Tourism price wars for summer 2008

THE contracting negotiations for the summer season 2008 have recently started, and there is already disagreement, with Balearic hoteliers being pressurised to reduce their prices. The first to start negotiations were the British tour companies, who were not accepting price increases above three percent, in some cases demanding more modest rises of one or two percent from the hoteliers on Majorca, Minorca and Ibiza. “Production costs are shooting up and we cannot accept the minimal increases which the British and German tour operators are demanding from us”, said a spokesman for the Association of Hotel Chains and the Federation of Majorcan Hoteliers. The Hoteliers Associations are recommending their members to ask for a five percent rise in prices for summer 2008, “because to sign for less than three percent would be commercial suicide as the costs will consume all the profit margin, threatening the quality of the product”, said the spokesman. The big chains, RIU, Iberostar, Sol Melia, Barcelo and Fiesta among them, will not have problems negotiating quotas and prices for summer 2008 but this is not the case for the small and medium chains, or the individually owned hotels. “We have to be very much on top of this process of negotiation, as it is clear that family hotels, around 80 percent of the total accommodation on the islands, will be those who suffer most damage in this process if we cannot resist the pressure from the tour operators”, said the Majorcan Hoteliers Federation. The big chains are at a greater advantage when negotiating with the tour operators as, with their diversification (Canaries, Andalucia and the Caribbean), “they can demand better conditions from the tour operators”. Thomas Cook and TUI both said that next summer there will be strong competition between holiday destinations in the western Mediterranean, and those in the eastern Mediterranean together with emergent destinations “which can compete well in both prices and service”. Every year between May and July, hoteliers and tour operators negotiate their contracts for the next tourist season. Depending on tourism trends, the level of strength varies, but it is always the tour operators who have the opportunity to impose their criteria, because they can pressurise other holiday destinations to accepting their demands.