SPANISH hotel prices rose by 2.7 percent year-on-year in January, cooling from a rise of 4.9 percent in December 2002, Spain's statistics institute INE said yesterdaty, but the Balearics posted the second highest price rise of 6.2 per cent, well above the national average. The hotel price rise was well below Spanish inflation in January of 3.7 percent year-on-year, and was the first time since August that prices had increased by less than 3 percent. Hotel prices are a key indicator for Spain's tourist industry, which accounts for some 12 percent of the country's gross domestic product and is the main employer in some regions. January's figure represented a substantial fall in hotel price rises from a year ago, when rates rose by 3.8 percent. That is good news for Spain's centre-right government, which aims to slash consumer price inflation from 4.0 percent last year to 2.0 percent in 2003. On a regional basis, prices in the Canary Islands - traditionally a popular destination year-round for German and English tourists fell 3 percent year-on-year. The Balearics and Andalusia chalked up tariff increases of over 6 percent on average. Balearic hoteliers can not complain, while they continue to push hotel prices up, against the wishes of central government and the Ministry for Tourism, January takings were also up 3'3 per cent on last year. Central government tourism chiefs, extremely concerned about the state of the Balearic tourist industry, have urged hoteliers against further price hikes and to concentrate on improving standards, services and offering clients much more value for money. Balearics hotels were some of the busiest last month, although in comparison to the past few winters, very few hotels have remained open this winter; some resorts are completely closed. Average occupancy in the Balearics was 42 per cent compared to 46 per cent in Valencia and 70 per cent in the Canary Islands.