Spanish tourism feels pinch of economic downturn
Oct 1st, 2008 by admin
Few Spaniards would sacrifice their annual summer vacation. But while Spain’s beaches are still busy, shops and restaurants at its resorts are ominously quiet as the country’s economic crisis envelops the tourism industry.
After 50 years of uninterrupted growth, Spain’s overbuilt and relatively expensive resorts seem ill-placed to cope with a downturn, at a time of increasing competition from cheaper, less-crowded destinations like Croatia and Turkey.
“In 48 years, I have never seen losses like this; tourism bosses I’m talking to have never suffered so much,” said Domenec Biosca, president of Spain’s Association of Tourism Directors and Experts. He said that in many parts of the country, tourism was already in deep recession, as both Spaniards and foreigners travel less distance, stay less time and spend less money.
Spain’s biggest hotel group, Sol Melia, reported that profits fell 41 percent in the first half of the year, while those at business hotel group NH dropped 20 percent. Revenues in the Canary and Balearic islands have fallen as much as 12 percent this year, Biosca estimated, predicting that such mature destinations would gradually decline in the face of foreign competition, despite lowering their prices.
Benalmádena, a resort near the southern city of Málaga, is one such mature destination. Its wide strip of golden sand is shadowed by 1970s hotels, high-rise apartments and cul-de-sacs of whitewashed houses that stretch in a 50-kilometer, or about 30-mile, swath of concrete from Málaga in the east to Marbella in the west.
While the town’s beach was packed with sunbathers on a typical afternoon in late August, despite the explosion of a small bomb by the Basque separatist group ETA on Aug. 17, local businesses said sales were down.
British and Spanish tourists strolled past Hami Bhot’s beachwear store, but only a few entered and fewer still spent any money. Takings have halved this summer, he said. “I can perhaps survive another year but then I will have to close. Maybe I will go back to India; the economy is better there,” said Bhot, who had dimmed the shop’s lights to save money.
Tourism, which accounts for up to 15 percent of Spain’s gross domestic product and one in seven jobs, is suffering just as the economy needs it to take up the slack left by the rapidly contracting construction sector. Until recently, towns on Spain’s coasts relied on construction for most of their income and growth, but as foreign home buyers shun Spain, these towns can ill afford to lose tourism revenues as well.
For the first time in a generation, Spaniards have had to slash spending on things like vacations as their incomes stagnate, prices rise and credit dries up. Unemployment, which leapt by more than 100,000 in August to a 10-year high of 2.5 million, has become a major concern for the first time in years.
Spain was the world’s No. 2 tourist destination after France last year, with almost half of its 60 million foreign visitors coming from Britain and Germany. But both countries are teetering on the edge of recession, and the British are turning away from euro-denominated countries like Spain after the British pound’s 15 percent slide against the euro in the last 12 months. Britain’s Thomas Cook, Europe’s second-largest travel company, has cut destinations in euro-zone countries and boosted offerings to Egypt and Turkey, which received 25 and 15 percent more tourists last year, respectively.
Eight percent fewer foreigners arrived in Spain this July, according to Ramón Estalella, secretary general of the hotel confederation Cehat. But more worrying, he said, will be the impact of Britain’s economic plight on bookings for later this year.
“Most package holidays in Britain were sold between January and April, when there wasn’t this feeling of recession as there is at the moment,” Estalella said. “I’m much more worried about bookings being made right now for the winter season.”
But it is economic pain in Spain, contending with the end of a 10-year-long property boom, that poses the greatest threat to the tourism sector, experts say. Hotel occupancy in some northern areas favored by Spaniards fell a hefty 15 percentage points over the summer, said Estalella, compared with a 3- to 4-point drop across the country. Establishments reported a respectable 85 percent occupancy rate in August, Estalella said, but to achieve that they resorted to price freezes and special offers that kept the average hotel bill increase to just 2 percent. The crash of a plane carrying tourists from Madrid to the Canary Islands on Aug. 20, killing 154 people, was another potential damper on the sector.
In Benalmádena, hoteliers and apartment owners reported that, for the first time, many guests had cut their stay to one week from two. Others are coming just for a long weekend.
Source: International Herald Tribune