The increase in domestic tourism in the Balearics failed to transpire this summer and the deficit caused by the slump in holiday bookings, primarily German, has left a gapping hole in the hotel sector's wallets. On average hotel occupancy this summer, across Spain, was down five per cent compared to last season, costing the hotel sector 300 million euros. President of ZONTUR, the Spanish association of resort hotels, Díaz Montañés, said yesterday that hotel revenue this summer was down 12 per cent on 2001 because of the 3'200'000 less nights spent in hotels. Díaz Montañés cited three key factors for the general dip: increased competition from other destinations, reduction in the average length of holidays and the poor weather. However, with regards to areas such as the Balearics, while the decline in tourism has been much more serious, the reasons are numerous and domestic tourism fell well short of compensating for the slump in overseas source markets. On the Costa del Sol however, a 6.5 per cent increase in the domestic market plugged the gap in the market caused by the five per cent drop in German and eight per cent decline in British tourists this summer; the Balearics had been hoping for a similar response from the mainland. But while Balearic hotels have been hit by one million plus holiday makers going elsewhere, on the mainland, the slight drop in hotel occupancy is because of clients reducing the length of their holidays. Díaz Montañés said that despite the huge effort which has been made by the hotel sector, the increases in bar and restaurant prices etc, have had a negative effect and certain parts of Spain have an image as an expensive destination. He added that two summers of strikes, last year's coach strike in the Balearics and the recent one in the Canaries, to name just two, have also damaged the industry's image and subsequently bookings. Díaz Montañés also pointed out that the growth in alternative accommodation is also hampering the hotel sector. The hotel sector has a dilemma, do we opt for quality, big spending clients and turn our backs on an important part of our market or go for quantity and become more competitive, which would involve a significant reduction in costs, he said. Díaz Montañés maintains that to start with, the government needs to increase its efforts to promote Spanish tourism while trying to help the hotel sector reduce its operating costs which will in turn, lead to a reduction in hotel rates and holiday prices. Basically, we've got to maintain our prices, because once we've dropped them, it's very difficult to recover them. We've got to improve quality, tend to clients more, make sure they are satisfied, promote tourism more with the main focus on sun and beach but using alternative tourism to outline why Spain is better and different to other destinations, he explained, adding that the media has a massive influence on a tourist destination's image so measures have to be taken to limit damaging news and pump out positive stories. Spanish tourism figures for this year will better 2001, but ZONTUR and the Spanish Confederation of Resorts Hotels and Apartments both agree that the industry has a structural problem and does not share the euphoria of the government. Díaz Montañés yesterday called for fiscal incentives, reductions in local rates and taxes, especially levies such as the Balearic tourist tax, for the hotel sector so the necessary investment can be made in improving hotel facilities and quality without having to increase room rates and push the burden onto hotel guests. We don't want government hand outs, but a reduction in our taxes so we can compete with countries where taxes are not paid, said confederation president José María Carbó, who added that, in accordance with 250 EU statutes, Spanish hoteliers are obliged to make hefty investments which do not apply in competing non-EU countries.