Since the late 1970s, the largest and most dynamic component of the service sector has been that of wholesale and retail trade, restaurants and hotels (tourism). It grew at double-digit rates between 1979 and 1988, except for 1986. Its contribution to the GDP in current terms quadrupled between 1979 and 1988. By the late 1980s, with about 50,000 workers, it had also become the largest source of employment.

Tourism gained importance in this subsector during the 1980s, but had not overtaken trade. Trade (wholesale and retail) contributed C£76.7 million, in current terms, to GDP in 1979 (79.56 percent of the sector) and C£217.3 million (55.4 percent) in 1988. Restaurants and hotels (tourism) contributed C£19.7 million in 1979 (20.43 percent of the total sector) and C£174.6 million (44.55 percent) in 1988. The value added to GDP by trade nearly tripled in current prices between 1979 and 1988, and that of restaurants and hotels (tourism) increased about nine times.

Tourism was seriously disrupted by the Turkish invasion of 1974. Only 47,000 tourists came to the island in 1975, down from 264,000 in 1973. However, under the influence of the emergency economic action plans of 1976-78, 1979-81, and 1982-86, earnings from tourism increased at least 20 percent for eleven straight years, and the number of tourists who visited the Republic of Cyprus went from 165,000 in 1976 to 1,376,000 in 1989. Foreign currency earnings from tourism amounted to almost C£500 million in 1989. Earnings were so significant that tourism was a greater source of foreign exchange than the export of domestic goods from 1986 through 1989.

Most of the tourists who came to the government-controlled areas were middle-income Europeans. For many years, British visitors were the most numerous and made up about one-third of the total. Swedes were the second largest group in the late 1980s, closely followed by Germans. Most tourists came for stays of about ten days and arrived during the warm months, despite efforts by the Cyprus Tourism Organisation (CTO) to achieve a more even seasonal distribution of visits. In the late 1980s, the CTO began to be successful in increasing conference tourism as a step toward this goal.

By the late 1980s, efforts were underway to raise the quality rather than quantity of tourism because the south's ability to receive more tourists had reached a saturation point. A one-year ban on licenses for new hotels in coastal areas was announced in March 1989 to check unplanned development. The volume of demand had surpassed the available infrastructure to support it, with resulting problems of traffic congestion, water shortages, and inadequate sewerage capacity.

Future growth was to depend on attracting wealthier tourists, who would spend more money during their stays. This aim was to be accomplished by turning away from simple sun-and-sea tourism and developing higher quality hotels with facilities such as golf courses, marinas for yachting, and casinos. Emphasis was also to be placed on building mountain resorts and developing the island's archaeological sites for sightseeing.

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Source: U.S. Library of Congress