The White Noise Of Balearic Technology

The Balearic government, the current one that is, has its grand projects. One is the anti-corruption office, an agency now scheduled to open some time early next year, assuming there can be agreement on what its director should be paid.

This office, much spoken about as a symbol of the "agreements for change" struck between PSOE, Més and Podemos, has acquired an almost mythical status. This is because many of us had begun to think that it was a myth, that it was never going to happen. Were it not to happen, the government's credibility would shrink, in particular when it comes to corruption. There are voices, some of them close to the government (Podemos), who believe it has been soft on corruption allegations and therefore soft on Biel Barceló over the contracts affair.

Another grand project is largely the brainchild of Barceló. It is easy to forget that he has responsibilities other than for tourism. He is also minister for innovation and research. His ministry is a curious, almost personal interest alliance of tourism and what in former times we would have referred to as R&D.

That old usage is one now consigned to the past along with smokestack industry and forgotten giants of the corporate worlds of chemicals, automotive and metals. These industries remain but they have been re-cast for the contemporary day. They focus on innovation and technology, not dull old research and development. But then, didn't they always?

For governments, innovation and technology are the means to current and future ends of competitiveness. Harold Wilson's white heat has been turned gold, and governments thus expend effort (or at least words) in pursuit of the philosopher's stone of alchemy. Hitherto unknown chemical compounds are to be innovated and from their fusion will erupt the rivers of gold of hot technology and broad avenues with business laboratories dedicated to reincarnating Silicon Valley.

Innovation, innovation, innovation. The Balearic government has spoken of little else. It has a status akin to consensus and dialogue in the on-message statements of the president, vice-president (also Barceló) and others. It matches the message of sustainability, for innovation is the path to economic diversification and thus a diversion on the route marked only tourism. Spoken of little else and done virtually nothing.

This second grand project, you see, is the Balearic Islands Institute of Research. Oddly, and unlike the anti-corruption office, it has barely received any mention since those optimistic days when the agreements for change were being signed. It can appear as if this government is more wedded to a single "tion" - corruption - than to truly putting the "tion" into innovation. This might be thought to be the consequence of the firm Podemos line on corruption, but not so. Podemos, you might be surprised to learn, have a highly detailed economic and competitiveness strategy, one that has hung its hat on technological innovation. A Podemos forebear, the now dimly remembered Partido X, drafted the roadmap.

The institute is, we are told, going to open next year: the second half of next year. The same rigmarole with selecting its director will be gone through as has been the case with the anti-corruption office. Agreements for change are fine, but they can result in virtual stasis through lack of agreement - consensus and dialogue or no consensus and dialogue. There are those who suggest that the institute will in fact not open until 2019; it might never, as there'll be an election to worry about.

Other regions of Spain have this type of institute, the Basque Country for instance, one of Spain's principal centres of industry for as long as there has been Spanish industry, which isn't the case with the Balearics. The Basques of the old smokestack and of banking have a culture of research, one that the Balearics do not. The islands are playing catch-up, in word as much as (?) in deed. The institute is not to be heavily funded, yet it will benefit from 300,000 euros of tourist tax revenue. Seriously, if there is to be a commitment to innovation and technology as the means to economic diversification, why not use all the revenue in the pursuit of innovation?

Technology can perform wonders, such as for the environment, water resources, agriculture and restoration of historical buildings. These are purposes for the tax, so why not let technology loose on them? And in the process, there could come quantifiable benefits in terms of business development and employment. But then, an issue with talk of innovation is what is meant. There has to be a very meaningful bottom line; economic shifts need to be seismic not just a slight realignment of the plates.

Will this institute represent the future? What do you think, when the Balearics dedicate a mere 0.33% of GDP to good old R&D? The lowest amount of all regions. White heat or white noise?

Are Tourist Friends Electric?

For those of you who have ever paid the tourist tax, are you delighted at the results of the deliberations of the judging committee for the impulse of sustainable tourism? Sixty-two finalists had been hewn from hopefuls twice that number and with shopping lists worth more than four times the revenue on offer - for new projects, that is. And when the sixty-two aspirants were paraded before the judging panel, they were all given a prize. There are no losers in the tourist tax competition, except for the sixty who had been given the heave-ho in the prelims.

So, if you have, for instance, spent 49.50 euros (plus VAT) for fourteen nights at a three-star superior for a family of four (one child over sixteen, the other younger) in the past few months, are you satisfied that you may have contributed 0.001% to the cost of "electric mobility", otherwise known as charging-points for electric vehicles? You are satisfied? Well, good for you, and some time in the future you'll be able to use these charging-points when hire cars are all electric or you'll be safe in the knowledge that the bus taking you to your resort from the airport is fully powered by electricity. Gosh, isn't this impulse for sustainable tourism a great thing and a wonder to behold, if you can actually behold it.

All this electric mobility, thanks to the nature of its funding, should require charging-points across the isles (and I suppose we are talking plural because it's only Mallorca that is ever referred to) to have legends emblazoned on them which read "Electric mobility: POWERED BY ECOTAX". Thataway, just in case you have failed to be satisfied, you will become so. "Heavens, so that's where my money goes. Well done, Balearic government, God bless you and thank you. The world is being saved. If only it weren't for all that permafrost being defrosted."

It isn't only you, as tourists, who will be thanking the government. So also will be all those who have been agitating for a dismantling of the tourism economic monoculture. Most curiously, this is a purpose for the tourist tax. Not about tourism but about something else, the Holy Grail of economic diversification. The 4.6 million euros that the judges have decided to lavish on electric mobility will, we are assured, be instrumental in diversifying the economy. Will it be?

To me, this sounds suspiciously like replacing one thing with another. Replacement isn't diversification. The ministers for tourism, innovation and research, land, energy and transport (aka mobility), and industry, trade and employment all suggest that it is diversification. Well, they must know something that you and I don't. Are there to be thousands of jobs created to enable drivers to plug their cars in and which will allow restaurant waiters to abandon the terraces and earn five grand a month, thereby contributing to quality employment?

It's not, I hasten to add, that I am against electric mobility. Quite the contrary. Anything that provides green, clean energy is to be welcomed. But it comes with its own plug-in of spin, which is the case with much of the bull, righteousness, virtuousness and cliché attached in cable form to the sustainable tourism tax. The eco-credentials of the ecotax were being sounded long into the ozone of autumn air as the judges and recipients explained the tourist tax spending verdicts. And there is no greater credential than when "footprints" can be referred to.

Més compatriots, Barceló and Noguera, were both on the footprint trail. The numerous (62 plus eight ongoing from last year) projects, opined the tourism minister, will help to alleviate the eco-unfriendly footprint of tourism (or words to that effect). Quite right. For far too long tourists have been getting away with using petrol for hire cars and relying on coal to power their hotel (and private apartment) air-con systems. Not any more. Our tourist friends are electric, and solar, to boot. 

Palma's mayor, continuing with the narrative of indignation that had endured from the fact that the chief judge - Barceló - had failed to last year give the city any direct tax funding, appeared moderately satisfied. But he was engaged in a battle of the footprints. Palma's tourism footprint is bigger than anyone else's. It's still only getting around five million, some of it to be shared with the neighbours (Llucmajor), but it's better than the 2016 spending zero. How, though, is this giant tourism footprint to be addressed? The odd track in Bellver forest does, I suppose, involve some footprints, but another way is to restore the Torres del Temple. And what, pray, has that got to do with footprints? The place has been crumbling for decades because no one has bothered to spend any money on it.

Still, the restoration will doubtless be welcomed by tourists because of its heritage value. Assuming, that is, they can find anywhere to park having arrived in Palma powered by ecotax.

Up For The Craic: Tourism Demos

While some fifty or so associations, organisations, platforms, groups, minor political parties and movements were failing to massify the streets of old Palma on Saturday, another survey was being added to the saturation of tourism saturationist discourse. Gadeso, for which we should all be very grateful as they are are good at gauging public opinion, had undertaken its second tourism and saturation survey. It is headlined "placing limits on tourism?".

The demo, rally, march, whatever you call it, mustered some 3,000 or so people; on average around sixty people per entity. Did it represent a watershed moment? Will there now be an irreversible drive towards "de-growth" and a declining reliance on tourism? Have the people of Mallorca definitively spoken and told their political masters that they must take more "courageous steps" in breaking the economic monoculture of tourism?

People go on demos partly for the craic, especially if they are young. I know I did. If the National Students Union demanded turn-outs in London against whatever was the latest reason to require a turn-out, off we would go and wearily tread the tarmac in the general vicinity of Westminster. There were doubtless earnest and idealistic reasons why we would do this, but there was also the impulse to join in because protest was what young people and students did. It was a rite of passage.

Not everyone who was on the march on Saturday was young. Not everyone would have gone along for the craic or because of a youthful determination to demonstrate and thumb a nose at authorities (or an entire industry in this instance). There were very valid reasons for the demo, but they have tended to get rather lost in all the publicity given to the odd act of vandalism, perpetrated, one suspects, by youthful protesters who may also find spraying graffiti to be a good craic.

The point is that a march such as Saturday's proves little, other than that some 3,000 people turned up and that this number was biased in favour of a younger age group. Gadeso, on the other hand, can provide a better flavour of what the people of Mallorca (and the Balearics) might really be thinking, those who wouldn't necessarily dream of taking part in a demo. So, what does the survey find? Well, two-thirds of those polled either believed that the islands cannot accommodate the high numbers of tourists at present (these numbers are unsustainable) or that more tourists don't equate to there being greater wealth and well-being.

In essence, therefore, there is a majority view that there should be limits on tourism. And one way of potentially establishing limits is via the tourist tax. The increase in the tax drew a 69% positive response. Public opinion, at least where Gadeso is concerned, does therefore lend some validity to the more public display of issues related to tourism that was on show on Saturday.

But what about tourism and its economic contribution, assessed at 45% of direct Balearic GDP? The latest survey didn't ask this, but a previous one - back in July - at least alluded to it. That survey revealed that only 48% of those surveyed believed that tourism activity was the basis for well-being. Which isn't the same thing as disputing tourism's importance to the economy, but is an indication that for all its importance it doesn't translate into providing a sense of benefit to a majority of the population. And this does rather back up one of the claims of those who were demonstrating: tourism fails to provide adequate wealth for all.

Because of this, there are the demands for less tourism dependence and for diversification. Gadeso asked what sectors should have priority for diversification. More than 50% voting was in favour of new information and communications technologies (ICT). Lesser priorities were energy, diversification of the actual tourism product, health and marine research, artistic and cultural creation, and agriculture and food (only 18%).

These suggestions do at least offer some means of filling the void that is the whole debate on tourism, i.e. there are no strong and sound proposals for alternatives, and there certainly weren't any on Saturday. It's all well and good shouting about less dependence and greater diversification, but what do either mean? And what, to be totally realistic, can be achievable in the short, medium and long terms?

In 2016 there was almost eight per cent growth in the ICT sector. It is one that has been championed for a long time, but it takes equally long to get to a point where it is a minor contributor to GDP, while it shouldn't be overlooked that in the Balearics it has a bias towards tourism applications.

The 3,000 on Saturday weren't necessarily wrong but nor were they providing any solution. Being up for the craic is one thing. Being realistic is another.

Hotelbeds: The best of Mallorca

Hotelbeds is unquestionably a successful business. "The world's bedbank", as it calls itself, is a world player. From having once offered only one destination market - Spain - for one traveller-providing market (the UK), it now has (fifteen years after it was founded) 180 country destination markets offering more than 75,000 hotels and 120 supplier markets. That's impressive stuff, and the all more impressive for being "made in Mallorca".

The business came into being following the purchase of Viajes Barceló (part of the Barceló hotel group and now B the Travel Brand) by First Choice. The travel agency was to be sold back to Barceló, but what was the international event and destination services division, which included Hotelbeds, was kept hold of. When First Choice was formally absorbed by Tui in 2007, Tui Travel Accommodation & Destination was established: its director was the founder and president of Hotelbeds, Joan Vilà.

Because of a strategic restructuring, Tui sought a purchaser for Hotelbeds. It found one in the form of fund managers Cinven and CPPIB, the Canada Pension Plan Investment Board, the Canadian government pension fund managers. There was more to be impressed with. The price. Hotelbeds went for a total of 1,165 million euros; the deal was sealed this spring.

Vilà has said that the business was founded right at the time that the travel industry was about to undergo massive transformation. Hotelbeds caught the initial wave, therefore, of the technologically-driven new age of travel. Value in the business obviously resides in the numbers it can generate. Tui revealed that the price paid to buy the business (almost 50% greater than had originally been hoped for) equated to 1.2 times the 2015 revenue with an underlying operating profit of 69 million euros.

But major acquisitions aren't made solely because of the numbers. Among other factors that attracted Cinven and CPPIB were the quality of senior management (with Vilà at the helm), a strong record of year-on-year growth and the technologies. Cinven understood the value of the latter very clearly. It has been a significant investor in Amadeus, a global leader in IT solutions for the travel industry and a company that is based in Madrid.

One might in fact argue that the greatest value lies with the systems. It is revealing to note that a couple of years ago, Hotelbeds identified another Spanish company, Transhotel, as a main competitor in the domestic market. Transhotel hit the rocks in 2014, and a reason for its problems was the fact that its technologies were said to have been outdated. The travel industry, never slow to change and adapt, has been moving at increasingly rapid speeds for the past fifteen years. Businesses which are slow end up in liquidation.

The combination of travel, tourism and technology is something that the Balearic government is keen to explore as a means of economic diversification, reputation enhancement and job creation. It is totally fitting, therefore, that the government should look upon Hotelbeds as precisely the type of business that it wishes to promote. Totally fitting also that within the government there is a combination of tourism and technology in the portfolios of its vice-president, Biel Barceló.

Since he adopted these responsibilities, we have heard a great deal about the tourism portfolio and very much less about innovation and research. Earlier this week, though, Barceló and President Armengol went to Hotelbeds at the invitation of Joan Vilà. Barceló observed that the company "fits perfectly" with the government's economic plans.

It does so in a variety of ways. It attracts talent to come and live in Mallorca (the purchase is not going to change the location). They add to the sum of knowledge locally, which is in any event already high: around a half of the 1,600 staff at the Palma HQ (there are over 6,000 worldwide) are products of the University of the Balearic Islands. They represent also the government's desire for quality employment. This said, and acknowledging that one review is hardly representative, a current employee reports that while the work atmosphere is good as are opportunities, the salaries are low and there is a high level of employee turnover. This might rather depend on the nature of the job though: call centre jobs (by no means all the employment on offer) are known for their high turnover, while in general this is a company operating in a fast-moving environment with highly competitive demands.

This caveat aside, and the employee who supplied the review does nevertheless give Hotelbeds a four out of five star rating, here is a business which does indeed fit with the government's vision. Moreover, its dedication to technological advances in Mallorca was reinforced last year by the creation and funding of the Hotelbeds Group Chair of Tourism Innovation at the university.

An impressive business, and a model worthy of the government's attention and interest.

The Weaver's Tale: Diversification

What does Mauritius have in common with Mallorca? Apart from the fact that both are islands and begin with an "M", their populations are not dissimilar in size and the economies of the two islands are roughly similar in size. Historically, both had an economic reliance on the land: Mallorca on crop farming, Mauritius on sugar.

Tourism came later to Mauritius than to Mallorca, and it was a different type of tourism. In the 1970s a predominantly luxury style of tourism, based on resort hotels, came into being. It was one that benefited the economy in general, but because it was aimed at a more exclusive end of the market and later became all-inclusive, a bar and restaurant sector did not complement the hotels. As a consequence, while the island's macroeconomic status flourished, the local population saw very little evidence of this.

At the same time as Mauritius's tourism was taking off, the government was setting in motion a process of economic development and diversification. Principally, this was a way of shifting the country's emphasis away from the land, i.e. sugar, but the unevenness of the benefits derived from tourism gave the process an added momentum. Furthermore, the government recognised that tourism can be fickle and subject to economic shocks or competition.

Sugar is today far less important but still more important than agriculture is to Mallorca. Tourism and services account for some 70% of GDP. And while industry has fallen back, the process of diversification did reap rewards.

The Mauritian government, through a combination of trade agreements, tax incentives and advantageous investment conditions, created, virtually from scratch, a textile industry. Despite a downturn over recent years, it represents some 7% of GDP. It employs a skilled workforce, it turns out quality product and it supplies the likes of Next and, a Spanish connection, Zara. The industry, and it has contributed as much as 14% to GDP, was built without the island having the natural resources to supply it and so was totally dependent upon the importing of raw material. Nevertheless, it worked.

Where similarities between Mallorca and Mauritius fall down is that one possessed a political class with the foresight to understand the risks inherent to an over-reliance on certain industries. Mallorca, essentially still a single-product island, has never been blessed with governments with sufficient vision to appreciate the dangers posed by a virtual mono-economy. Rather, they have been blinded by the success of tourism and continue to consider it the principal means of economic growth.

Mallorca can boast some textile expertise. Martí Vicens created remarkable textile designs in Pollensa, and they are still evident today. The island doesn't, however, have a great tradition of textiles. There again, neither did Mauritius. I am not advocating that the regional government suddenly weaves a strategy based on textiles, but whether it is skills which do exist in Mallorca or new skills that need to be acquired and new types of business formed, the time is long overdue for a genuine strategy of economic diversification to be put in place.

If there is one thing, and one thing alone, that the new government of President Bauzá should be addressing, it is the economic future of Mallorca and the Balearics, and one that isn't so obsessed with tourism.

There has been some success in diversification, notably with new technologies, but it has been a very small step. A strategy for innovation going forward to 2020, dreamt up by the last administration, has achieved comparatively little, hampered by economic crisis but also by a lack of real energy.

Mauritius shows how with energy and vision a mixed economy can be developed. Textiles were not the only diversification. The island is also a financial centre and has a decent IT industry, one that Mallorca would bite its hand off to have. A small African nation of comparative size to Mallorca has demonstrated how it can be done and how economies do not have to be reliant on tourism and to accept the fate of the consequences of a primary industry, agriculture, in almost terminal decline.

Are the next four years likely to yield anything in respect of real strategic development in Mallorca? You wouldn't bank on it. There may be more of the desperately slow crawl of technological evolution, but something akin to Mauritius's textiles revolution is required. And it won't happen.

(I would like to thank John in South Africa for pointing out the Mauritius experience.)


Any comments to andrew@thealcudiaguide.com please.

White Heat Of Technology: Mallorca's future

There are thirteen new commercial projects in Mallorca, the consequence of the raising of the moratorium on their building. Let's all celebrate. Evidence of recovery, evidence of confidence in Mallorca as a place to invest. If only.

What are these projects? They are ones being undertaken by Mercadona and Lidl. Ever more supermarkets. The others are a commercial centre and a Chinese-bazar hypermarket. Why not add a few more? All McDonald's, and then the picture would be complete and appropriate. "McJob", low-paid employment and short-term construction work on commercial buildings that rise up quickly. The new projects are not evidence of a suddenly reinvigorated economy. They are the opposite: a response to the economic crisis-led demand for lower prices.

The director-general of trade at the Balearic Government's trade and industry ministry believes that these projects represent a "good rhythm" of investment. They are not unwelcome, but equally they are not diversification or wealth-generation. Their arrival has more to do with the ending of the moratorium than with real investment. Moreover, they can be seen in the context of what has been happening to the island's industrial estates. New ones come along, and are under-utilised, while old ones are abandoned by smaller businesses because of high rents or are given over to car showrooms and entertainment centres. Mallorca's industrial, manufacturing and skills base is marginalised in favour of the unnecessary and frivolous.

The trade and industry ministry should be looking for investments beating to an entirely different rhythm to those of groceries and the fish and meat counter. The need for diversification away from the unsustainable tourism-centred economic model of Mallorca is, to be fair to the ministry and to the government, understood. A strategy for innovation and development is reaping some benefit, as evidenced by the number of businesses that have sprung up on Palma's ParcBit technology park. Taken as a whole, they offer new employment opportunities and the prospect of business growth. Mallorca's hopes of becoming a Silicon Valley or a silicon beach are fanciful, but this is not a reason not to follow a technological future.

The quest for an economy in Mallorca not so dangerously dependent upon tourism has been too long in the starting. The seduction of tourism has been understandable, but it has been proven to be built on the sands of shifting tourist demand and international competition. Its dominance has also reinforced the hugely unsatisfactory six-months-on, six-months-off work culture, itself unsustainable. The service model, based on tourism, supermarkets, the plethora of lawyers and architects and any number of unproductive public-sector pen-pushers, is not a solution for the long-term. A far greater mix with technology and industry founded on new technologies has to be the way forward for Mallorca.

To this end, there is some good news. In Inca, a company called Vent Illes is due to start production of wind turbines for the generation of electricity. It will create thirty jobs. Not a huge number, but it's something. It is also indicative of the development of technology founded on local resources and know-how. Wind is very much a resource, but the Vent Illes turbines require very little wind. They are designed with the constraints caused by a limited resource - land - in mind. They are practical for locations where colossal wind farms would be untenable: other islands, for instance. It is the one eye on export possibilities that makes the Vent Illes scheme particularly interesting.

The home market, that in Mallorca, is too limited to offer local technology companies the scope for expansion and for creating significant employment opportunities. They need to be export-driven, just like Mallorca's most successful businesses, its world-class hotel chains, have, irony of ironies, exported tourism know-how to competitor destinations.

The hope is that the incubation of new-technology businesses in ParcBit, together with the likes of Vent Illes, creates a momentum towards the clustering of further businesses, thus establishing a dynamic which, while it will not completely transform the economy, will at least send it down the road to a more diverse future. It will be one predicated on what Mallorca can do well, such as marine technology and its export, and it will mean far more than the few months of tourism employment or being a shelf-stacker at a new commercial project.


Any comments to andrew@thealcudiaguide.com please.

The Death Of The Hen: Diversification in Mallorca

"Mallorca vive una fantasía: el turismo no volverá a ser la gallina de los huevos de oro."

I wouldn't normally reproduce a newspaper headline, especially not one in Spanish, but this one deserves reproduction. If you do the native, then you'll understand. If you don't, you might get the drift. If the drift is not with you, then: "Mallorca is living a fantasy: tourism will not return to be the hen with golden eggs".

The headline came from the "Diario" two days ago. The words are those of Jerry Mander, a "guru" and the director of the International Globalization Forum. He, along with other worthies, gathered together in Alaró the other day, in a meeting organised by Camper, the Inca footwear company. As befits a coming together of those with sound credentials of a "sustainable" nature, there was a fair bit about sustainability, that mantra of current-day tourism. But the key message, the key conclusion was that the island's future lies in a diversification of its economy.

I should nominate myself as a guru. I couldn't tell you how many times I have referred to the need for economic diversification on this blog over the years. The Balearic Government, some while back, looked to set in motion a so-called innovation and development plan (largely forgotten about), but otherwise I have, and I don't wish to sound immodest, felt like a lone voice. You just never hear about economic diversification, or not in a way that addresses the subject seriously. Yet the need has been obvious for years.

Mallorca lives its fantasy because many of the people who live in Mallorca occupy a fantasy world - the absence of being in the real world, as I said two days ago. Perhaps it is something to do with the illusion or delusion of a "paradise island", lulling them into a false sense of security.

Mander's statement is, of course, inaccurate. Tourism hasn't gone away. But the implication is that it will not return on the scale that it once was. Moreover, it cannot be grown in any meaningful way; there just aren't the resources on a small area of land. It's that sustainability again, but this time in terms of the environment. Even if it were to be grown, more hotels, more golf courses, more this and more that, who would come?

Forty or more years ago, Mallorca set itself on a strategic path to economic transformation through tourism. Its old industries, agriculture most obviously, were shunted into the background. Those attending the Camper meeting seem to think that there is a need for some going back to the future. But is agriculture really a solution? It is one that smacks of the idyllic meeting the more wacky end of economics. It wouldn't represent diversification either. It has never gone away, just, in certain instances, such as almond-growing, been surpassed by superior technology and productivity elsewhere.

The general conclusion - that of diversification - is undeniably true, even if there might be disagreement as to the precise road-map for that diversification. What is staggering, though, is that the subject is even being discussed, as in being discussed now. It should have been on the table years ago.


Any comments to andrew@thealcudiaguide.com please.