Spanish Steps to Recovery?

By Matt Costin

The harshly named Eurozone PIGS (Portugal, Italy, Ireland, Greece and Spain) are still taking their bitter medicine – recession, industrial decline and unemployment but without the escape hatch of currency deflation to restore competitiveness. Clearly it will be a long haul.
However, outside investors are showing signs of increased confidence in Spain. Foreign capital is returning - Bill Gates is now the second biggest shareholder in a major construction company and the UK’s largest mall owner has added another to its collection, in northern Spain. Profits at Banco Santander have surged and the national economic rot has stopped after nine months of decline – at last, the Spanish economy has returned to (small) growth in the third quarter with more growth forecast next year.

Inbound Market Holding Up

We hope to be reporting better news for Spain’s hoteliers in 2014, therefore. Actually, things in 2013 haven’t been as dire as in the rest of the Spanish economy. The inbound market is resilient (good to know that Germans still love their vacations in the sun!) and, perhaps surprisingly, the number of Spanish people travelling on leisure within their own country has remained stable. It seems likely, though that economic drop outs from this market have merely been matched by a similar number of leisure travellers giving up their international vacations and staying at home – down nearly 20% in the year to 2.5 million. As elsewhere in Europe they are taking shorter breaks, though the over 45’s stay away longer than their younger relatives. Taken as a whole, the Spanish domestic leisure market has experienced its worst year since the Hotel Guest Survey was launched here in 2008/9.

International and Domestic Business Fall

International leisure travel among Spanish nationals has also declined, from 3.1m to 2.5m adult participants, with much of this decline in the international short break market. Longer breaks have held up better, leaving international room nights for leisure purposes at 22m, compared to 23m last year. International business travel participation has also fallen by 20% to 400,000 adult participants, with international business room nights falling similarly – from 6m to 5m.

The domestic business market has inevitably dropped, with travelers down 20% from 1.5m to 1.2m. Numbers of frequent business travelers have remained fairly stable at around 200,000 adults but overall, a reduction in participation and number of nights across the population as whole has resulted in total domestic business demand falling from 20m adult room nights to 17m.

Regional Differences

Better to be a hotelier in the inbound tourist destinations – last year RevPAR in Barcelona increased by 6.9%, with more forecast this year. Both supply and occupancy rates have grown there in the past two years – the sun has been shining on Catalonia. Madrid, on the other hand, has been impacted by weakening corporate demand, down 5.5% last year. Room supplied has only changed marginally while there has been a slight fall in occupancy of 1%. The picture is bleaker again away from major tourist centres, with some chains considering temporary closures during the quiet summer months in secondary cities.

Brand Movements

As to brands, NH Hoteles remains the #1 ranked brand overall, though this year’s Most Improved Brand is Meliá, partly driven by a strengthening of its position as a leading choice leisure brand. Other brands to record notable year-on-year gains include AC Hoteles by Marriott moving into 3rd position for business from 5th last year. Hilton moves into 4th position for leisure and Sol Hoteles to 8th position for leisure.

How are the Spanish booking their nights away? For business and leisure, travel websites have moved ahead of hotel websites as the primary online tool for bookings. Some websites, which have already gained considerable traction for leisure bookings are now becoming key tools for business bookings. Trivago, Booking.com and tripadvisor are websites that have seen significant gains in this area.

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