Tourism: The budget's poor relation

Something rather odd has happened. The 2012 budget for the Balearics, announced by the regional government's finance minister, Josep Aguiló, is to go up. By 8.6%. It will, in total, be 3,675 million euros.

What is odd about this is that the government has spent the first months since it came to power creating a general sense of alarm and panic. Remarkably, it has now found more than just some loose change down the back of a few sofas.

From the budget, various ministries will get just over 70%. The health service, one should be thankful, isn't about to collapse under a lack of money; it will receive 3% more. But as you look down the list of which ministry gets what, there, languishing at the bottom, is the ministry for tourism and sport. 63 million in all. Oh well, so much for tourism being the motor for economic recovery.

The amount might seem paltry, less than 2% of the government's total spend, but it is roughly the same as that for business promotion and employment and not much less than the ministry of the presidency (whatever that actually does). Agriculture and the environment seems to have fared much better, harvesting 231 million.

There does seem to be a bit of an imbalance, as agriculture counts for only around 1.5% of the economy, but it's hard to tell exactly what goes to agriculture alone as it has been wrapped up into the super-ministry along with the environment, which could probably do with some money to replant all the forest that people have so thoughtfully set fire to this year.

The other way of looking at the tourism ministry's budget is that it is in fact a reasonable wedge, and I rather fear some people might it look at like this. Come on, Carlos, they'll be saying, get those ads on prime-time British TV sorted out. Fortunately, Carlos (Delgado of that ilk) is proving to be the Arsène Wenger of the tourism world. He's not about to blow the lot on some marquee signing of a celeb and have him or her (well, him, as it could only be Nadal) extol the virtues of the Balearics during a "Corrie" ad break.

Something else rather odd has also been happening. And that is that tax receipts have shot up. They have shot up that much that government tax revenue is greater than it was BC (before crisis). Partly this is down to an excellent tourism season and to the increase in IVA.

The socialist opposition, moaning that the budget should have been and could have been announced much earlier and therefore implying that the delay has been manufactured so as to allow Bauzá as much panic-inducing time as possible, reckons that it can take some credit for the tax bonanza. It must have been the previous administration that paved the way for the excellent tourism season. Which is of course a load of rot. Everyone knows why it has been an excellent season, and it had nothing to do with policies of the regional government.

The fact, though, that tax revenues have increased does undermine to an extent Bauzá's state of alarm. What they also suggest is that the IVA rise has not proven to be detrimental to tourism, so contradicting predictions that preceded the increase and the Partido Popular's own intentions to create a "super-reduced" rate of IVA for the tourism sector.

What this year has shown is that spending shedloads on tourism promotion is unnecessary when the conditions are right. Sadly, Arab springs don't come around too often, so it's not as though Delgado can become too Wenger-like. An IVA reduction for the sector might still be wise, though it is far less important than has been made out, even faced with a revival in tourism-market competition in 2012.

To achieve anything like a repeat of the 2011 tourism season next year does demand that the tourism ministry gets its cheque-book out. But its budget is not so huge that it can afford to fritter away ten or twenty per cent on television advertising campaigns; and please, let's not forget that there are countries other than the UK which are promoted to.

The effectiveness of spend is what matters. TV campaigns create an impression of something being done when their returns are relatively that much lower than those through other means, such as incentivising tour operators, airlines, hotels and overseas delegations and exploiting the internet and now mobile technology.

Something rather odd has indeed happened. And that's that there are reasons to be cheerful, and it's tourism that can be thanked, even if luck can also take a bow.


Any comments to andrew@thealcudiaguide.com please.