Greece's new Tourism Minister, Nikos Sifounakis, said the country's hoteliers' association quoted prices well over the odds to foreign tour operators. The association tried to justify the high prices by forecasting a fall in the value of the drachma, even though it knew that government policy was to maintain a strong drachma at all costs.
The drachma's value held, and many tour operators either pulled out or failed to sell the holidays on to their customers.
"This is all true," Mr Sifounakis said. "The hoteliers overcharged, although it is difficult to say how much."
TUI, a major German operator, reckons it was asked to pay 15 per cent more than the going rate. As a result, bookings to Greece were down by about 25 per cent. Germany accounted for the largest numbers staying away from Greece, followed by the Netherlands and Britain, where bookings are down by between 25 and 30 per cent.
According to British travel companies, British tourists have turned toward Turkey, ironically Greece's enemy over the centuries. First Choice Travel, the UK's third-biggest tour operator, has felt the backlash from holidaymakers fed up with price rises. The group marketing director, Kevin Ivie, said: "Greece needs to be significantly more competitive. People expect it to be a relatively cheap holiday and that's not been the case over the past couple of years."
News of Greek overcharging came as British tour companies revealed their brochures for next summer which showed substantial price increases. There will also be fewer holidays on offer next year. When 1996 holidays go on sale on Friday, packages to Spain - the most popular destination for Britons - will show rises of around 10 per cent on brochure prices.
The travel industry has been hit by over-optimistic projections, a trend towards late booking, and this summer's exceptionally good weather.
In Greece, the poor tourist season, which follows five years of growth, has sparked anxious debate about the quality of services for tourists and prompted a major shake-up in the ranks of the tourist authorities.
The president of the National Tourist Organisation, Evangelos Gianakoulias, was fired a month ago after widespread complaints not only about the pricing fiasco, but also about the expense of shops and restaurants, poor standards of service, low levels of investment and a lack of decent publicity for Greek holidays.
Mr Sifounakis, whose predecessor quit two months ago in a scandal over an abortive casino-building project mired in kickbacks, vowed to give the tourist industry a shot in the arm and recreate value for money in a country that pioneered cheap holidays. He said he would encourage development of new resorts and build luxury yacht marinas at Rhodes, Mykonos and Kos to spur the meagrely served upper end of the market. It may be an uphill struggle. Tourism to Turkey was up 50 per cent this summer, and long-haul destinations are also popular.
Economists in Greece forecast revenue from tourism falling to $2.9bn this year, compared with $3.9 bn last year. There are fears that next year will be worse again.
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