Resort Obsolescence: Financing mature zones

Amidst recent talk of Magalluf and its changing face, something quite important has slipped under the radar that is highly relevant to this face-changing. It applies also to Palmanova, Santa Ponsa and Paguera, where facelifts or other cosmetic surgery are spoken of less. That's the power of Magalluf, one supposes. Mention Calvia, and the assumption is that Magalluf is what is meant, but other resorts in the town have just as much of a need for makeovers as Magalluf: more in a way, as they have not gone under the operating scalpel of Meliá.

Businesses, small ones for the most part, met with town hall representatives last week to talk about concerns they have. While they raised once more the prostitutes and lookies' issues - ones that for all the triumphal talk are not getting any better - and also called for greater police presence in Santa Ponsa's Ramon Moncada (a street every bit as bedevilled as Punta Ballena has been), top of their list were "mature zones".

To remind you, these are areas of resorts deemed to be obsolete and outdated. Rundown might also be a description. The zones' levels of maturity reveal their age - fifty plus years - and there are legacies that date back to the first years of development, as is the case with other resorts on the island. The tourism law that the Bauzá government introduced contained provision for resorts (or parts of them) to be declared mature zones. Making such declarations is largely the responsibility of town halls, and if and when these are approved, the process is set in motion for eradicating the outdated and replacing it with the up to date, or possibly even futuristic.

The carrot, where the law is concerned, is that bureaucratic procedures will be relaxed. Financial assistance should also be available. The carrot is for the stick which demands that mature zones and business premises within them are redeveloped, and done so within a set period of time. In Magalluf, Palmanvoa, Santa Ponsa and Paguera, businesses such as bars, restaurants, shops and clubs have three years to get their modernisation act together: approximately a thousand premises across the four resorts are affected.

These businesses had until Monday to submit the initial documentation in order to get the ball rolling and to qualify for the plan. There was talk of extending this deadline, but at the heart of the concerns, one fancies, is the question of money. Where will the financial assistance come from? Will it be forthcoming?

A mature zone declaration brings with it an obligation on behalf of the local authority and businesses. It isn't a jargonistic term but an item of law, the first application of which - to Playa de Palma - is set out in suitably legalistic fashion. It is also a concept which doesn't only apply to Mallorca. It was adopted by the last regional government (and the new one would have no reason to abandon it) as part of a national scheme for modernisation, and nationally there is a fund for the modernisation of touristic infrastructure. This totals 200 million euros but only one eighth of it is targeted at mature zones: 25 million for the Balearics, the Costas and the Canaries.

The rules of engagement suggest that 30% of finance for business modernisation has to be private. Some would argue that it should all be private, as these are not public-sector businesses, but the scale of the task of modernisation in resorts demands government intervention and government cash. The problem is that there seems so little of it.

The Balearics of course have a fundamental issue with national government over investment funding, but even were Madrid (of whatever political colour) to up this investment for tourism infrastructure, would it go to businesses? There's no guarantee that it would, as the resorts themselves need improvement and modernisation, while with Podemos in the equation, public funding going to the private sector would probably be a no-no: they've said that the tourist tax benefiting the hoteliers would be unacceptable, and they might well have the same attitude towards restaurants and clubs.

There are other funds, such as the Balearic tourism "bolsa" that was created from levies paid by hoteliers to legalise all the places in their hotels that hadn't been legal. This is used for resort improvements, but of a general nature. And then there will be the tourist tax, but it won't go into private hands.

There are other funds in the form of generous lines of credit from certain banks, but a key problem, as identified by Meliá's Mark Hoddinott in Magalluf is that bars and restaurants don't operate in the long-term. It's why convincing them of the merits of Magalluf's transformation and changing market profile is not easy. And that means that it isn't easy to convince them that there will be profitable returns on borrowing.