Wednesday, November 13, 2013

Still The Palace Of Follies?: Palma's Palacio de Congresos

Palma town hall last week approved a loan of 42 million euros to go towards work on the Palacio de Congresos and its adjoining hotel. What initially might have sounded like positive news regarding the Palacio for once turned out to be less than positive; the 42 million is not for further work which might complete the damn thing, it is to pay the constructors Acciona for what they have already done. The payment to Acciona and schedules of payments to other suppliers which are now envisaged, thanks to the central government in Madrid having given the green light to Palma to take out the loan, do though raise hopes that work on the Palacio might restart in the not too distant future and actually be completed some time in 2015, work having been suspended in July last year because of lack of funds.

Despite renewed optimism for the future of the convention centre, there remain doubts as to the whole project's viability. Funding is one issue, another is who might end up managing either or both the Palacio and the hotel. It was because the viability was brought into question that Palma town hall looked into what it might cost to demolish the structure - 28.6 million euros, so it was reported in February.

Demolition would be an extreme measure, and it can almost certainly be dismissed. But assuming funds can be raised to allow completion, the town hall is still no nearer finding a company to operate the site. Yet another tender process is underway, with Hilton, which has expressed an interest, likely to make a further offer, but the tendering has thus far been shambolic. Either no interest has been shown or interest that has been shown comes with a price tag below what the town hall has been putting on the Palacio.

One Mallorcan company which has bid is Meliá, but when its offer in July last year was turned down (it had been the only bidder), work on the Palacio promptly stopped. Meliá's submission was declared void, primarily, it would seem, because a bond of eight million euros wasn't paid which would have secured the contract. The town hall, via the company it has to oversee the Palacio, determined that tender conditions had not been met, but it was revealing that Meliá might have been reluctant to have parted with a sizable amount and also that it was the only bidder, and this despite there having been a reduction in the bond.

Though Meliá had looked as though it might have stepped in and given the boost to allow work to continue, the company was presumably playing hardball, and this might not have been altogether surprising. The reluctance on behalf of Mallorcan companies to get involved before the Palacio and hotel are actually finished was stated by the president of the Mallorcan hoteliers federation at the end of last month. He said that the Palacio was in a "bad location". In other words, its siting makes it too expensive and does not guarantee sufficient profitability. The president, Aurelio Vázquez, explained that "hotel chains know which projects are profitable and those which are not". Now that Hilton, not a Mallorcan company, knows what the Mallorcan hoteliers think of the project, might it now think again?

Vázquez's statement came a couple of weeks after the spokesperson for the Més grouping at the town hall, Antoni Verger, had declared that the Palacio was a "ruin". He made the same point as Vázquez - that no local business was willing to commit itself - and pointed also to the fact that the value placed on the sale of the hotel alone was below the investment that will ultimately have been put into it.

Against this background, there has at least been some good news for Palma town hall. Representatives of TUI and its subsidiary operation, Hotelbeds, have been talking up the part that the Palacio can play in eating away at tourism seasonality. TUI is in for some 100 grand as a sponsor of Palma's 365 Foundation, so it has an interest in seeing that a project which might actually realise tourism 365 days a year (or close to 365) goes ahead. It has said that it will promote Palma via Hotelbeds and other websites and at travel fairs.

But even if the Palacio is seen as being key to the success of Palma 365, then TUI's people have made it clear that it has no intention of becoming involved in the actual business of the convention centre. Indeed, why should it? As such, it is making a similar point to that made by Aurelio Vázquez, which is that once (if) the Palacio and hotel are finished, then, and only then, will businesses get involved. And it is going to take some 40 million euros more to ensure that the project is finished; 40 million euros that will have to be found from a public purse.

* Photo: the semi-built Palacio de Congresos from "Ultima Hora".

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