As you might expect her to, the national secretary-of-state for tourism, Isabel Borrego, isn't a fan of tourist eco-taxes wherever they might be applied. She is of course affiliated to the Partido Popular - it is widely said she got the job because she was chummy with the ex-president of the Council of Mallorca, Maria Salom - and so she would be bound to oppose tourist taxes. Being Mallorcan, she has a particular interest in the plan for a Balearic tax, and she has been voicing her displeasure.
Borrego says that there are "objective data" which show that the new tax would create a loss in tourist numbers. These data relate to the previous tax. It, she says, led to there being one million fewer tourists in the Balearics during 2002-2003. Her objective data are open to question.
What losses did the Balearics incur because of the previous tax? Any? It is true to say, because the Balearic tourism ministry keep very complete records of these things, that there was a fall in tourism numbers in the first year that the tax was applied (it came into effect in May 2002). This decline, though sharp, was not as great as Borrego says: it was just over 550,000 for the whole of 2002. Nevertheless, and QED, the eco-tax meant more than half a million fewer tourists. Well, not necessarily.
Borrego has been speaking about the tax and how it is or will be perceived by the German market. The 2015/2016 version of this market will see itself as being under attack by the tax, one which implies a rejection of the visitor. In this, she is echoing the narrative from a separate issue that arose around the time of the old eco-tax. It was one to do with remarks from the then tourism minister, Celesti Alomar, and president of the Council of Mallorca, Maria Antonia Munar. They gave an implication that German tourism of the 2002 variety was not wanted: or at least a certain type of tourism was not wanted. This had little or nothing to do with the eco-tax. It had everything to do with wanting a whole new "quality tourism". It was picked up in Germany in particular, though it was a theme that applied to tourism from all markets: just as the eco-tax did.
The German market did require some later PR massaging in order for it to be satisfied that Alomar and Munar had not been waging some sort of campaign against it. But the fall in tourism (and in German tourism in particular) which occurred needs to be seen against this background, as it also needs to be considered in terms of economic conditions.
While tourism in the Balearics in 2002 fell by 7.6%, the German market showed one of the heaviest falls: down 16%. Indeed, most markets were down that year. The British registered a small 1.2% drop. So, was this the result of the eco-tax?
The German economy went into recession at the end of 2001. Slight growth returned six months later, but weak economic performance was still evident enough by the start of 2003 for "The Economist" to feature an article entitled "Germany's Not Working" on 6 January. There were recessionary influences across Europe in 2002. The UK was an exception. Meanwhile, in Spain as a whole German tourism fell in 2002 by over 6%
The point is that the German market, which had roughly the same one-third share of all Balearic tourism as the UK market in 2001, was by far and away the most important reason why there was a fall in tourism in 2002. The 16% represented over 500,000 tourists. Therefore, was it just the eco-tax which contributed to the decline or did recession and those negative comments from politicians have as much impact if not more?
Moving on to 2003, though Germany was still stumbling economically, the German tourism market revived. As so often is the case (or certainly was before the prolonged "crisis"), confidence picked up relatively quickly. In 2003, and the eco-tax was still applicable until October, tourism in the Balearics grew by 6.6%. The German market was up by over 4%, the British by almost 7%. The losses of 2002 were all but regained.
These "objective data" suggest that in the second year of the eco-tax (2003), tourists - especially German tourists - had either accepted the reality of the tax or had shaken off anxieties caused by recession (a further anxiety, 9/11, has been widely accepted to have not been much of a factor in 2002). The growth in 2003 pushed total tourists numbers above those of 2001, when - and this is usually forgotten - there had also been a fall in tourism: before the eco-tax came in.
This isn't to let the eco-tax off completely. In 2002, for the five main sun and beach regions of Spain, the Balearics was the only one apart from the Canaries to experience a fall in tourism, and this fall - 7.6% - was much higher than the Canaries' 1.8%. Catalonia, meanwhile, had romped along with 15.2% growth.
Was the 2002 crash due to the eco-tax or is it a myth? Not totally. It did play a part, but how great a part is impossible to evaluate. One thing's for sure, it wasn't one million.
Showing posts with label Recession. Show all posts
Showing posts with label Recession. Show all posts
Thursday, July 23, 2015
Thursday, March 14, 2013
The Recovery Will Not Be Realised
Alfredo Pastor is professor of economics at the IESE Business School. He is also a former secretary of state for the economy - in the last PSOE government of Felipe González. It was interesting, therefore, to find an article of his in "The Bulletin", one entitled "Reasons to believe Spain's recovery is not far away". The reasons why Professor Pastor believes recovery might be in the offing include greater competitiveness through lower labour costs, a growing export market and some hints of business confidence creeping back.
There are some signs of recovery and it would be wrong to talk down the possibility of an improvement in the overall economic picture if not this year then next. BBVA bank has suggested that negative growth of minus 1.1% in 2013, slightly less bad than had been predicted, will be matched by plus 1.1% in 2014. It wouldn't be a huge improvement, but it would still be an improvement. BBVA, like Professor Pastor, emphasises export performance, but the economist Edward Hugh, generally a pessimist rather than an optimist, has made a comparison with the experience in Hungary where, despite good export performance, its economy keeps slipping back into recession. In Hungary, the country's current account balance is in the black. Spain's is moving this way, too, which sounds like a reason to be cheerful, but this disguises the size of the country's external debt.
Because of this debt, gains that are made from having a trade surplus thanks to export performance are used to service the debt. Greater competitiveness because of lower labour costs (internal devaluation) leads to better export competitiveness but doesn't necessarily mean economic growth, or growth that is anything other than small or even sustainable.
The Spanish Government is pinning its hopes on there being some growth, even if it is very moderate, and on this having a positive impact on the 26% unemployment rate. But unless export growth were to be more spectacular, it remains difficult to see how this unemployment is going to be tackled. Despite Professor Pastor's belief that confidence may be coming back, even if it is only trickling back, is this confidence among exporters or among those involved with the domestic market? The retail sector, for instance, is depressed and is likely to stay depressed. It may even become more depressed. And the reason for this is that there are potentially more recessionary measures yet to be taken.
The EU's budget enforcer, Olli Rehn, has suggested that Spain's deficit targets, ones that the government keeps missing anyway, could be eased, but the fact is that the country's fiscal position is currently unsustainable. More cuts and more tax increases are going to be needed at some point. Indeed, the EU has also suggested that there is room for a further rise in IVA (if not to the higher, general rate then to the lower rate, the so-called tourist rate). The political fallout from a rise in the tourist rate might prove too much for the government and for its supporters in the tourism industry who would desert it. But if the higher rate were to rise, then demand would be squeezed even more, meaning a further brake on any possible growth.
The miserable truth is that although taxes have been raised, although cuts have been swingeing, the deficit targets are still not being met, while, as a consequence - and perversely enough - of attempting to curb the deficit as swiftly as the government has been attempting to, the economy has been contracting because of the squeeze on demand.
Growth may return next year but as the government has been hell-bent (mainly because it had no other option) on pursuing a policy of internal devaluation through lower costs, this will also, both in the short and longer-term, have a depressive effect. Salary and wage reductions, some in the order of up to 40%, mainly in the public sector but certainly not exclusively, will do nothing to stimulate demand, and with credit squeezed as well (though movements on banks' recapitalisation may just takes the brakes off to a degree), it is almost impossible to see from where growth, other than any from exports, is likely to come and even more impossible to see how it might be sustained.
Professor Pastor is optimistic that the political situation re Catalonia will not lead to violence (and one can interpret this how one wants). Let's hope he's right. I happen to agree with him, but can there be the same optimism where social discontent is concerned? There is only so much a people can put up with, and while the financial economy might be showing an improvement, in the real world, there is none.
Any comments to andrew@thealcudiaguide.com please.
There are some signs of recovery and it would be wrong to talk down the possibility of an improvement in the overall economic picture if not this year then next. BBVA bank has suggested that negative growth of minus 1.1% in 2013, slightly less bad than had been predicted, will be matched by plus 1.1% in 2014. It wouldn't be a huge improvement, but it would still be an improvement. BBVA, like Professor Pastor, emphasises export performance, but the economist Edward Hugh, generally a pessimist rather than an optimist, has made a comparison with the experience in Hungary where, despite good export performance, its economy keeps slipping back into recession. In Hungary, the country's current account balance is in the black. Spain's is moving this way, too, which sounds like a reason to be cheerful, but this disguises the size of the country's external debt.
Because of this debt, gains that are made from having a trade surplus thanks to export performance are used to service the debt. Greater competitiveness because of lower labour costs (internal devaluation) leads to better export competitiveness but doesn't necessarily mean economic growth, or growth that is anything other than small or even sustainable.
The Spanish Government is pinning its hopes on there being some growth, even if it is very moderate, and on this having a positive impact on the 26% unemployment rate. But unless export growth were to be more spectacular, it remains difficult to see how this unemployment is going to be tackled. Despite Professor Pastor's belief that confidence may be coming back, even if it is only trickling back, is this confidence among exporters or among those involved with the domestic market? The retail sector, for instance, is depressed and is likely to stay depressed. It may even become more depressed. And the reason for this is that there are potentially more recessionary measures yet to be taken.
The EU's budget enforcer, Olli Rehn, has suggested that Spain's deficit targets, ones that the government keeps missing anyway, could be eased, but the fact is that the country's fiscal position is currently unsustainable. More cuts and more tax increases are going to be needed at some point. Indeed, the EU has also suggested that there is room for a further rise in IVA (if not to the higher, general rate then to the lower rate, the so-called tourist rate). The political fallout from a rise in the tourist rate might prove too much for the government and for its supporters in the tourism industry who would desert it. But if the higher rate were to rise, then demand would be squeezed even more, meaning a further brake on any possible growth.
The miserable truth is that although taxes have been raised, although cuts have been swingeing, the deficit targets are still not being met, while, as a consequence - and perversely enough - of attempting to curb the deficit as swiftly as the government has been attempting to, the economy has been contracting because of the squeeze on demand.
Growth may return next year but as the government has been hell-bent (mainly because it had no other option) on pursuing a policy of internal devaluation through lower costs, this will also, both in the short and longer-term, have a depressive effect. Salary and wage reductions, some in the order of up to 40%, mainly in the public sector but certainly not exclusively, will do nothing to stimulate demand, and with credit squeezed as well (though movements on banks' recapitalisation may just takes the brakes off to a degree), it is almost impossible to see from where growth, other than any from exports, is likely to come and even more impossible to see how it might be sustained.
Professor Pastor is optimistic that the political situation re Catalonia will not lead to violence (and one can interpret this how one wants). Let's hope he's right. I happen to agree with him, but can there be the same optimism where social discontent is concerned? There is only so much a people can put up with, and while the financial economy might be showing an improvement, in the real world, there is none.
Any comments to andrew@thealcudiaguide.com please.
Thursday, January 31, 2013
The Incredible Shrinking Spanish Economy
The Spanish economy shrank again in the final quarter of 2012. The provisional figure for the slump during the whole of 2012 is 1.4%, worse than the Bank of Spain had been predicting only a few days ago. Never mind though, the minister for the economy, Luis de Guindos, says that the slump hasn't been as bad as predicted. You pays yer money, you takes yer choice as to whose version you prefer. If you had any money, that is.
The output figure is one piece of bad economic news, the other is the level of unemployment - 26% of the total workforce, with unemployment among the young now reaching 60%. Sixty per cent. Just hold that thought and ask yourself what the future holds for this unemployed youth.
The lost generation of Spain's youth is increasingly looking abroad for work. Overall, there was an exit of over 40,000 people from Spain during the first half of 2012, and many of them are heading to the UK. As the Trans-Iberian blog from "El País" points out, the volume of applications for UK National Insurance numbers by Spanish migrants is second only to those made by people from Pakistan.
It's not as if the young are going to the UK and finding employment commensurate with their qualifications. They are taking bar work, any menial tasks, but at least there is some prospect of work. What is there in Spain? Nada.
The recessionary statistic for the final quarter should not come as a great surprise. It can be partly explained by consumption having been squeezed into the third quarter in order to avoid the rise in prices as a consequence of the increase in IVA (VAT) at the start of September. There are other factors, though, one of them being an impact of the government's labour reforms. Welcomed by some, these reforms have nevertheless contributed to a further weakening of confidence. If job security is lessened, so is the temptation to consume.
De Guindos reckons that positive growth will return in the second half of this year. He may be right, but you shouldn't put money on this either. De Guindos is prone to talking rubbish. (The IMF haven't said as much but disagree with his forecast.) At the end of April last year, let me remind you, he dismissed the idea of increasing IVA until this year. His rationale, if you can consider it rational, was that growth would have kicked in in 2013 and so the time would have arrived to raise indirect tax. Seriously, this is a minister responsible for economic affairs. Not only was he wrong about the IVA rise, as it was made four months later, he was also wrong in his thinking. If there were growth, the last thing that was needed was to stop it in its tracks by increasing tax.
It is a cliché to suggest that politicians don't know what they are doing. Some do. But as far as Spain's are concerned, they do their utmost in proving the cliché to be right. The austerity measures are taking Spain nowhere, except further inside its own basket case. The enormity of the poverty of political economic thought is matched only by the enormity of the brassnecked spin. Take the Balearics own economic genius, José Aguilo. Tax increases will stimulate the economy, he stated earlier this month. The screeches of laughter were drowned out only by the screams of despair. Aguiló's probably next in line for a Madrid cabinet position.
The Balearics finance (and employment and business) minister believes that the rise in taxes will help entrepreneurs because of a consequent lowering in interest rates. But who will be doing any lending? Entrepreneurship is the current flavour of the month of both the regional and national government. Rajoy has announced tax cuts for young entrepreneurs. So what? Growth measures are what will help these entrepreneurs. And credit. Unavailable credit.
But what about tax cuts for everyone else? There is a growing counter-argument to the austerity strategy imposed by the Spanish Government and imposed on it by forces from outside. Spain's problems with its borrowing rate have been eased thanks to European Central Bank intervention. We know what the pound (or euro) of flesh has had to be for this intervention, but what on earth is austerity ever going to achieve? Consider this. If it takes 2% economic growth to cut unemployment by 1% (a not untypical ratio), how long will it be before the 26% unemployment rate is lowered at all significantly? An awfully long time, always assuming there were such growth. And where's this going to come from?
Any comments to andrew@thealcudiaguide.com please.
Index for January 2013
Balearics tourism promotion action plan - 26 January 2013
Bishop of Mallorca - 12 January 2013
Bradley Wiggins and cycling tourism promotion - 27 January 2013
Broadcasting interference in Spain - 24 January 2013
Floating Spain on the stock market - 2 January 2013
Foodstagramming - 29 January 2013
Glosadors - 13 January 2013
Hainan: where Mallorca can't compete - 4 January 2013
Handball - 16 January 2013
Health and safety and traditions - 9 January 2012
Ill Manors adaptation - 19 January 2013
Luis Bárcenas and Partido Popular corruption - 21 January 2013
Madrid Olympics bid - 3 January 2013
Magalluf and Trip Advisor - 30 January 2013
Mallorcan attitudes and winter tourism - 6 January 2013
Osborne bull vandalised again - 1 January 2013
Paradores - 25 January 2013
Pollensa festival funding - 22 January 2013
Porto Cristo's name - 17 January 2013
Reading and misinterpretation or misunderstanding - 7 January 2013
Sant Sebastià: the legend and gay icon - 14 January 2013
Spain stuck in the 1930s - 28 January 2013
Spanish and Latin rock music - 23 January 2013
Spanish economy and unemployment - 31 January 2013
Spanish military, Republicanism and independence - 11 January 2013
The Truth About Magalluf - 5 January 2013, 10 January 2013, 20 January 2013
Tourism areas developments - 8 January 2013
UK resident population in Mallorca - 18 January 2013
Winter season: will there ever be one? - 15 January 2013
The output figure is one piece of bad economic news, the other is the level of unemployment - 26% of the total workforce, with unemployment among the young now reaching 60%. Sixty per cent. Just hold that thought and ask yourself what the future holds for this unemployed youth.
The lost generation of Spain's youth is increasingly looking abroad for work. Overall, there was an exit of over 40,000 people from Spain during the first half of 2012, and many of them are heading to the UK. As the Trans-Iberian blog from "El País" points out, the volume of applications for UK National Insurance numbers by Spanish migrants is second only to those made by people from Pakistan.
It's not as if the young are going to the UK and finding employment commensurate with their qualifications. They are taking bar work, any menial tasks, but at least there is some prospect of work. What is there in Spain? Nada.
The recessionary statistic for the final quarter should not come as a great surprise. It can be partly explained by consumption having been squeezed into the third quarter in order to avoid the rise in prices as a consequence of the increase in IVA (VAT) at the start of September. There are other factors, though, one of them being an impact of the government's labour reforms. Welcomed by some, these reforms have nevertheless contributed to a further weakening of confidence. If job security is lessened, so is the temptation to consume.
De Guindos reckons that positive growth will return in the second half of this year. He may be right, but you shouldn't put money on this either. De Guindos is prone to talking rubbish. (The IMF haven't said as much but disagree with his forecast.) At the end of April last year, let me remind you, he dismissed the idea of increasing IVA until this year. His rationale, if you can consider it rational, was that growth would have kicked in in 2013 and so the time would have arrived to raise indirect tax. Seriously, this is a minister responsible for economic affairs. Not only was he wrong about the IVA rise, as it was made four months later, he was also wrong in his thinking. If there were growth, the last thing that was needed was to stop it in its tracks by increasing tax.
It is a cliché to suggest that politicians don't know what they are doing. Some do. But as far as Spain's are concerned, they do their utmost in proving the cliché to be right. The austerity measures are taking Spain nowhere, except further inside its own basket case. The enormity of the poverty of political economic thought is matched only by the enormity of the brassnecked spin. Take the Balearics own economic genius, José Aguilo. Tax increases will stimulate the economy, he stated earlier this month. The screeches of laughter were drowned out only by the screams of despair. Aguiló's probably next in line for a Madrid cabinet position.
The Balearics finance (and employment and business) minister believes that the rise in taxes will help entrepreneurs because of a consequent lowering in interest rates. But who will be doing any lending? Entrepreneurship is the current flavour of the month of both the regional and national government. Rajoy has announced tax cuts for young entrepreneurs. So what? Growth measures are what will help these entrepreneurs. And credit. Unavailable credit.
But what about tax cuts for everyone else? There is a growing counter-argument to the austerity strategy imposed by the Spanish Government and imposed on it by forces from outside. Spain's problems with its borrowing rate have been eased thanks to European Central Bank intervention. We know what the pound (or euro) of flesh has had to be for this intervention, but what on earth is austerity ever going to achieve? Consider this. If it takes 2% economic growth to cut unemployment by 1% (a not untypical ratio), how long will it be before the 26% unemployment rate is lowered at all significantly? An awfully long time, always assuming there were such growth. And where's this going to come from?
Any comments to andrew@thealcudiaguide.com please.
Index for January 2013
Balearics tourism promotion action plan - 26 January 2013
Bishop of Mallorca - 12 January 2013
Bradley Wiggins and cycling tourism promotion - 27 January 2013
Broadcasting interference in Spain - 24 January 2013
Floating Spain on the stock market - 2 January 2013
Foodstagramming - 29 January 2013
Glosadors - 13 January 2013
Hainan: where Mallorca can't compete - 4 January 2013
Handball - 16 January 2013
Health and safety and traditions - 9 January 2012
Ill Manors adaptation - 19 January 2013
Luis Bárcenas and Partido Popular corruption - 21 January 2013
Madrid Olympics bid - 3 January 2013
Magalluf and Trip Advisor - 30 January 2013
Mallorcan attitudes and winter tourism - 6 January 2013
Osborne bull vandalised again - 1 January 2013
Paradores - 25 January 2013
Pollensa festival funding - 22 January 2013
Porto Cristo's name - 17 January 2013
Reading and misinterpretation or misunderstanding - 7 January 2013
Sant Sebastià: the legend and gay icon - 14 January 2013
Spain stuck in the 1930s - 28 January 2013
Spanish and Latin rock music - 23 January 2013
Spanish economy and unemployment - 31 January 2013
Spanish military, Republicanism and independence - 11 January 2013
The Truth About Magalluf - 5 January 2013, 10 January 2013, 20 January 2013
Tourism areas developments - 8 January 2013
UK resident population in Mallorca - 18 January 2013
Winter season: will there ever be one? - 15 January 2013
Friday, July 06, 2012
MALLORCA TODAY - Balearics in recession
According to the Centre for Economic Research, the Balearics are in recession. The report from the centre, which conflicts with the official government line, shows negative growth of 0.3% in the first quarter this year and an additional decline of 0.5% in the second quarter. While factors such as a moribund construction industry are obvious contributors, less obvious has been what is described as "weaknesses" in the tourism sector which are also contributing to the lack of growth. The tourism sector is always looked upon as being key to economic stimulation and vital to growth.
Thursday, March 01, 2012
Multiplying By Zero: Recession and tourism
You say recession, we say growth. The Centre for Economic Research (Centre de Recerca Econòmica, CRE) is the "you", the Balearic Government is the "we". Forecasts that the Balearics will fall back into recession in the third quarter of this year have been countered by the government. No recession, it says; there will be slight growth. And as ever, the slight growth will come because of tourism, or so the government would hope.
The eternal optimism that flows from tourism coming to the rescue is not, however, one that is shared by the CRE. Serious attention should be paid to what the CRE is saying, because if a myth being debunked can be said to have a sound, then there is an awful lot of noise coming from the CRE.
It says that the multiplier effect of tourism on the Balearic economy has been shrinking. And this means? In basic terms, the multiplier effect refers to how an increase in spending results in an increase in the income of a country (or a region, in the case of the Balearics) that is greater than the increase in spending (hence the multiplier). Essentially, if there is a strong multiplier effect, then there will be decent growth. The problem arises when the spending doesn't increase.
And this - spending - is just the problem that the Balearics have. Spending by tourists, that is.
Intuitively, anyone can tell you that tourism spending has been declining. At least, this has been the experience for many businesses right in the front line - bars, restaurants and so on. Counter-intuitively, statistics related to tourism spending, stays and arrivals that the government trots out ad nauseam show increases in spending. They haven't always but generally they have. The CRE says that government figures are misleading. You bet they are.
The CRE's report is damning. The multiplier effect of tourism has been shrinking not since the economic crisis started but since the turn of the century. It is an industry that has, says the CRE, lost productivity and competitiveness. In other words, it is not maximising returns on its resources, and one reason why is because Balearic tourism simply doesn't spend enough. The CRE argues that, in order to activate genuine growth (and growth that might be sustainable), there has to be a focus on more profitable tourism.
I don't like to say that I told you so, but if you have followed what I have written over the years about local tourism, then you will know that I have told you. For example, I have referred to key research from the early 1990s which proved that a percentage (approximately 10%) of tourism equated to a net loss. This percentage has to have increased since the onset of market change of low-grade all-inclusive tourism from around the mid-1990s. Another example: tourism spend statistics are misleading, as a good chunk of the spend is not spend that finds its way into the local economy as the statistics include spend made to tour operators and airlines.
The productivity return on resources is inevitably going to be less than it might be when there are so many resources unemployed for such a lengthy period of time. These are not just the human resources of the dole queues, they are also the physical resources of hotels; vast amounts of expensive real estate that inflates the price of property in general but which is unused for anything up to six months of the year.
The obscenity of this unused resource contributes, in turn, to an inhibitor to growth because of the high costs associated with residential property which lead to a lowering of disposable consumer spend. Furthermore, low wages, as are paid to many within the tourism sector that is meant to drive economic growth, mean a lack of competitiveness.
At the same time as there is renewed talk of recession (or not), the government has been forced to backtrack on one element of its new tourism law, that of stipulating that hotels which convert to condos would have to be open eight months a year. The eight months are now back to six. The best intentions of government to try and address the lack of hotel productivity have been undermined.
The CRE's report might just be thought of as another piece of economic blah-blah, but it should not be dismissed as such. In a nutshell, it has exposed the fundamental problem of the Balearics economy, one that is so reliant on tourism, and one which - and this is the only conclusion that can be drawn - will not achieve sustainable growth unless there is a rethinking of tourism strategy.
Any comments to andrew@thealcudiaguide.com please.
The eternal optimism that flows from tourism coming to the rescue is not, however, one that is shared by the CRE. Serious attention should be paid to what the CRE is saying, because if a myth being debunked can be said to have a sound, then there is an awful lot of noise coming from the CRE.
It says that the multiplier effect of tourism on the Balearic economy has been shrinking. And this means? In basic terms, the multiplier effect refers to how an increase in spending results in an increase in the income of a country (or a region, in the case of the Balearics) that is greater than the increase in spending (hence the multiplier). Essentially, if there is a strong multiplier effect, then there will be decent growth. The problem arises when the spending doesn't increase.
And this - spending - is just the problem that the Balearics have. Spending by tourists, that is.
Intuitively, anyone can tell you that tourism spending has been declining. At least, this has been the experience for many businesses right in the front line - bars, restaurants and so on. Counter-intuitively, statistics related to tourism spending, stays and arrivals that the government trots out ad nauseam show increases in spending. They haven't always but generally they have. The CRE says that government figures are misleading. You bet they are.
The CRE's report is damning. The multiplier effect of tourism has been shrinking not since the economic crisis started but since the turn of the century. It is an industry that has, says the CRE, lost productivity and competitiveness. In other words, it is not maximising returns on its resources, and one reason why is because Balearic tourism simply doesn't spend enough. The CRE argues that, in order to activate genuine growth (and growth that might be sustainable), there has to be a focus on more profitable tourism.
I don't like to say that I told you so, but if you have followed what I have written over the years about local tourism, then you will know that I have told you. For example, I have referred to key research from the early 1990s which proved that a percentage (approximately 10%) of tourism equated to a net loss. This percentage has to have increased since the onset of market change of low-grade all-inclusive tourism from around the mid-1990s. Another example: tourism spend statistics are misleading, as a good chunk of the spend is not spend that finds its way into the local economy as the statistics include spend made to tour operators and airlines.
The productivity return on resources is inevitably going to be less than it might be when there are so many resources unemployed for such a lengthy period of time. These are not just the human resources of the dole queues, they are also the physical resources of hotels; vast amounts of expensive real estate that inflates the price of property in general but which is unused for anything up to six months of the year.
The obscenity of this unused resource contributes, in turn, to an inhibitor to growth because of the high costs associated with residential property which lead to a lowering of disposable consumer spend. Furthermore, low wages, as are paid to many within the tourism sector that is meant to drive economic growth, mean a lack of competitiveness.
At the same time as there is renewed talk of recession (or not), the government has been forced to backtrack on one element of its new tourism law, that of stipulating that hotels which convert to condos would have to be open eight months a year. The eight months are now back to six. The best intentions of government to try and address the lack of hotel productivity have been undermined.
The CRE's report might just be thought of as another piece of economic blah-blah, but it should not be dismissed as such. In a nutshell, it has exposed the fundamental problem of the Balearics economy, one that is so reliant on tourism, and one which - and this is the only conclusion that can be drawn - will not achieve sustainable growth unless there is a rethinking of tourism strategy.
Any comments to andrew@thealcudiaguide.com please.
Wednesday, February 29, 2012
MALLORCA TODAY - Tourism won't combat Balearics recession
Coming on the back of the report which suggests that the Balearics will re-enter recession later this year, doubts are being expressed as to whether tourism, always held up as the means of creating growth, will be capable of doing so. This is because tourism to the islands has lost both productivity and competitiveness, a consequence in part of tourism that simply doesn't spend enough money.
This grim economic news is not made any better by the fact that the Balearic Government plans further drastic cuts in order to tackle the islands' deficit.
Update: The Balearic Government disputes the report which suggests that recession will return, claiming that there will be moderate growth of up to 0.5%.
This grim economic news is not made any better by the fact that the Balearic Government plans further drastic cuts in order to tackle the islands' deficit.
Update: The Balearic Government disputes the report which suggests that recession will return, claiming that there will be moderate growth of up to 0.5%.
Tuesday, February 28, 2012
MALLORCA TODAY - Balearics to go back into recession
Were you aware that the Balearics had ever got out of recession? Well, they did but only just, but by the third quarter of this year they will be back, or so says a joint report from the Centre de Recerca Econòmica (centre for economic research).
Saturday, May 01, 2010
Dancing In The Dark: The Mallorca season 2010 starts
The first of May. Onto the pagan and Germanic roots of the day have been grafted a labour symbolism, originally an American phenomenon, now celebrated all over the place, including Spain. It is a day of demonstration as much as it is one of celebration; it also marks the month of "Mary" in more religious Spanish circles. For the Mallorcans, it holds another meaning - the first day of the summer season.
Paganism, the labour movement, the Virgin Mother and holidays. Four seasons in one day. And the most important is the latter. Few "seasons" can have been anticipated with more trepidation and uncertainty than this one, and that includes last year. Season 2010 was always likely to suffer the after-shocks of the quake of confidence collapse of 2009. There may be grounds for optimism, but try telling some and they'll laugh - or more likely cry - in your face, while the damn volcano didn't do anything to set the hats of business owners at a more jaunty angle. The deteriorating situation in respect of the Spanish economy and the breach of the 20% unemployment rate just add to an atmosphere of tension. Every season can seem like make or break, but in some instances things are already broken. They should erect some maypoles and let everyone have a dance to keep their spirits up, even if it might seem like whistling or dancing in the dark.
The season begins with the pathetic sight of hotels boarded up. The collapse of Globespan and the impact on its hotels in Puerto Pollensa is a fable for the current malaise and worries. Like consumers and businesses were caught out by and caught up in the incomprehensible workings of an out-of-control and distant banking industry, so the company was brought down by the e-commerce and distant banking tangles of a credit-card processing concern, one that was, to all intents and purposes, unregulated. The financing food chain has starved many, Globespan among them, and at the bottom of this chain, the small businesses of holiday resorts are forced to eat the thin gruel of a creditless holiday consumer market.
But there have always been collapses: Clarkson, Laker, Intasun, similarly the victims of recession if not of the pagan rituals of the current-day finance industry. We'll get over it, like we always get over it. Hard though it may seem, when a psychology of fear takes hold, to smile in the face of adversity is what has to happen. For the tourists' sakes, if no one else's. They come to enjoy themselves, not to be told about "cree-sis" and how tough things are. They know this anyway.
However, one can predict, with some degree of certainty, that the season will be littered with stories of high prices, poor service, things not being as they used to be and the end of tourism civilisation in Mallorca as we know it. And some tourists will be the ones relating the stories, selectively, anecdotally and prejudicially. One can also predict that the tourism ministry and other authorities will issue statistics that no one believes; that there will be voices of complaint regarding all-inclusives; that the car-hire agencies will be the whipping boys of the price agitprop; that the authorities who must always do something will be pressed to act by a groundhog-day press.
Yet amongst all this negativity, one thing will be overlooked, and this is that thousands, millions of people will start arriving as of today, and that they will leave happy but also sad, because they are having to leave. But they will know that they can come back, and they do.
The first of May. Hug a tourist day. Hug a tourist every day. Today is when things get better.
QUIZ -
"Dancing in the dark" - who?
Any comments to andrew@thealcudiaguide.com please.
Paganism, the labour movement, the Virgin Mother and holidays. Four seasons in one day. And the most important is the latter. Few "seasons" can have been anticipated with more trepidation and uncertainty than this one, and that includes last year. Season 2010 was always likely to suffer the after-shocks of the quake of confidence collapse of 2009. There may be grounds for optimism, but try telling some and they'll laugh - or more likely cry - in your face, while the damn volcano didn't do anything to set the hats of business owners at a more jaunty angle. The deteriorating situation in respect of the Spanish economy and the breach of the 20% unemployment rate just add to an atmosphere of tension. Every season can seem like make or break, but in some instances things are already broken. They should erect some maypoles and let everyone have a dance to keep their spirits up, even if it might seem like whistling or dancing in the dark.
The season begins with the pathetic sight of hotels boarded up. The collapse of Globespan and the impact on its hotels in Puerto Pollensa is a fable for the current malaise and worries. Like consumers and businesses were caught out by and caught up in the incomprehensible workings of an out-of-control and distant banking industry, so the company was brought down by the e-commerce and distant banking tangles of a credit-card processing concern, one that was, to all intents and purposes, unregulated. The financing food chain has starved many, Globespan among them, and at the bottom of this chain, the small businesses of holiday resorts are forced to eat the thin gruel of a creditless holiday consumer market.
But there have always been collapses: Clarkson, Laker, Intasun, similarly the victims of recession if not of the pagan rituals of the current-day finance industry. We'll get over it, like we always get over it. Hard though it may seem, when a psychology of fear takes hold, to smile in the face of adversity is what has to happen. For the tourists' sakes, if no one else's. They come to enjoy themselves, not to be told about "cree-sis" and how tough things are. They know this anyway.
However, one can predict, with some degree of certainty, that the season will be littered with stories of high prices, poor service, things not being as they used to be and the end of tourism civilisation in Mallorca as we know it. And some tourists will be the ones relating the stories, selectively, anecdotally and prejudicially. One can also predict that the tourism ministry and other authorities will issue statistics that no one believes; that there will be voices of complaint regarding all-inclusives; that the car-hire agencies will be the whipping boys of the price agitprop; that the authorities who must always do something will be pressed to act by a groundhog-day press.
Yet amongst all this negativity, one thing will be overlooked, and this is that thousands, millions of people will start arriving as of today, and that they will leave happy but also sad, because they are having to leave. But they will know that they can come back, and they do.
The first of May. Hug a tourist day. Hug a tourist every day. Today is when things get better.
QUIZ -
"Dancing in the dark" - who?
Any comments to andrew@thealcudiaguide.com please.
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