Only a quarter of Cyprus hotels hold a full licence

Lack of oversight threatens Cyprus tourism product, auditor warnsSerious weaknesses in Cyprus’ system for licensing and supervising tourist accommodation are undermining efforts to upgrade the country’s tourism product, according to a new special report by the Audit Office, which found that only 23 per cent of hotels and tourist accommodation hold a full operating licence. The report, prepared under Auditor General Andreas Papaconstantinou, paints what it describes as a worrying picture of the sector, citing shortcomings in licensing procedures, supervision, inspection mechanisms and the management of subsidy schemes operated by the Deputy Ministry of Tourism. Papaconstantinou warned that “the effort to upgrade the Cypriot tourism product is being called into question,” pointing to the low proportion of businesses operating with full licences. The report found that 55 per cent of tourist accommodation operates without a full operating licence, while a further 22 per cent operates under temporary licences. The situation is particularly severe in the Famagusta district, where only 24 of the 241 tourist accommodation establishments, or 9.9 per cent, hold a full operating licence. According to the Audit Office, these figures raise serious questions about the effectiveness of enforcing existing legislation. It argued that improving the quality of Cyprus’ tourism product cannot be achieved while a substantial proportion of businesses continue operating outside the prescribed licensing procedures. The report also highlights strong indications that a large number of self-catering tourist accommodation properties are operating without being registered in the Deputy Ministry of Tourism’s official register. Cross-checks between online booking platforms and other databases found that hundreds of properties either could not be identified or did not appear in the official register. The Audit Office said the absence of a comprehensive monitoring mechanism means the true scale of the problem cannot be determined, although there are clear indications that a significant number of establishments are operating outside the legal framework. It added that the actual situation could be even more serious than official figures suggest. The report makes specific reference to the apartment building that collapsed in Germasogeia in February 2025. According to the Audit Office, three self-catering tourist apartments were operating in the building and were properly registered with the Deputy Ministry of Tourism, holding valid operating licences until the building collapsed, after which they were removed from the register. The case highlights the need for more effective supervision of self-catering accommodation, the report said, adding that the Audit Office will carry out a separate special investigation focusing exclusively on this issue. It also stressed that tourist accommodation operating in buildings with serious structural problems demonstrates the need for stronger inspection mechanisms and closer cooperation between the relevant state authorities. The Audit Office warned that the widespread operation of unlicensed or temporarily licensed accommodation could mean compliance with fire safety, structural integrity, hygiene and safety requirements is not being adequately ensured, with direct implications for visitors and the reputation of Cyprus’ tourism industry. The report also identified serious weaknesses in the administration of the Deputy Ministry of Tourism’s subsidy schemes. It found insufficient safeguards to prevent double funding, while the absence of a comprehensive information system makes it difficult to monitor applications, maintain a complete audit trail and reduce the risk of errors or data loss. The Audit Office also found that the Deputy Ministry had not systematically recorded or analysed the reasons why many businesses fail to comply with the law, making it more difficult to design effective corrective measures. It was also critical of the fact that businesses complying fully with licensing requirements are effectively treated the same as those operating without full licences. The report cited the participation of businesses without full operating licences in state financial support schemes, including those introduced during the Covid-19 pandemic, arguing that this creates conditions of unfair competition for businesses that comply with the law. In its conclusions, the Audit Office said years of inconsistent enforcement have created a culture of tolerance and non-compliance, with businesses aware that sanctions are either limited or not imposed. It argued that concerns over potential impacts on tourism cannot justify failing to enforce legislation, adding that if the current legal framework is considered impractical it should be amended rather than applied selectively. The report concluded that the current situation undermines the credibility of the regulatory framework, distorts competition and may negatively affect both visitor safety and the international reputation of Cyprus’ tourism sector. The Audit Office called on the Deputy Ministry of Tourism to take immediate action to substantially increase the proportion of fully licensed tourist accommodation and to examine, together with all relevant stakeholders, why licensing procedures remain particularly lengthy, especially for older developments. It also recommended intensifying inspections and enforcement, improving public awareness of legal obligations, and introducing a comprehensive digital system to manage subsidy applications and payments. Furthermore, it advised establishing controls to prevent multiple funding of the same expenditure, carrying out formal on-site inspections of subsidised projects, and adopting a uniform evaluation framework to ensure equal treatment, transparency, and consistent implementation. The report further recommends revising the existing supervisory framework for tourist accommodation in line with European practices to create a more effective inspection system that safeguards user safety while taking account of administrative costs. The Audit Office said the draft report had been sent to the Deputy Ministry of Tourism for comment before being finalised, with the ministry’s responses reproduced in full in Appendix III. It added that issues included in the draft but omitted from the final report were considered to have been adequately addressed or resolved through the Deputy Ministry’s submissions.