When Business Growth Is Not Positive: Too many bars

Can you ever have too many bars and restaurants? If you spend your entire existence in pursuit of continuous drinking and eating, then maybe not, though even if you are an alcoholic and over-eater (normally the two are mutually exclusive), the number of hostelries is, one would have thought, immaterial.

What is the optimum number of establishments in relation to the size of a town's population? Someone may have come up with a calculation, but it is hard to see how. The criteria for deciding are too diverse. Rather than seeking an ill-defined optimum, are there just simply too many bars?

Intuitively, you would think there are. In Palma, for example, there are 3,008 establishments of varying types. One for every 135 inhabitants. Alcúdia has 257 bars, restaurants, ice-cream parlours, kiosks, what have you. One for every 70 or so people. Calvia boasts 763. In relative terms, it has the most - one for every 67 residents.

Such figures pay no attention to temporary populations - tourists, obviously - and nor do they pay attention to the periods when some bars and restaurants will be shut (for tourism reasons). Of Alcúdia's 257, how many of these are actually open all year? Half of them? When they are all open and when tourism is at its height, the equation is very different; in the order of one establishment for every 175 or so people.

An annual report into economic activity that was published in July revealed that between 2008 and 2011 the total number of bars and restaurants in Spain declined by 20%. All regions of the country registered a fall, one attributed to the impact of economic crisis. In Mallorca last year, however, the number of establishments increased dramatically by more than 15% (466 new businesses). This rise contrasted with an overall increase in the Balearics of only around 3% with both Ibiza and Formentera registering a decline.

How does one explain the increase in Mallorca? The most obvious answer is probably that of economic necessity, yet it seems perverse that so many establishments would open when the general level of consumer spending by residents of Mallorca has fallen as has spending by tourists. And where the tourism element is concerned, the onward march of all-inclusives would be, you would have thought, a deterrence to opening a new bar or café.

There may be other reasons, such as the sheer number of units that are available and which had, before crisis put a stop to much construction, meant that there was an increasing supply of units because of rules that require ground floors of apartment buildings to be reserved for commercial purposes. Another may be just simple opportunism.

Whatever the reasons, the Chamber of Commerce and other business organisations are, rather than being pleased by this growth, concerned because of the high risks involved (turnover is often no more than a few months) and because of falling standards. People are taking on establishments without having the right skills, says the head of the restaurant division of PIMEM, the small to medium-sized business association. One might add that people are taking them on without adequate finance as well and so end up in debt.

These organisations want, therefore, a system of certification to be introduced which would require a new owner to satisfy certain criteria. They also want limits introduced on the number of places, a system which applies to hotels. The tourism ministry has in fact been looking at just such a system.

The Chamber of Commerce and others are convinced that there can be such a thing as too many bars and restaurants. It is difficult to argue against the fact that there is over-supply and that there has been for years, but this over-supply has suddenly risen sharply. However, what would be done with all the units were systems of certification and place limits to come in? They would be left empty, thus giving an impression of abandonment and decline. The over-supply has been, in no small part, the consequence of stupid planning regulations which insist on commercial properties being created but for which there is too little demand and, at present, a falling demand.

Can there be too many bars and restaurants? Yes, there can be, and in Mallorca, there are.


Any comments to andrew@thealcudiaguide.com please.

Being Boring: Rural tourism

What does rural tourism mean? Simple, you might think. A hotel or finca in the countryside. True, but rural tourism is so widely defined that across the regions of Spain there are no fewer than 80 categories of accommodation that fall under its umbrella, and some of it isn't even rural. This lack of harmonisation is just one reason why rural tourism in Mallorca and Spain as a whole faces a challenge.

A finca in the countryside sounds idyllic. And so it should be. But for owners the idyll is not matched by ideal procedures. When UNESCO declared the Tramuntana mountain range a heritage site, the response among some, for example the quality press in the UK eager to show it was on top of its game and rushing to offer its "top tens" of mountain accommodation, was not matched by that of underwhelmed property owners.

Just one reason for the lukewarm response was the sheer amount of bureaucracy and time that is involved in gaining permissions for re-development. The Balearic Government has addressed the rural tourism sector in its proposed new tourism law by suggesting that procedures which require the involvement of the environment ministry will be relaxed. It also intends to allow for more development of existing fincas on "rustic" land so as to increase the amount of accommodation.

As regards the former, time will tell if this indeed is the case and time will also tell as to what extent agencies other than government, i.e. the environmental lobby, pitch into the rural tourism debate and seek to prevent developments. More fundamental, though, is whether increasing the amount of accommodation will achieve a great deal. Rural tourism has been going through something of a crisis, and one not solely brought about by the economic climate.

On the "Hosteltur" website there has been a scathing attack on the rural tourism sector. Arturo Crosby, a regular contributor, condemned it for being "allergic to change", for having "little imagination" and for quite simply being "boring". Most of the commentators who replied to Crosby's article tended to be in agreement with him.

Not all rural tourism can be tarred with this negative brush, and some organisers go out of their way to provide activities of the type one would associate with rural tourism, such as hiking and biking. But rural tourism faces all manner of competition in making itself more appealing. Its most obvious competition comes from the sun-and-beach package holiday. Last year in July, while other tourism sectors were enjoying increased occupancy, rural tourism was the only one to suffer a decline.

The strength of competition is such that it has placed increasing pressure on prices. Some rural tourism, at the luxury end, can be expensive, but some isn't, and it has had to bring prices down in order to compete, so eroding margins on what is only ever very low-volume business. For rural hotels, there is an added problem that the length of stays is much shorter than that for resort hotels, while there is an issue for the sector as a whole and for Mallorcan rural tourism in particular when it comes to travel agencies.

Unlike the mainland where rural tourism is dominated by the domestic market, the reverse is the case in Mallorca. Mainland tourists do not bother with travelling to the island for this type of tourism, so the emphasis is on the foreign market, but travel agencies are confronted with the fragmented nature of rural tourism, constraints on commercialisation (partly, the legality or not issue) and the confusion of categories. As an example, an interior hotel in a town such as Alcúdia or Pollensa is embraced by the rural tourism tag, when it isn't.

There is also a perceptual problem when it comes to the foreign market. By comparison with France where rural tourism forms a cornerstone of the tourism industry, and has long done so, in Mallorca and Spain there is not the same image.

Tourism promotion, going back to the 1950s, used to give equal weight to rural and sun-and-beach tourism, but the latter decimated rural tourism because it afforded opportunities for shifting tourists en masse. With the help of huge injections of European money (and also funds from the Spanish state), rural tourism has sought a revival since the 1990s. But now there is a situation in which supply greatly outweighs demand, and the Balearic Government wants to add to that supply.

Rural tourism is idyllic but it is also idealistic. Were it marketed more effectively, were the procedures less burdensome, perhaps it could fulfil its potential. But will it ever do so, or is it simply too boring?


Any comments to andrew@thealcudiaguide.com please.