By Humphrey Carter
NEXT year is going to be a difficult one for the Balearic tourist industry which is being told by the International Federation of Tour Operators (IFTO) to wise up to changes in the market, growing competition, the effects of the euro and how each satellite market has changed in the wake of the September 11 attacks.

IFTO has been holding one of its four annual conferences in Palma over the past few days, having chosen the Balearics because of the “significant issues” concerning the region's tourist industry which the federation felt it needed to discuss. IFTO chairman Martin Brackenbury told the Bulletin yesterday that IFTO also chose the Balearics because of the recent change in local government.
Q. What are IFTO's primary concerns for the Balearics?
A. To start with, while the number of people coming here does not appear to be diminishing, hotel occupancy levels are and that affects not only the hoteliers and the tour operators, but eventually employment and the local economy, so it's something we (IFTO, local government, tourist industry) need to look at together and try and reverse.

Q. What's causing this, the growth of the independent market, holiday home owners travelling more often with low-cost airlines?
A. There is a mixture of different reasons for that. Certainly the holiday market has changed, such as the holiday home sector fuelled by the growth of the low cost market, but the key area we're concerned about is that, if we look to the future, we have a country (Balearics/Spain) that is relatively expensive, no less expensive than the destinations from where most of the visitors originate, particularly with regards to the costs of extras, and word gets round. Spain is now considered a relatively expensive destination. That's partly because of rising wage rates but the introduction of the euro has not helped.
Q. Has the euro been good for the tourist industry?
A. No and it has also made it even more difficult for the Balearics to compete in a market which also includes non-euro zone destinations which do not have to meet such high labour costs etc. Turkey in particular but curiously, the Italians regard the luxury Egyptian resort of Sharm El Sheikh as a competitor destination to the Balearics.
Bulgaria is growing very rapidly simply because people feel they can no longer afford to come here.
So it's very difficult to know what the overall solution is going to be, but clearly it will involve innovation in all aspects of the experience provided, but also in ways in which everything is delivered. The Balearics needs to provide the highest quality and the lowest costs. So there's a lot of thinking to do and the Balearics needs to think about what other people are doing.
Just to assume that when economies in Northern Europe get better, people will come back, is probably not really a reasonable assumption. Therefore we need to think very carefully about what needs to be done here.

Q. Which area of the market has suffered most?
A. We think it is the family holiday market, upon which a lot of local hoteliers depend and one we want to find ways of reactivating in the Balearics.
Q. On the whole, the summer has not been that catastrophic?
A. No, in the terms of numbers it has not been, but it has not been a normal year and we need to take this into account. We've had the war in Iraq and when you have wars at the end of the Mediterranean, you find bookings which would have gone to that region, are redirected to Spain. In a normal year, which we hope next year will be, it may be that the situation has rather been exaggerated in favour of Spain and the Balearics this year by the conflict. What the Balearics needs to be thinking about is how it is going to maintain tourism figures next year when all destinations will be competing on level terms. But another problem concerning us for 2004 is further devaluation of the pound against the euro with regards to the UK market.
Recent devaluation already means that people are looking at prices in brochures being pushed up by between 12 and 14% here in the Balearics by the change in currency value and of course any local inflationary pressure affecting hoteliers. So the problem is that customers have looked at 2004 brochures and decided to wait to see if things change.
Q. UK travel agents are pushing 2004 holidays now, are they selling?
A.It does not appear to be the case, there is a distinct lack of activity.
On a month by month basis, holiday sales are currently down 25% for the market overall and it is worse for the Balearics and we're concerned because it is looking very difficult for 2004, hence why we're here to talk to the government and the local private and public sectors to try and recover the situation. Do not forget, the Balearics is at the heart of our business.
Q. Is the new government back as being a partner as opposed to over the past four years when it was not perhaps so co-operative?
A. Yes, I have to say that the progress that we have made in the past few months with the current administration has been very helpful and hopeful. It's not led yet to final outcomes because there's a lot of work still to be done, not least in what is happening in each of the individual markets and they've all changed. The events of September 11 gave a push to those changes, some of which have been very significant, which need to be fully understood by people working in the travel industry here.

Q.Have customers become more demanding when booking a holiday?
A.You have economic cycles and we're probably near the bottom of one now which is when people become much more conscious about their purchases.
Q. There's talk of the British economy being soft, is it heading into recession?
A.No, I think we're going to escape a recession, but the problem is that an awful lot of people are heavily indebted and are therefore unlikely to borrow even more money to pay for a holiday which may be part of the current reluctance to spend. We've had a relatively difficult July, August and September and we're still seeing difficulties for 2004, at the moment there does not seem to be any incentives for customers to book.

Q.What is your advice to the Balearics government going to be?
A. There are issues relating to products, services and the experience on offer we want to explore. It's going to be very difficult for the Balearics to find a way to compete, but the reality is that in the past, the region has risen to the challenge when faced with these potential differences and I expect the Balearics to do it again.

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