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Cyprus Hotels See Softer Summer Demand As Energy Costs And Regional Tensions Weigh On Tourism

by THEFUTURE.TEAM

July 27, 2026

Cyprus’s hotel sector is heading into the peak summer season with occupancy averaging about 85% in July and August. While remaining strong by historical standards, it is still below last year’s record levels as rising energy costs and regional instability continue to weigh on tourism.

Bookings Improve, But The Market Remains Behind Last Year

Pasyxe director-general Christos Angelides said reservations have strengthened in recent weeks, helped by stronger demand over long weekends and a rise in last-minute bookings from neighbouring countries and the domestic market.

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“There has been stronger demand over long weekends, particularly through last-minute bookings from neighbouring countries and the domestic market, which has helped improve the picture,” Angelides said.

Even so, he said Cyprus continues to face a difficult operating environment, with higher energy costs linked to regional conflict and persistently high airfares adding pressure to the sector.

“We remain optimistic and continue to work together as an industry, but these are issues we must keep in mind,” he said.

Occupancy Holds Up, But Last Year’s Benchmark Was Exceptionally High

Angelides said nationwide hotel occupancy is averaging around 85% during the summer peak, compared with as much as 97% in August during last year’s record tourism season. Industry estimates suggest occupancy this year is running about 10% to 15% lower.

The Industry’s Next Test Is The Off-Season

The industry’s focus is now shifting to extending the tourism season into the winter and shoulder months.

“Our biggest hope is to build on last year’s performance during the November 2026 to April 2027 period. That is where we believe the difference can be made,” Angelides said, adding that stronger off-season demand could help offset the softer start to the year.

Despite the more challenging conditions, he said Pasyxe members remain committed to maintaining service standards and protecting Cyprus’ reputation as a high-quality destination.

Regional Tensions Continue To Influence Booking Behaviour

Separately, Actta president Haris Papacharalambous said the market remains behind last year’s pace, although the decline has so far been manageable. He noted that the Famagusta district has been affected more than other parts of the island.

Papacharalambous said arrivals have declined across almost all of Cyprus’ main source markets this year, with Israel the clear exception. Arrivals from Israel rose 170% in June compared with the same month in 2025, when the Israel-Iran conflict disrupted travel patterns.

He said one of the industry’s biggest challenges remains the perception of Cyprus as being exposed to regional conflict, particularly following the drone incident at the British Bases in March and the media coverage that followed. According to Papacharalambous, any renewed outbreak of violence in the region has an immediate impact on bookings.

“The effect is visible the very next day,” he said, adding that the latest developments have not yet triggered a significant downturn.

Outlook Points To A Softer Year, But Not A Collapse

Papacharalambous expects overnight stays across Cyprus to finish the year about 12% to 14% below last year’s record level. While tourism volumes are expected to remain historically strong, 2026 is unlikely to match the exceptional performance recorded in 2025.

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Cyprus Depositors Lag Behind As Mortgage Costs Rise, CBC Data Shows

by THEFUTURE.TEAM

October 6, 2026

Cyprus households are earning relatively modest returns on their savings even as mortgage borrowing costs climb again, according to new Central Bank of Cyprus data that places the country among the euro area’s weakest performers on deposit rates.

Deposits Rise, But Remain Near The Bottom Of The Euro Area

The central bank’s latest analysis, covering August 2026, found that the interest rate on new household deposits with agreed maturities of up to one year increased to 1.35 per cent from 1.27 per cent in July. Over the same period, the average rate on new house purchase loans rose sharply to 4.16 per cent from 3.78 per cent.

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The contrast underscores a persistent imbalance in how interest rate changes are being transmitted across Cyprus’s banking system. While borrowers have felt the impact of higher rates more directly, savers continue to receive returns that remain unusually low by euro area standards.

The CBC said deposit rates in Cyprus sit at the lower end of the euro area and remain an outlier. The transmission of market interest rate changes to deposits has also been weaker in Cyprus than in almost every other euro area country, affecting both households and businesses.

Borrowing Costs Are Closer To The Euro Area Median

The picture on the lending side is more mixed. Interest rates on outstanding loans and on new lending are broadly aligned with the euro area median.

According to the CBC, the interest rate on outstanding loans to households in Cyprus was only 0.1 percentage points below the euro area median, while the corresponding rate for non-financial corporations was 0.3 percentage points above it. For new lending, the weighted average rate on loans to households for house purchase was 0.2 percentage points below the euro area median, while the rate for non-financial corporations was 0.1 percentage points lower.

Still, the latest monthly data show a notable increase in mortgage pricing in August. The average rate on house purchase loans rose to 4.16 per cent, from 3.78 per cent in July. The CBC noted that this is a weighted average across different types of housing loans, including mortgages for primary residences and holiday homes.

Because the composition of banks’ housing loan portfolios changes from month to month, weighted averages can move even when the underlying rates offered by banks have not shifted by the same amount.

Consumer Credit Rises, Business Lending Eases

Consumer borrowing also became more expensive, with the average interest rate rising to 7.12 per cent in August from 6.94 per cent in July.

For businesses, the trend was more favourable. The rate on loans of up to €1 million edged down to 4.45 per cent from 4.47 per cent, while the rate on loans above €1 million fell more sharply to 3.67 per cent from 4.29 per cent.

Even so, new lending volumes fell significantly across the board in August. Pure new lending dropped to €251.40m from €415.00m in July, while total new lending, which includes refinancing and other operations, declined to €390.10m from €686.10m.

Pure new consumer loans fell to €19.30m from €23.90m, and total lending in that category slipped to €20.70m from €26.50m. Pure new house purchase loans fell to €114.40m from €149.50m, while total lending for house purchases declined to €141.90m from €205.80m.

Business lending also slowed. Pure new loans of up to €1 million declined to €35.50m from €52.30m, while pure new lending above €1 million fell to €77.00m from €162.30m.

Why Cyprus Deposits Stay Low

The CBC’s euro area comparison is especially telling for savers. Unlike lending rates, the interest rates on existing deposits in Cyprus remain near the bottom of the euro area, which the central bank described as an outlier.

The CBC attributed this in part to the high level of excess liquidity held by Cypriot credit institutions. Cyprus’ Liquidity Coverage Ratio stood at 313 per cent in August 2026, compared with a median of 182 per cent and an EU average of 158 per cent in June 2026, the latest available figures cited by the central bank.

The relatively short maturity structure of Cyprus’s banking sector was also identified as a factor weighing on deposit rates. Rates offered on new deposits are similarly subdued and remain close to those paid on existing balances, reflecting the same underlying market conditions.

In practical terms, this means the European Central Bank’s monetary policy cycle has affected borrowing costs in Cyprus more visibly than it has improved returns for depositors. Savers have received only a limited pass-through of higher interest rates, even as borrowers have faced higher costs.

Mortgage Preferences Are Changing

The CBC also highlighted a marked shift in the type of mortgage borrowing being taken out by Cypriot households.

The share of new house purchase loans carrying a variable interest rate has fallen dramatically, from almost 100 per cent at the beginning of 2022 to just 12.0 per cent in August 2026. That is now below the euro area median.

The central bank said this may partly reflect borrowers opting for fixed-rate loans for an initial period, typically three to five years, before switching to floating rates. The shift suggests households are becoming more conscious of interest rate risk, a development banks will need to reflect in their risk management frameworks.

A similar trend is visible when household and business loans are viewed together. The share of new loans to households and non-financial corporations carrying floating rates has dropped from almost 100 per cent at the beginning of 2022 to 55.9 per cent in August 2026, below the euro area median. The CBC said this could again partly be explained by fixed-rate periods early in the life of a loan, before conversion to floating rates later on.

The Bottom Line For Savers And Borrowers

For households, the latest data point to a mixed picture. Mortgage rates remain broadly comparable with the euro area, but deposit returns remain unusually low, while the cost of new house purchase loans rose significantly in August.

The central bank’s analysis suggests that the core issue for Cypriot savers is not that lending rates are especially high by euro area standards. Rather, it is that interest rate changes have been passed through to deposits far less fully than elsewhere in the currency union.