Sunday, September 01, 2013

When Business Growth Is Not Positive: Too many bars

Can you ever have too many bars and restaurants? If you spend your entire existence in pursuit of continuous drinking and eating, then maybe not, though even if you are an alcoholic and over-eater (normally the two are mutually exclusive), the number of hostelries is, one would have thought, immaterial.

What is the optimum number of establishments in relation to the size of a town's population? Someone may have come up with a calculation, but it is hard to see how. The criteria for deciding are too diverse. Rather than seeking an ill-defined optimum, are there just simply too many bars?

Intuitively, you would think there are. In Palma, for example, there are 3,008 establishments of varying types. One for every 135 inhabitants. Alcúdia has 257 bars, restaurants, ice-cream parlours, kiosks, what have you. One for every 70 or so people. Calvia boasts 763. In relative terms, it has the most - one for every 67 residents.

Such figures pay no attention to temporary populations - tourists, obviously - and nor do they pay attention to the periods when some bars and restaurants will be shut (for tourism reasons). Of Alcúdia's 257, how many of these are actually open all year? Half of them? When they are all open and when tourism is at its height, the equation is very different; in the order of one establishment for every 175 or so people.

An annual report into economic activity that was published in July revealed that between 2008 and 2011 the total number of bars and restaurants in Spain declined by 20%. All regions of the country registered a fall, one attributed to the impact of economic crisis. In Mallorca last year, however, the number of establishments increased dramatically by more than 15% (466 new businesses). This rise contrasted with an overall increase in the Balearics of only around 3% with both Ibiza and Formentera registering a decline.

How does one explain the increase in Mallorca? The most obvious answer is probably that of economic necessity, yet it seems perverse that so many establishments would open when the general level of consumer spending by residents of Mallorca has fallen as has spending by tourists. And where the tourism element is concerned, the onward march of all-inclusives would be, you would have thought, a deterrence to opening a new bar or café.

There may be other reasons, such as the sheer number of units that are available and which had, before crisis put a stop to much construction, meant that there was an increasing supply of units because of rules that require ground floors of apartment buildings to be reserved for commercial purposes. Another may be just simple opportunism.

Whatever the reasons, the Chamber of Commerce and other business organisations are, rather than being pleased by this growth, concerned because of the high risks involved (turnover is often no more than a few months) and because of falling standards. People are taking on establishments without having the right skills, says the head of the restaurant division of PIMEM, the small to medium-sized business association. One might add that people are taking them on without adequate finance as well and so end up in debt.

These organisations want, therefore, a system of certification to be introduced which would require a new owner to satisfy certain criteria. They also want limits introduced on the number of places, a system which applies to hotels. The tourism ministry has in fact been looking at just such a system.

The Chamber of Commerce and others are convinced that there can be such a thing as too many bars and restaurants. It is difficult to argue against the fact that there is over-supply and that there has been for years, but this over-supply has suddenly risen sharply. However, what would be done with all the units were systems of certification and place limits to come in? They would be left empty, thus giving an impression of abandonment and decline. The over-supply has been, in no small part, the consequence of stupid planning regulations which insist on commercial properties being created but for which there is too little demand and, at present, a falling demand.

Can there be too many bars and restaurants? Yes, there can be, and in Mallorca, there are.

Any comments to please.

No comments: