Tax Incentives For Hotels Opening All Year?

The Spanish Confederation of Hotels and Tourist Accommodation (CEHAT) held its last meeting of the year this week in Madrid. One of the main topics for discussion was the old - very old - chestnut of seasonality. Solutions that the meeting raised included those which are as old as the problems posed by seasonality, ones that are of a financial (tax) nature.

The headlining suggestion from the meeting was that the super-reduced rate of IVA (VAT) should be applied to those hotels which stay open all year, meaning that it would only be 4%. It is believed that this reduction would have a direct effect in increasing revenues.

Playing around with tax has been spoken about for so long and the debilitating effect of seasonality has existed for so long that it seems astonishing that there haven't been measures adopted which might give tax breaks and so incentivise hotel openings. In fact, certain local authorities have brought in tax breaks for those taxes which they have responsibility for. In Marbella, hotels will be credited with 50% of their business tax if they stay open. In Almeria, both business and property tax will be reduced.

Marbella and Almeria are in Andalusia, a region of Spain which attracts greater numbers of off-season tourists than most others. As an example, it receives seven times the number of golf tourists who visit the Balearics. Despite this greater number, Andalusia is and has been mightily concerned about the impact of seasonality. In October, the region's tourism minister met with business and unions in arriving at an agreement for incentives for hotels to stay open. The incentives have yet to be fully worked out, but the very fact that various parties have got together in order to come to an agreement in principle contrasts greatly with the situation in the Balearics. In Andalusia, where the problem of seasonality is less acute, they nevertheless are looking to do something about the problem. There's a lesson here for the Balearics.

Represented at the meeting this week was HOSBEC, the hotel association for Benidorm and the Costa Blanca. Benidorm, widely believed to be a destination that has something approximating to a genuine winter season, has witnessed a decline in this seasonal tourism over the past few years, but this November hotel occupancy in Benidorm was 79%, up by 8.5% over the same month in 2012. In the second half of November, overnight stays by Spanish guests rose by a staggering 42%.

Benidorm does benefit from national tourism in the off-season and most of what it was receiving in November was from the "seniors" market, but the figures for November indicate what can be achievable. HOSBEC, looking to develop on this success, has added to the call for incentives. It wants social security payments to be deferred for hotels which keep open.

Both the Costa Blanca and Andalusia have advantages which Mallorca and the Balearics do not. They are easier to get to for both national and international travellers. There are, for example, that many more international flights, partly a reflection of the existence of much larger populations of foreign nationals (British for instance). But both are looking to be proactive in bringing more off-season tourists and in introducing or pressing for incentives. The Mallorcan hoteliers have spoken about incentives as well, but a key difference is that, where there is talk in Mallorca, in other parts of Spain, they get on and actually do something.

And there is a way in which HOSBEC differs to Mallorca. It, and CEHAT appears to side with it on this one, wants to establish a uniform system of private tourist accommodation, drawing on the experiences in Catalonia and work done there by, yes, the Barcelona Hotel Association. Totally unlike the Balearics, the hoteliers have worked with the private owners to arrive at a system which has now been launched that categorises private accommodation (including and especially apartments) according to a key system. HOSBEC and CEHAT refer to the need to eradicate illegal accommodation, but both appear to accept the sense of there being a properly regulated and marketed private accommodation sector. Again, there should be a lesson here for the Balearics, but of course there almost certainly won't be.

The Catalonian categorisation, were it to be more widely adopted, would in fact fall in line with what the national government had foreseen in its national tourism plan, namely more standardisation of accommodation types and classification. It might, therefore, become a national standard, except that it wouldn't be national, not while the obstinacy of the regional government and hoteliers in the Balearics remains as it is.