Harming Tourism: Government policies

Hugh Morgan, director-general of Cosmos Holidays, bemoans the fact that British reservations for holidays in Spain this summer are down by 5%. Spanish tourism, as a whole, will enter its own recession in 2012, experiencing a fall of 0.3%. In Greece, airport taxes have been scrapped for nine months. In Egypt, these taxes have been reduced, there has been "aggressive promotion" and in the first quarter of 2012 the level of arrivals increased by over 30% compared with the same quarter of 2011.

These different stories are inter-related. In the case of Spanish tourism, the reason for it experiencing negative growth in 2012 is due to a fall in demand from the domestic market, one that will not be compensated for by overseas markets. This local demand is being affected, among other things, by the rise in airport taxes in Spain. British reservations are not being helped for the same reason. Yet in Greece and Egypt ... .

There is more to the British story than just the taxes, there is also the fact that joint promotions between the Spanish tourism agency, Turespaña, and tour operators have all but ceased. Not because the tour operators have wanted them to, but because the Spanish Government has slashed the tourism promotional budget to the extent that it has. And for the Spanish Government, read also the Balearic Government. Yet in Greece and Egypt ... "aggressive promotion."

There are of course other factors affecting a fall in British tourism, but if the boss of Cosmos argues that a lack of joint promotion and a rise in taxes are major ones, then I am not about to disagree with him. It's when you put these different stories together, though, that a picture emerges that paints a scene of governmental ineptitude and one-dimensionality of economic strategy, both nationally and regionally in the Balearics.

Neither Madrid nor Palma are showing the slightest sign of doing anything to inspire growth. Both are interested solely in austerity and in measures that will do nothing to help growth. Tourism, for all that it is a double-edged sword in being a key driver of the economy and being an industry sector on which there is an over-reliance, cannot be treated, should not be treated with the apparent disregard with which it currently is. Attitudes in Madrid and Palma are perverse.

It may prove to be that, with people being killed again in Egypt, the best intentions of Egyptian tourism leaders are dashed. The beneficial effects of the Arab spring on Spanish and Mallorcan tourism had been expected to continue this year, and they may indeed now do so. But it is poor strategic thinking if a reliance is placed on external factors, such as events in Africa, to the detriment of proactivity, e.g. in promotion, or of use of the fiscal system in aiming for growth in the key Spanish tourism sector.

The perversity of attitudes towards tourism is indicative of a serious malaise within governmental circles. Current policies are being aimed mostly at symptoms of Spanish economic troubles and indeed at making these symptoms worse, e.g. by increasing IVA, rather than attacking causes. I have great sympathy for the arguments regarding a rationalisation of public administration, e.g. repatriation of certain responsibilities to central government, elimination of tiers of government or mergers of existing local authorities. I have said previously that a solution is staring the national government in its face, i.e. the system of regional government and decentralisation as it is currently practised, but as I said more recently, in connection with the tiny administration of the village of Búger, it isn't anything like as simple as one might think for this system to be changed.

Political expedience doesn't rule out a change, but would any Spanish government, including the current one, be bold enough to take remedial measures that would, almost at a stroke, have a highly positive effect on the deficits nationally and regionally? The answer is almost certainly no. So instead, the government takes the easy options to do nothing, where promotion to drive tourism and therefore growth is concerned, or to hammer everyone arbitrarily through indirect taxation and to further hammer tourism by raising airport taxes. They are economics of the madhouse, determined by a total absence of political courage in effecting a major change to a root cause of Spain's troubles.

Over in Greece, they know all about economics of the madhouse, but remarkably they also seem to know something about tourism. The Spanish Government clearly doesn't. But then what do you expect if you appoint a property expert as a tourism secretary of state?


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