Palacio Success: Dependent upon flights?

So, six years after it first walked away from the project, the Barceló group that had left Palma's Palacio de Congresos a damsel in distress has returned in the guise of white knight saviour. How strange the machinations of Mallorca's touristic politics can be.

Barceló secured the bid because its was considered to be a better financial package than Meliá's. In other words, it was willing to offer to pay a higher rent for the complex, though the value it has placed on the option to purchase the accompanying hotel was lower. This option, worth 40.5 million euros, has to be exercised within five years. If not, the rent (1.75 million euros) will rise by 2% per annum, a chicken-feed increase in terms of its penalty value. As Barceló has the concession until 2052, it could afford not to bother buying the hotel and still have plenty of change left over, though the 2% would increase under conditions of higher inflation. It probably will buy it though, but only if it looks as if it makes economic sense to do so.

Barceló is to bring on board a company named GL Events, a French-based events and conferences management concern. It has an impressive portfolio, so its involvement is a distinct positive, but it is one of the few positives to emerge from the miserable history of the Palacio since the decision to build it was taken twelve years ago.

In announcing the award, Alvaro Gijón, Palma's deputy mayor and the president of the consortium overseeing the congress centre, said that there had not been any "bad faith" on behalf of Barceló. He was alluding to its decision to walk away all those years ago. Bad faith there isn't, but there is a bad taste where opposition parties are concerned. José Hila, the PSOE candidate for Palma mayor, accepted that everything was legal but considered Barceló's return to be "indecent". The company had abandoned the project and left the taxpayer to pick up the bill. Costs of maintenance alone during the many months when development work was suspended were colossal. The spokesperson for Més reckoned that the people of Palma had gifted Barceló eighty million euros, "thanks to the Partido Popular and PSOE".

In explaining why Barceló did return, its regional director for the Mediterranean, José Canals, said that the situation and the rules of the contest (for the bid) had changed. When the company definitively turned its back on the project at the start of 2011, it had done so because of arguments with the PSOE-led town hall over payment that had not been forthcoming. The situation, one might suggest, changed as soon as there was a change at the town hall later that year. Indeed, by the start of 2012 Barceló was saying that it might renew its interest.

And finally, it did. While all the old ground of what has happened (and for many months running into years didn't happen) will be trodden over again, now is the time to consider the Palacio's future, not its past and its cost - conservatively put at three times the original estimate.

The future brings with it the uncertainty as to how successful or not the congress centre will be. For Barceló to be convinced that it would be worth paying for the hotel, it will have to first convince itself that this would represent a good investment. There again, the ball is in its court. The incentive is all Barceló's. It, together with GL, has to make a success of this wretched project.

This success may well depend, however, on factors beyond Barceló's control. The greatest is that of flights. As I have mentioned previously, the conference season is generally confined to the months of low tourism activity, i.e. when flights are fewer to the point, in some cases, of non-existent. There may be demand from Spain, but success will surely depend upon the development of international markets. Will conference organisers be willing to commit when there are weaknesses with air connections in the off-season? And these organisers typically plan several years ahead.

There is also the huge competition to take account of, not least that of Barcelona, one of the world's premier conference destinations. Could Palma grab the type of mega-event that Barcelona (and Madrid) stage? It must be doubtful.

Nevertheless, there are some reasons for optimism. Palma is shaking itself out of promotional lethargy, and there is a good deal of positive news about the city at present. But is it just flavour of the month? There are plenty of other cities lining up and wanting to be nominated as the best. Then there is Simon Barceló. Might his non-executive directorship of AENA bear some Mallorcan fruit after all? Who can say, but ultimately one feels that it will be the flights' situation that determines success.