The Blog: The cost of converting Mallorca’s hotels

Jaime Martínez, who became minister when Delgado resigned in late 2013, was the tourism director-general. He has often been credited as having been the chief architect of the 2012 bill, which was criticised by the left and environmentalists because of the framework it established that allowed hotels to grow in size - floors could be added and so therefore could rooms.

The criticism has always been selective. The investment that the bill enabled was a key element in economic recovery from the financial crisis, while the principle of the legislation was based on modernisation and on tackling obsolescence. The reduction that Delgado referred to concerned old hotels of three star and below. In essence, if they weren’t modernised, if their star ratings were not upgraded, alternative uses should be found for them.

There was sufficient nuance in the legislation against elimination as well as subsequent non-application to mean that, by 2019, 43% of establishments with an H hotel classification were still below three-star superior category (357 out of 822). These represented 37.5% of all places - 84,452 out of 225,367. For the AT apartments with key ratings, the situation was more extreme - just five per cent of establishments (40 out of 803) were three-key superior or higher; 7.4% of all places.

It is fair to say that there has been a good deal of investment in improvements within the limits of the lower star and key ratings, while there will have been upgrades on the 2019 figures. The wholesale removal of three star (key) and below was never going to happen and nor was it really the intention; the law was more concerned with one and two stars.

Nevertheless, it was understood that there were obsolete establishments that were never likely to be improved, and it was these for which alternatives needed to be found.
This was all part, as it has been since, of a vision for Mallorca’s tourism that was at least four star. Upgrading would mean greater quality, would mean greater competitiveness in respect of other destinations and would also mean greater profitability.

As I noted in an article back in March - Will Mallorca become a “five-star island”? - tourism started to become less profitable around the middle of the 1980s, and this was as a direct consequence of the growth in accommodation places.

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Mallorca’s tourism: Did something important just happen?

The reason for having asked the question in yesterday’s article if something important had just happened was not just because of the presentation of the Civil Society Forum’s document in parliament but also because it coincided with the views of Jaime Martínez. There is a political consensus as well as a business consensus that adjustments need to be made.

These adjustments require the elimination of obsolescence, the acceptance of what may well prove to be post-Covid reduced demand and the undertaking of further modernisation as envisaged through objectives for European Next Generation funds, e.g. digitalisation, green and efficient energy and sustainability.

As was said when the Civil Society Forum presented its document, “tourism will have to adapt to a new reality, marked by an uncertain global scenario and by climate crisis, that will arrive sooner than any of us had thought”. This reality means moving towards “a more balanced, sustainable, supportive and inclusive society”. And an aspect of this is the housing need in Majorca.

That document contains an analysis of what conversion of hotels into residential accommodation would or could entail. It takes Magalluf as an example, where there are twenty establishments below four-star rating with just under 6,000 places. Based on the minimum space per person per hotel room as demanded by law (8.5 square metres), these establishments could between them provide 854 dwellings of 60 square metres, 644 of 80 or 498 of 100.

Extrapolating this example to the whole of Mallorca, there could be as many as 23,150 dwellings of 60 square metres (18,005 or 13,504 for 80 or 100 square metres).
The calculation is that conversion in Magalluf would cost 42 million euros, at least some of which would come from a proposed investment fund for diversification. It is accepted that jobs would be affected - 590 is the calculation - but that these would be offset by 360 for construction.

Notwithstanding the investment, the imbalance between jobs is a flaw in the proposal. It certainly doesn’t follow that tourism workers could become construction workers or that they might find permanent work in construction. Another flaw lies with the type of accommodation envisaged - social housing. Mallorca’s hoteliers are not opposed to conversion, but they don’t want to be hamstrung by social housing agreements with the government.

There is merit in the Civil Society Forum’s proposals, but there are an awful lot of holes in them as well. Even so, they contribute to a debate that most definitely must be had.