Conversion Rates: Town halls and hotels

The marathon of consultation and proposed amendments to the new tourism law in the Balearics is about to enter the stadium and take the last lap prior to its final presentation to the regional parliament at the end of this month. Since the start of December, every self-interested party and ones that are more altruistic have had their say, whether officially or unofficially.

The most significant movement by minister Carlos Delgado has concerned the say-so of local authorities - the island councils and the town halls - when it comes to proposed changes of use to existing hotel stock. The local authorities got into a fair old lather when they realised that a major reason for their existence - the approval or rejection of urban planning requests - was threatened by a government inclined to do the signing-off themselves.

The reasons for the local authorities having become so exercised about this possibility were obvious. They do have responsibilities for planning and they do, or so they would argue, have a better understanding as to what a change of use, be it to residential or co-participation (i.e. condohotels), would have on local areas.

A fear has been that the government, were planning left to it alone, would unleash a free-for-all of virtual deregulation, hence the objections of organisations such as the architects college in the Balearics and opposition political parties that this new urban planning would send the islands back to the bad old days of the sixties. Has this fear been overstated? Despite the go-ahead for new projects in Capdepera, Campos and Magalluf (all in theory earmarked for some years), the government has made it clear that it does not envisage massive new coastal construction; work under the provisions of the new law would be confined to conversion and this alone. Or would it?

Ultimately though, the objections of the town halls have been founded on their own self-interests, ones that do not, at first glance, appear to help in stripping out the sorts of delays and bureaucracy in planning requests that the government was hoping would be a consequence of centralised decision-making. The government has bowed to local authority pressure because on this issue it matters to town halls, many with Partido Popular mayors, that they hold onto their power. The government may otherwise have found itself with a real revolt on its hands from the party membership.

The law, as it now appears to be drafted, will give town halls the final say as to plans for hotel conversion. So will this mean that such plans are likely to be blocked  or delayed by unco-operative local authorities? Not necessarily. Indeed, the government has been pretty crafty. Any conversion work is going to come with a 5% tax and this tax will end up in town hall coffers. A nice little earner for cash-strapped municipalities, and one that will have them salivating at the prospect and making pretty damn sure that the stamps have adequate rubber and are immediately to hand. Badly needed tax revenues can speed up even the most lethargic of public bodies.

There is, however, an unknown in the provision for conversion of use. It may become clearer once the bill is finally published, but changing a hotel to residential use means a loss of tourism offer. This much is obvious, but it has a planning dimension, namely that within municipalities there is a set amount of land that is designated as being for this tourism offer, i.e. it is accommodation or some other facility expressly with tourism in mind. Take some of this accommodation away, make it residential and what happens to that percentage which can be for tourism?

This is one reason why the government's insistence that it is not contemplating new hotel construction over and above the projects that are known about might not be all it seems. It is not as though it hasn't been, how can one put it, relaxed about other planning matters, such as regularising urbanisations previously considered illegal or giving the green light to projects that had been blocked, albeit that to have kept them blocked would have meant shelling out a whole load of compensation.

The furore over the hotel development near Es Trenc has given rise to further fears of coastal building deregulation, but the Es Trenc project is a specific case, one that will benefit an area of Mallorca underdeveloped in tourism terms. If the government does in fact end up permitting new construction within existing tourism centres, would this be such a bad thing? But it will still depend on whether local authorities agree. What's the tax revenue from new construction?


Any comments to andrew@thealcudiaguide.com please.

Re-thinking Resorts: Magalluf and hotels

"To build four hotels with 2000 rooms, where on earth are they going to find the people to fill them?"

This was a question posed by Sue of Magalluf the other day in "The Bulletin". It's a reasonable question. And to an inability to fill existing hotels can be added anti-social behaviour in the resort as a reason for questioning the wisdom of the new development.

Though plans for these hotels may have been in existence, the government had implied that its revision of the tourism law did not envisage new developments. Indeed, all the noises that have come from the government, and the previous one, had suggested that there was a preference for a reduction in hotel stock, as has been the plan for Playa de Palma.

Now, however, we have a situation in which, in addition to four new hotels in Magalluf, there will be new complexes in Campos and Capdepera, both of them established in principle for some years.

In Magalluf's case, there is, unlike for example the luxury development contemplated for Canyamel in Capdepera, a marketing problem. It is one of image. Both the new Viva hotels and the overhaul of current hotels that Meliá is to embark upon come up against Magalluf's reputation.

Magalluf is a cracking resort, primarily because it is so bonkers, but to suggest that it enjoys a reputation for more than just the good old family holiday and the lads and ladettes on tour would be wide of the mark. If Meliá and Viva are going to make their plans work, they are also going to have to work damned hard on re-branding the resort. Are they aware of the "Shagalluf" nickname?

If Magalluf is to undergo a four-starring, then it needs to acquire a four-star reputation. Meliá and Viva will doubtless achieve this in their own developments, but a dog of a resort having previously been given a bad name creates a stumbling-block. Meliá may be able to spin a Sol Calvià Resort name within a resort, but they can Sol, Calvià and Resort all they like; Magalluf is Magalluf. Changing the style of the resort by changing the style of hotels will ultimately, one would imagine the thinking is going, change the style of tourists, but you have to attract them in the first place. This will require more than just some new hotels.

It won't be easy, but it may be easier if this is a reconceptualisation of a resort with new or different markets in mind, i.e. not predominantly British. It is just conceivable to consider that within ten years Magalluf will be a very different place with a very different tourism profile. But old habits die hard, and no more so than among tour operators for whom Magalluf has represented a solid product for a solid and traditional tourism market, namely the Brits.

Notwithstanding the challenge of re-branding, filling hotel places might not be the problem it appears. The tourism law will permit change of use of some hotels. Meliá already contemplate this in their redevelopment. If this change of use is to residential use, then the existing hotel stock is whittled down and is replaced by the new. It is quite a sophisticated solution to a problem in Mallorca, which is one of land that is designated for either tourism or residential purposes.

By changing the use of existing real estate, the availability of residential accommodation can increase. New hotel developments gobble up some new land, but relatively little. The total number of hotel places may therefore end up being roughly the same as at present, so filling them will be no more of a problem than it currently is.

It is a neat idea. Though the government may not have been entirely accurate when it suggested that there would not be new developments, the new law does make a great deal of sense: freeing up real estate for living purposes while also setting in motion an improvement in hotel quality. But change of use is key to the whole thing, and here the government has fallen victim to the interests of the town halls. It has been forced to bow to pressure that means town halls, and not it, will still have the final say as to whether there is a change of use or not. Calvià might not pose too much of an obstacle if Carlos Delgado can still wield some influence, but this can't be relied on. The government should have had the courage to tell the town halls to get lost.


Any comments to andrew@thealcudiaguide.com please.