Covid – 19 pushes Spain’s tourism industry into doldrums

 Thursday, August 27, 2020 


Although most of Spain is again considered a coronavirus risk area, the Canary Islands are hopeful for the winter season. However, Spain needs to rethink its strong reliance on tourism for its economy.

“The season is over and a million jobs are at stake,” says Juan Carlos Higueras from EAE Business School in Madrid, summing up the current situation in Spain.

Officially, Spain currently has the highest new infections per 100,000 inhabitants in Europe and travel warnings keep coming in from other countries.

So far, only 55,000 Spaniards have officially lost their jobs because many workers are still covered by short-time work programmes. But a study by the FEDEA business association predicts that 70 per cent of employees in the tourism sector will lose their jobs.

Especially hard hit are the Balearic Islands in the Mediterranean Sea, where tourism contributes 35 per cent of overall income. By comparison, tourism accounts for around 12 per cent of gross domestic product (GDP) in the rest of the country.

For Mallorca things look bleak: “The exaggerated scaremongering of some German media has made the situation worse,” criticizes investor Matthias Meindel, who lives on the island part time.

However, he does not let it get to him or his planned hotel for cyclists in the town of Inca. “We will start the renovations next year,” he said.

Increased police patrols and closing beaches and parks at night are meant to curb the spread of the virus. Mask requirements have been in place for a long time. Now even those smoking in public need to keep a distance of two meters.

The locals adhere to the regulations with iron discipline. “You can’t always say that about tourists,” says Meindel. In addition, you can only enter Spain if you have previously filled in an extensive digital questionnaire.

On the other hand, the Canary Islands in the Atlantic Ocean, where youth unemployment is particularly high, currently have an advantage in the short term. Not only are they excluded from most travel warnings because of the low level of COVID-19 infections, now the German tour operator TUI is redirecting some of their Spanish trips there. On top of that, the main tourism season for the Canaries is in winter.

It is clear that Spain’s economy has to reinvent itself. The government now wants to work with consultants to mould the entire sector toward a model with fewer visitors yet larger margins.

After the record year 2019 with almost 84 million foreign tourists who left €92 billion ($109 billion) in the country, the industry association Exceltur expects a minus of almost €100 billion in 2020, a hole that is €15.6 billion bigger than previously thought.

The “Safe Tourism” (turismo seguro) quality seal recently issued by the country’s Ministry of Tourism aims to relieve holidaymakers’ fear. It guarantees hygiene protocols and a low risk of infection.

In 2019, almost 2.4 million people worked directly or indirectly in the holiday industry in Spain, an increase of 500,000 new jobs in 10 years. Now, with only a third the number of foreign visitors, it’s increasingly hard to keep them employed.

Therefore, Exceltur demands that a quarter of the promised €140 billion from the European Union flow into their sector. Many want short-time work programmes to be extended until the winter season. Exceltur goes even further and demands the programs be extended until Easter 2021.
How that should be financed is unclear, though. According to Banco de Espana, the country’s national debt rose to 110 per cent of GDP in June and could be 120 per cent by the end of the year.

According to the Spanish property appraisers Tinsa, house prices have fallen by an average of 8.2 per cent on the Balearic and Canary Islands and by 6.1 per cent on the country’s Mediterranean coast since March 2020.
To stop that, the Spanish economist Javier Diaz-Gimenez advises not to lose sight of the rest of the economy and to finally build more energy efficient houses and buildings: “The construction industry is just as important to us as tourism,” he said in an interview.

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