The application of ERTE temporary layoff regulations has resulted in Meliá laying off around 8,300 employees in Spain

The application of ERTE temporary layoff regulations has resulted in Meliá laying off around 8,300 employees in Spain.

23-06-2017ARCHIVO

This week's review of what is not so much the week in tourism but the week in hope of tourism at some point in the future begins with some more incongruous figures. Last week in this column it was the rise that there was in tourism employment in February (pre-crisis, therefore). The honours this week go to the National Statistics Institute for having informed us that hotel overnight stays in Spain in February went up almost seven per cent compared with 2019 - to something over 17.7 million. In the Balearics there was 4.8% rise in overnight stays (535,758 in all), an 8.8% increase in the number of visitors and an average hotel occupancy of 49.3%, which was up on last year.

So, there was some good news, but coming to the March reality, where do we start? Extrapolating from last year's numbers, the Fundació Impulsa calculates that up to the end of May, assuming there is no tourism, there will be a fall of 11.5 million overnight stays, a loss of turnover based on hotel accommodation alone of 466.4 million euros, and a loss in the region of 2,000 million euros of tourist spending. The March-May period equates to something like a fifth of annual business.

Then we come to the bigger economic picture. The Centre for Economic Forecasting reckons that the state of emergency (or alert, call it what you prefer) will result in a 2.7% drop in Balearics GDP. The national average decrease, the centre estimates, will be 1.7%. The fall in the Balearics will be the highest in the country, with the Canaries occupying second spot with -2.1%. This decline in the Balearics would mean the economy going into the red with negative growth, which probably won't come as any great surprise.

The centre's calculation is based on a general fall in consumption. It isn't solely to do with tourism, but quite clearly tourism does provide a huge chunk of consumption. President Armengol referred the other day to the Balearics being the region of Spain worst affected by the crisis, and she meant the economic impact because of the loss of tourism. In the Balearics, tourism's direct contribution to GDP is around 45%. The Canaries have the second highest dependence on tourism - roughly 35%.

The director of Fundació Impulsa, Antoni Riera (professor of applied economics at the University of the Balearic Islands), says that calculations about the impact in the medium and long terms are virtually impossible. Right now, he puts the total loss of Balearics GDP at anything up to 3,600 million euros. He refers to what economists call a black swan in comparing the current situation with 9/11. The black swan is an unpredictable event of limited duration but with a significant economic impact. He explains that economic contraction because of 9/11 lasted ten months. With coronavirus this will be longer because of the losses being incurred.

The Exceltur alliance for tourism excellence, whose president is Meliá CEO Gabriel Escarrer, reckons that if the crisis lasts into the summer, the losses from tourism (for the country as a whole) will be 62,000 million euros. Even if there is swifter reactivation, Exceltur estimates a 40,000 million euro loss.

Tourism contributes 12.3% to national GDP, and Exceltur are questioning whether the Spanish government is taking into account the impact on total GDP of a collapse in tourism. The alliance's vice-president, José Luis Zoreda, is urging the government to put in all the financial resources necessary in order to prevent companies going under. These companies include the large ones. If they fall, the overall effect is greater because of the impact on other sectors of the economy and on employment.

When it comes to jobs, the application of ERTE temporary layoff regulations has resulted in Meliá laying off around 8,300 employees in Spain; these represent 90% of the total workforce. The remaining ten per cent will have their working weeks cut by 50%. Riu, another of Majorca's big four hotel groups, is applying ERTE to its entire workforce in the country - 5,570 people.

These layoffs are of course being made by all hotel groups and indeed by most of the regional economy.

Tour operators ready to go

Tui's CEO, Fritz Joussen, has written a letter to all employees saying that as soon as the "situation returns to normality, Tui will be ready". All "work processes" are being maintained so that activity can resume immediately, and Tui will be there "to do what we know best, which is to fulfil the dreams of millions of clients".

It has been reported that some tour operators are gearing up to go on the first of May, the date normally taken as the start of the tourism season. Flights to Majorca and the Balearics are apparently being planned for the start of May. This, it has to be said, seems especially optimistic, and it isn't necessarily a view that it is shared by Tui or Jet2. The line coming from Tui is that it would be speculation to give a date, but as Joussen has said, the tour operator is ready. Where Jet2 are concerned, operations are currently suspended at least until the end of April.

Spain's tourists leading the recovery?

As and when tourism recovery comes, there is a belief that it will be led by the national market. Inmaculada Ranera, CEO of the Christie & Co real-estate consultancy in Spain which has a particular interest in the hotel sector, suggests that the speed of recovery will depend on the impact of the crisis on the consumer economy, and the point is well made. Regardless of the lifting of restrictions, consumer spending is bound to be hit, and this includes holidays. Increased demand will occur at different speeds, according to how individual economies have been affected.

For Spanish tourists, the suggestion is that they will stay in the country, firstly for financial reasons and secondly because of anxieties regarding travel. In this regard, however, the Balearics (and the Canaries) could benefit less than other regions. Getting to the islands requires flying. On the mainland there isn't the same necessity.

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Simon / Hace 7 months

I’ve managed to move my April holiday to September and, all being well, I fully intend to return. If the virus is cleared before September and travel restrictions lifted I will quite likely return sooner, maybe June/July, for a short break. I think I’ll need it after all this! Stay safe everyone.

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