Hotel de-growth - what a difference two years make

Yes, there were various prognostications, but they were most if not all fallacious.

Given this situation of total uncertainty, Mallorca’s hotels were facing the possibility that many (perhaps all) might be closed for the entire season. The first of May, the “official” start to the season was just hours away, and the whole season was looking dicey to say the least. What were the hotels to do then? Some of them anyway.

I refer back to a report of April 30, 2020. This report started by saying that the hotel sector was proposing various measures to the Balearic government that would allow many establishments to take advantage of the potential season-long closure. One of these proposals referred to change of use. Obsolete hotels, for which there was limited or no investment capacity, could be converted into housing.

This was a proposal that had previously been on the table - the 2012 tourism law raised it, for instance - but nothing had ever really come of it. But now, and because of the extreme crisis, conversion acquired a new dimension as a means for part of the hotel industry to be able to contend with the crisis and, at the same time, to offer a housing solution.

Speaking about this proposal, the president of the Mallorca Hoteliers Federation, Maria Frontera, said that it was a possibility. “It will have to be considered like so many other proposals.” Because of the extraordinary situation, “we all have to be very creative”.

Frontera pointed out that, despite all the investment that had been ploughed into the island’s hotel sector over the past few years (largely thanks to the 2012 tourism law), some 40% of hotel stock remained obsolete. A change of use, she argued, should be backed up by incentives and means of investment for those hotels which did not have the necessary financial muscle.

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What did 40% look like? Tourism ministry figures showed that there were 1,791 establishments of all types in Majorca in 2020 and that these had 304,710 places. At maximum, therefore, 40% equated to 121,884 places. Looked at a different way and excluding all establishments of four-star (or key) and above plus the likes of agrotourism and interior hotels, there were 753 with 116,028 places. Not precisely 40% but not far off, and for the most part the obsolescence and lack of financial muscle would have applied to establishments below four-star.

I fully accept that the situation at the end of April 2020 was extraordinary, but my reason for referring back to it is to indicate that the hoteliers federation was seemingly willing to contemplate a situation whereby over 100,000 places could potentially have been eliminated. Those prognostications had included ones that tourism would never be the same; loss of places would be inevitable.

As things were to pan out, the government passed its coronavirus emergency measures. These included precisely what the hoteliers federation had been talking about - the possibility of conversion and change of use. Not a single application for this was ever made, largely one feels because it was change of use to social housing and not free market.

The utter failure of this government measure aside, we now arrive at a point where the government has introduced its tourism decree and the hoteliers federation is expressing its anger about the potential loss of places and the lack of negotiation. Cack-handed and non-consensual this decree may have been (says one side of the argument), but denouncing it as some sort of charter for de-growth contrasts greatly with what the federation dared to consider two years ago. What was 40% if not de-growth, and on a huge scale?

Exaggerated this may have been, but the 40% nevertheless provided a framework.

Two years on and the situation is less extraordinary, so much so that a season akin to 2019 may await us. Obsolete establishments are therefore needed, even if there is a hotelier reminder of the 40%, which has not modernised and has lacked the investment capacity to do so. The federation suggests that establishments which do not modernise will be “excluded from the market”. If they do and expand buildable space for non-accommodation places, there will be a five per cent reduction in the number of places.

While I don’t see the logic of the government’s 5% reduction (making it a stipulation could even be counterproductive to modernisation), this may be the extent of any de-growth. There will surely not be the loss of 40% of hotel stock or anything like this. But even were there to be a portion of this, the hoteliers might remind themselves that it was they who once alluded to it.