Tourists are returning to Spain. After a sharp drop-off during the global economic crisis, the number of foreign visitors rose by 1% in 2010, to 52.6 million. It was the first increase since 2007, according to the Ministry of Industry, Tourism and Trade, when 59.2 million foreigners visited. Visits had fallen 2.3% in 2008, then 8.7% in 2009. Primary reasons for the increase, says Antonio López de Ávila Muñoz, director of the IE Business School’s master’s program for tourism management, were “the economic recovery in the major markets that send us tourists and the growth of new markets.” But Spain has fallen on the list of the world’s most popular tourist destinations, and diversifying its customer base and reliance on its beaches will be essential to the sector’s future.
Nearly a quarter of the visitors came from the United Kingdom. Still, at nearly 12.5 million, visits from the UK were down 6.5%. Germany was the second-largest source, with 8.8 million visitors, or 16.7% of the market. Other European markets playing important roles included France, with 2.3% of the market; the Nordic countries, with 7.2%; and Italy, with 9.4%. This market diversification helped alleviate the effect of such unusual factors as transportation strikes and unfavorable atmospheric conditions for travel.
Not only did more tourists come, they also spent more. The sector enjoyed a 2.5% increase in revenue last year, to €49.14 billion. The typical tourist spent €930, or €98 per day. That was 0.3% more than in 2009. An especially important point, López de Ávila says, is that “while tourism grew by 1%, its profitability increased by 2.4% from January through November,” year-on-year.
Despite the higher numbers, says Josep Francesc Valls, a professor at ESADE, Spain’s tourism sector remains in critical condition. “2007 was the best year in history for Spanish tourism, and the numbers for that year won’t be improved on in coming years. The fact that the number of incoming foreign tourists has rebounded means that the tourism sector is not feeling excessive pressure, as it did in recent years,” he says. However, “We need to remember that 184,000 jobs have been eliminated during the crisis. In 2011, the labor market could begin to improve somewhat. But it will be very hard to recover those lost jobs; that will take at least 10 years.”
And a non-profit association of the sector’s most important business groups notes that tourism grew in 2010 despite a lack of new campaigns. Exceltur (the Alliance for Tourism Excellence) warned at a news conference in January that it is still “very far” from being able to anticipate a clear recovery.
Nevertheless, Sebastian Escarrer, president of Exceltur and vice president of Sol Melia hotels, stressed publicly that the latest figures reveal “a change in trend.” López de Ávila agrees. “These years of crisis have forced many companies and destinations to innovate their products and services; they have improved their promotions and marketing and, from that point on, made adjustments in their costs.”
The recent trajectory of Spain’s tourism sector has clearly been downward. In 2009, the sector provided 10% of Spain’s GDP, or five-tenths of a percentage point less than the year before, according to INE, the National Statistics Institute. That’s down from 11.6% in 2000. The Spanish government noted after the release of official statistics that the contribution of tourism to GDP increased in 2010 “for the first time in ten years.”
The World Tourism Organization revealed another negative trend on January 17: Spain’s descent in the global rankings. The group said that in 2010, when global tourism grew by 6.7% to 935 million arrivals, 2.5% above its pre-crisis peak, China replaced Spain as the third-most-popular tourist destination. Spain had earlier lost its number-two position to the United States, which is behind France on the global list.
Taleb Rifai, the group’s secretary general, explained in a news conference that traditionally strong destinations are likely to be hurt in coming years by newly emerging destinations, so further changes in global rankings are likely.
An Ailing Sun and Surf Model
So what’s wrong with Spain’s tourism sector? Valls points to its “excessive dependence on the German and English market, especially in beach resort regions.” Dependence on beaches as the primary attraction has changed how coastal land is used, leading to serious ecological damage. “First-class beach regions are now overused,” Valls says, “and they have no chance of reinventing themselves. Most significantly, beach resorts are a tourism sector that is losing more and more of its attractiveness. This model is clearly trending downhill.” Visitors are reducing their stays at beach resorts from about 10 days to about eight, he notes.
Rather, tourists are increasingly attracted by so-called city breaks — brief visits to cities with different tourist attractions. Palma de Mallorca and Tenerife are examples of cities that could become more attractive for tourists year round if they developed cultural sites, health care services, and other pursuits. “This process of adapting to new trends is taking place very slowly,” Valls says. “There is still an oversupply of beach resorts in places where infrastructure and equipment are poorly prepared to adapt to the new trends in the market.”
Additionally, the sector’s poor Internet presence needs to be addressed, Valls says. “Although this is happening, it is happening very slowly. Yes, websites of Spanish companies are improving, but the sector is too far behind in making the needed transformation. Right now we are unable to offer vacation packages over the Internet in a competitive way. Spain is excellently positioned in traditional channels, but it has to position itself this way in online channels.”
Notes López de Ávila, “Despite recent years of crisis, many companies and destinations have been able to provide innovative products and services; they have improved their promotions and marketing, and have cut their costs. Yet much remains to be done for the tourism sector in this country when it comes to improving the competitiveness of its destinations.”
Still, Spanish tourism has much to offer, and much potential. “Spain has managed to significantly diversify the products in its tourism sector, moving beyond just sun and surf to offering a multitude of different experiences throughout the country: cultural, linguistic, gastronomical, outdoor activities, boating, religious tourism.” López de Ávila believes that all this, when “added to the safety of these destinations, the [quality of the] country’s health system, the infrastructure, and its hospitality and friendliness — which tourists recognize when we survey them — all of these factors are strengths when it comes to competing with new destinations.”
The Road to Follow
As for the road ahead, Miguel Sebastián, Spain’s minister of industry, tourism and trade, said on January 11, “We need to maintain our commitment to diversifying our markets.” A China Tourism Plan released in December 2010 aims to attract 300,000 Chinese tourists by 2012 and one million annually by 2020. A promotional campaign backed by Chinese tour operators will be launched to help achieve that goal, as will an initiative to expand air routes between Spain and China. Sebastián noted that the extent of the latter depends on airlines’ business decisions.
Valls says that “a series of mergers is currently taking place among the hotel corporations, with the goal of absorbing the excess capacity they committed themselves to creating during the period of strong growth.” He believes “very little progress has been made in improving the hotels, whose product offerings are not very differentiated.” As a result, “Hotel companies are focused on cutting excess costs and finding new means to improve their competitiveness. To improve competitiveness, you have to go ahead with mergers and expansions.” He argues that the industry needs to reduce the large number of hotels that don’t belong to a chain, currently about 70% of all hotels in Spain.
López de Ávila emphasizes that Spain must attract more visitors without neglecting the quality of its tourism. “Spain is a country that is large enough and diverse enough to care for a larger number of tourists each year, but we must not lose sight of profitability.”
“One year, a tourist can be seduced by the climate and the incredible beaches of the Canary Islands, and then the following year by the route of the caliphs in Andalusia,” one of the most important centers during Spain’s Arab age. “Or he can choose the cultural tourism and relaxation of Madrid, or the Romanesque art route [from the Middle Ages] in Castile and Leon. We have a vast supply [of tourist destinations] and many of our less mature destinations have a large potential for expansion.” There is also enough space for everyone, he argues. “From working-class European tourists to members of the international jet set, there are products and destinations that win over everyone. In the final analysis, we have to make it clear that our profitability cannot decline. And in that regard, we are not doing poorly at all. Spain’s tourism sector ranks second in profitability after only that of the United States. Even though Spain has almost 30 million fewer tourists than France has, Spain’s tourism sector is more profitable than that of France,” he notes.