The Chronology Of A Fiasco: Palma's Palacio

In June 2003 Jaume Matas became president of the Balearics for the second time. Among his top priorities was the revival of the international image of Palma, and key to this was the building of a major conference centre which would propel Palma into the forefront of the business tourism market. This was to be the Palacio de Congresos, one of several stellar projects of the Matas administration. A conference centre had been spoken about often before 2003. Matas was praised for being the one who sought to make it a reality. Even opposition politicians were inclined to approve.

Three areas of Palma were initially considered. One of these, Playa de Palma, was ruled out straightaway as there was no obvious site. A second was Porto Pi, which was the one that pretty much everyone agreed would be the best. It was not possible because of how land was classified. This left the Moll Vell, i.e. in the La Lonja area. A fourth option then arose: near to the GESA building. This was the one that was chosen.

By November 2003 the Palacio was already being talked up. At London's World Travel Market the boss of Meliá, Gabriel Escarrer, said that it would be an "emblematic installation" and alluded to the architect tendering process, which in itself would enhance Palma's image. Various names were mentioned, including Norman Foster and Richard Rogers. On 14 June 2005 Matas and the mayor of Palma, Catalina Cirer, unveiled the winning architect - Patxi Mangado from Pamplona. The project for the conference centre, the hotel and new parking would cost 60 million euros. On 17 April 2008 work officially started on the project. It would take thirty months to complete.

Fourteen months before the work started, the cost of the project having apparently risen to 130 million euros, the Matas government approved the 40-year concession to operate the conference centre and hotel to a consortium that was headed by the hotel group Barceló. It would have half the shareholding. Others included Globalia, Iberostar and the building company Acciona. In May 2007, three months after this approval, Matas lost the regional election. He left politics and went to work for Barceló.

Two years on from this election and so some months after work had started, Barceló, which had bought out other members of the consortium and so owned 95% of the project (Acciona stayed in with 5%), announced that it was "temporarily" abandoning the project. Reasons cited included an additional thirty million euros that had been added to the bill, modifications to the project and "legal and economic irregularities". In early 2011 Barceló definitively broke off its involvement, a month before the Palacio was supposed to have opened, the schedule for opening having been modified from the original end of 2009 date.

Uncertainties surrounding the Palacio increased through a combination of Barceló's concerns and economic crisis. Election victories which installed PSOE administrations in Palma and regional government were less significant, but when the PP regained Palma and government in 2011 it was faced with major problems. The lack of a conference operator was just one. Debts were mounting. Acciona, the constructor, was owed millions. Because of this, in June Acciona downed tools  and paralysed the work indefinitely.

Tendering processes proved to be fruitless. One produced no interest. The second attracted Meliá, but Meliá was not prepared to accept the proviso of paying a bond of eight million euros to secure the concession. Why not? This remains a good question.

This was in the summer of 2012. Work was suspended, but the costs were still rising. Over half a million euros a month had to be found simply to cover the costs of maintenance and security for the half-built white elephant. Palma's mayor, Mateo Isern, attributed the problems not to lack of interest from the private sector but to "country risk": the shaky state of the Spanish economy in other words. This shaky state was such that there was a financing shortfall of 70 million euros.

Hilton was another hotel chain which expressed an interest, but nothing was to come of this. Different solutions were now being sought. One was to separate the hotel and convention centre and invite tenders for each. Another was demolition. In February 2013 consideration was being given to this. The cost, just under 30 million euros, was prohibitive. 

In November 2013 Palma Town Hall was given permission by national government to take out a 42 million euro loan. The money was to pay Acciona what it was owed. In so doing, the way was open for work to restart. When in June last year the regional government committed to spend 36 million euros to finish the project, the financing shortfall that Isern had referred to was covered.

So we now come to the present day. The conference centre may well be finished this year. There is still, however, the matter of the operator. It has been suggested that a new consortium featuring some of those involved with the Barceló consortium might emerge. But were Mallorcan hoteliers to finally decide they want to be a part of the conference centre, how would this square with one of the most damning statements made about the project? It came from Iberostar's Aurelio Vázquez, the president of the Mallorcan hoteliers federation. In October 2013 he said that the Palacio was in a "bad location". It was too expensive and did not guarantee sufficient profit. "Hotel chains know which projects are profitable and those which are not," he added.

Damning though this was, there was another observation about the Palacio which was more damning. It came from advisors in 2003. Matas was told that it was an investment which made little sense because of the strong competition from conference centres elsewhere in Spain and in Europe and because of the high costs. And as for these high costs, does anyone actually know how much the Palacio will finally end up costing?

Photo: What the Palacio should eventually look like.