A problem with tourism is its lack of economic value added.

02-07-2006S. Cases

The president of the Andalusia Economic Observatory, Francisco Ferraro, has conducted an analysis of the economic contributions of different regions to Spain's tourism.

He has found that five regions are responsible for 93% of all foreign tourism in Spain - Andalusia, the Canaries, Catalonia, Valencia and the Balearics. However, he also discovered that over the past almost twenty years the contribution to GDP has been falling.

Ferraro argues that this is because the tourism industry doesn't generate the same sort of value added as other sectors of the economy. Factors that explain this are the seasonal nature of tourism, a workforce which is often not highly qualified (if at all) and the very competitive nature of the market. The latter of these is particularly significant in exerting downward pressure on prices and in limiting investment.

Tourism, generally speaking, has low intensity in terms of capital and technology, while the low qualifications demanded of a large part of the workforce depress salaries and incomes and so ultimately consumer spending.

The findings and conclusions are obviously relevant to the Balearics where there is greater GDP reliance on tourism than in any other region (and that includes the Canaries). In the Balearics, a figure of 45% is often quoted as tourism's contribution to regional GDP. In fact, this figure has risen from some 40% over the past seven years, which does rather conflict with Ferraro's analysis. However, there is the implication from Ferraro's report that tourism underperforms - and has been underperforming - in terms of its total economic welfare, such as in the pay packets of an expanding population, while he is taking the contribution of tourism to GDP at a national level.

There is particular current relevance because of the debate and arguments over the Balearic economy's monoculture of tourism and the criticisms of low pay in the tourism sector. In addition, there is all the talk of hotel prices (now going up after a lengthy period when they more or less stagnated) as well as the investment that has been ploughed in to upgrade hotels and therefore make price increases justifiable.

But perhaps above all, there is an echo of what has been said about the diminishing per capita income in the Balearics. At one point in the 1990s, the Balearics led the way among the Spanish regions. The islands are now seventh, and Ferraro's analysis over almost twenty years may offer an explanation as to why.

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