Holiday Rentals: Now they go international

The Spanish Confederation of Hotels and Tourist Accommodation (CEHAT) has issued a report in which it says that holiday rentals that are not within the law generate a black economy sum of almost 3,000 million euros.

This is a staggering amount of money, so staggering that it is hard to know what it actually refers to. Is CEHAT saying this is an annual sum? As always with these amounts that are thrown into the media fire, they are designed to stagger without substance being offered to support them or to explain them. Let's just accept, though, that there is a lot of black money associated with holiday rentals; it is undeniable.

This 3,000 million is from the "oferta alegal". The use of "alegal" is not unimportant as it doesn't mean the same as "ilegal". It means "not within the law" and can also mean "unregulated". The distinction is important because across Spain many holiday rentals are "alegal" in that there is no legislation in several regions of the country that expressly deals with this type of accommodation. There is one region, however, that does have legislation, and we are of course familiar with it: the Balearics tourism law.

The need for regions to have their own laws is one consequence of the reform of the national tenancy act. Madrid, by this reform, effectively abrogated any responsibility for holiday rentals, placing this responsibility with regional governments. It was a reform that had the support of the hoteliers (some might say that it was a reform drawn up by the hoteliers) as, in certain parts of Spain, the hotel lobby is all powerful, e.g. in the Balearics, and heavily influences regional legislation.

It was a reform, however, that was curious in one particular way. The national plan for tourism, published in June last year, identified "an increase in residential tourism" as a strength of Spain's tourism. Though the plan's document avoided reference to holiday rentals, concentrating instead on second homes and on family use of such homes (permissible under the tenancy act), this type of tourism is only an element of the catch-all term "residential tourism". Another element, and a very significant element, is the "oferta alegal" or "ilegal" where illegal can be used.

What was doubly curious was that, having identified this type of tourism as a "national" strength, a reform that does not directly come under the heading of tourism, that to do with the tenancy act, which is property legislation, went in the opposite direction. By handing responsibilities to regional government, not only was a national strength ignored but the potential for diverse and so confusing legislation was also heightened. To give one example, and a very different one to the Balearics, in Catalonia, where there is regulation, the offer of holiday rental places has soared. CEHAT says that, in Barcelona alone, it greatly outstrips the number of places in hotels or previously regulated types of accommodation, so bringing about conditions under which it is impossible for hoteliers to compete.  

But what CEHAT doesn't say is that Catalonia introduced a tourist tax last year. The government there saw a need to harmonise this tax for different types of accommodation and also saw a revenue opportunity; it has regulated holiday rentals in order to bring in more money. And what CEHAT doesn't admit is that growing tourist demand cannot be met by hotel supply and will not be met by a new boom in hotel construction (there are due, for example, to be some new hotels built in Mallorca but only a few). 

There has been, again according to CEHAT, a very significant rise in the "oferta alegal" over the past three years: a rise of 300%. We will have to take its word for it. There is little doubt that there has been a steep increase and there are good reasons why - demand, economic circumstances (of owners who need to supplement incomes), the emergence of P2P websites such as Airbnb. Alarmed by this, CEHAT sees the threat not just nationally but also internationally. At the meeting of the European Trade Association of Hotels, Restaurants and Cafés in Europe that takes place shortly in Athens, it hopes that "international best practice" can be established to guide regulation of accommodation that is outside the law.

CEHAT, as with the hotel federation in Mallorca, cries foul against the "oferta alegal", warning of the dangers it poses to the tourism industry and claiming unfair competition. It will keep on issuing these warnings and making these claims, while all the time not admitting that its aim is to eliminate competition; and competition, moreover, that is needed in order to satisfy demand.