Cruise lines spend

Total spend

Embarkations spend

Other spend

Cruises represent an important growth opportunity for Greece

* Including spend, e.g., on fuel and other procurement of goods and servicesSource: European Cruise Council; G.P. Wild

Real 2010

Port-of-call visits spend

600

2021

2,900

1,900

1,000

2016

1,650

1,300350

2009

€ million

95066060

300

1,130180

720€ million

860600

270270

1,650790

870€ mil

40 3020

30

2021

120

90

2016

60

2009

€ million

130 18060

60

370

190

190

€ million

670210

210

2021

1,280610

2016

680

470

2009

18.8

15.83.0

12.0

11.01.0

5.0

€ million3.1

1.61.5

1.6

1.10.5

0.5

€ million

2,560.0

1,330.0

1,230.01,350.0

930.0420.0420.0

Incremental impact

Baseline

€ million

PRELIMINARYESTIMATES


Croatia’s strategy in nautical tourism

Description

▪ One of the most dense marinas network (almost 10 marinas per 1,000 km of coastline, 58 marinas in total) in Southeast Europe

▪ 2.6 mooring places per km of coastline (2005), with a plan to increase total number of harboring spots by 160% until 2015

Capacity of infrastructure

▪ Modernization of repair centers as well as construction of new ones▪ Implementation of surveillance and maritime navigation systems▪ Development of a naval construction cluster (21 companies, 13

shipbuilders, 7 equipment manufacturers, 1 design company)

Quality of services

▪ Harmonization of all business elements of operators (product, market, price, marketing, and public relations)

▪ Focused strategy on promoting Croatia as a permanent-mooring option and not simply as a nautical destination

Marketing and sales

▪ Procedures simplification and harmonization of regulations regarding customs, business organization, and public-private partnerships

▪ Establishment of a special coordinating entity composed of representatives of entities and participants in nautical tourism

Regulatory framework

Source: Press and Web research


Benchmarking indicates that Greece might be able to host more than 20 ‘mixed use’ integrated resorts

Number of resorts per millions of arrivals

Ø2.1

0.3

2.2

3.8Number of resorts per millions of population

Ø2.0

0.5

1.9

3.6

AverageItalySpainPortugal

Density of resorts in selected countriesImplied potential for Greece

~27

~23

Currently, there is formally expressed demand for 9 new large

integrated resorts

Currently, there is formally expressed demand for 9 new large

integrated resorts

ESTIMATES


Athens needs to establish a multi-dimensional value propositionto develop the brand/image of a top-notch City Break destination

SOURCE: McKinsey analysis, Euromonitor

Strong

Moderate

Weak

Trend/style Culture, heritage, art Gastronomy

Leveraging environment

Opennesstolerance Nightlife

Istanbul




Athens




Barcelona




Rome


Eight tourism critical functions to drive the new tourism growth strategy

Tourism-related fast track

Tourism operations facilitation (Local Tourism ΚΕΠ)

Ministry of Tourism

PPP (Σ∆ΙΤ)

GNTO Local tourism offices (ΠΥΤ)

Product/ destination and

customer/ source market

management

Marketing execution Accreditation Sector

Intelligence

Overall Tourism sector strategy

Sales and know how support


2021

16.1

12.53.6

2016

13.5

11.12.4

2009

10.0

23.3

14.48.916.2

12.63.611.1

Possible upside in tourism demand drivenby its key components / drivers€ billion, real 2010

Capital investment

Number ofVisitors (mil)

Other exports(to non-visitors)

Total demand

Visitors demand

Otherdemand

Domestic demand

Governmentexpenditure

2021

66.0

49.616.4

2016

51.2

43.67.6

2009

40.4

37.112.837.7

32.55.230.4

49.9

26.621.5

19.9 22.71.619.3 3.9

8.88.0

6.2 7.01.85.7 1.8

2021

2.4

1.60.2 1.80.6

2009

1.0

2016

1.8

1.0

19.716.3

14.4 16.61.913.3 3.1

5.45.4

5.2 5.00.2

5.40.4

5.4

146 151 151

19216514146 41

2021

4.9

3.30.4

3.71.2

2009

3.3

2016

3.7

3.3


Average stay (days)

Foreigndemand1

Incremental impact

1 Foreign demand includes cruises spend on top of regular international visitors spend (Baseline: € 0.6 billion for 2009, €1.3 billion for 2016, €1.9 billion for 2021/Incremental impact: € 0.4 billion for 2016 and €1 billion for 2021)

ESTIMATES

Documents

‘Greece 10 Years Ahead’ Defining Greece’s new …...610 810 720 780 2.800 +520 (+23%) 2021Ε 870 80 100 2016Ε 2.430 770 80 60 2010 2.280 650 80 240 30 GVA (€ billion at 2010