Is there truly a will in Mallorca to diversify and have less reliance on tourism?

Tourism monoculture complacency is hard to shake off

The centre of Palma this season. | Miquel À. Cañellas

Andrew EdePalma29/09/2024 12:01

The CES is the Economics and Social Council. Ultimately a Spanish government consultative body, there are regional councils, the members being drawn from business, unions, the primary sector, consumer associations, and from appointed experts. There is, therefore, a CES in the Balearics, and it has recently issued its 2023 report on the economy, employment and society on the islands.

A headline aspect of this report is that the services sector represents 87% of the Balearic economy. According to the CES, this is a figure "never previously seen". Over the period 2019 to 2023, industry and construction both fell back in terms of their weight in the economy - from 6.2% to 5.5% and from 7.4% to 6.9% respectively. The services sector meanwhile grew from 85.8% to 87.1%.

In light of this report, the CES president, Rafel Ballester, has called for there to be "a reflection" on the lack of steps taken towards greater economic diversification. Given the figures, there appears to have in fact been a backward step. And for those who see a diversification towards or rediscovery, if one likes, of the primary sector, take note. Services, plus industry, plus construction leave a whopping 0.5%.

Ballester points to the persistence of an economic "monoculture". So what's new? Nothing. I seem to have spent the best part of the past twenty years pressing the need for diversification and lamenting inaction and a complacency that have acted against this. But this said, one does perhaps need to take account of what Ballester's monoculture comprises, as the general complaint in the Balearics has concerned a tourism monoculture. This doesn't account for the whole 87%, of course it doesn't.

A problem with considering services as a whole is that it can ignore a genuine presence of diversification into information technologies. This has happened, but even then there is the focus for these technologies. Tourism, more often than not, begets technological innovation for the simple reasons that there is a great deal of tourism knowhow in Mallorca and the Balearics and there is a great deal of tourism to be serviced.

However it is qualified, though, a conclusion will be that the CES is wanting reflection regarding a tourism monoculture which does, for example, drag a good deal of the retail and transport sectors with it. And as we all know, the vulnerabilities of all three were brutally exposed by the pandemic, when the hammering they took placed a need for diversification at the top of the agenda. Unfortunately, however, the pandemic gave rise to all sorts of post-Covid prescriptions and scenarios that were variously well-intentioned or plain fanciful.

In the latter category, there was the supposed change that tourism was meant to have experienced, one of which was less tourism. A recent opinion piece in the Mallorca tourism press sums up my view of what was being said - that there was never going to be an after-Covid for tourism, it would just revert to how it had been. And it has, with an additional 1.5 million tourists per annum.

There was so much blah during the pandemic probably because there were so many individuals who suddenly discovered they had so much free time. And so they devoted themselves to endless webinars offering opinions that were so much nonsense. Sadly this was also the case with diversification.

In mitigation, it needs saying that diversification doesn't just happen overnight. The latest report from the Forum for Civil Society, which largely consists of entities critical of the tourism model, has stressed that diversification is not occurring despite the crisis that the pandemic sparked. Perhaps so, but how long are we talking about? Not that long, that's for sure. The observation wasn't that helpful, unless the forum is truly suggesting that there isn't the appetite or wherewithal for diversification.

It is very easy to slip back into old complacent ways, blinded by ever more numbers of tourists and a full employment at least partly based on low-paid jobs in those sectors that were so badly impacted by the pandemic. And if one looks around at investment opportunities, which ones present themselves most clearly? Tourism, especially in the form of hotel real-estate investment, is one such, and this offers an at-times depressing vista of top-end investment predicated on a market anticipation of being able to extract ever greater income from a tourist with wealth to burn.

Sure, this may well result in better pay but it does nothing for diversification. It's just the same business bottom line with added noughts. In this regard, we had Gabriel Escarrer of Meliá Hotels International saying the other day that there is still room to increase hotel prices in the Balearics as current prices are "far away" from islands like Mykonos. Yes, an island with nothing else to rely on.

So the temptation is to keep treading the same monoculture path, assured of being able to give shareholders handsome dividends. Where's the diversification? Well, if we go back to the CES, I'm not sure it has solutions, merely a request for reflection. Quite, as has happened unproductively for decades.

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2 comments

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Zoltan Teglas | 3 months ago

Morgan WilliamsYou're right it's a difficult problem to solve, and the local politicians (of all colours) don't seem to have the talent/will to address it.

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Morgan Williams | 3 months ago

The problem is, that successful diversification is a bloody difficult thing to do, and in the case of Mallorca, would certainly involve lots of imported talent. In the early 2000's there was a real push for diversification. The Balearic government invested millions in business parks to try to attract high tech, medicine, R&D and other types of business. They gave a few tax breaks for startups. And a few other incentives. But it never really took root. But some things did. Look at the case of Conectabalear. A Manacor based startup that saw an opportunity to deliver internet where nobody else could. They set up WIMAX transmitters on all of the mountaintops and delivered high speed internet to everyone who didn't have access, at competitive prices. Today, they've laid high speed fibre to just about every little village on the island, delivering reliable 600MB+ and 4G/5G mobile phone service at very competitive prices, and most unusually, really outstanding customer service... in English, German, Spanish... They now basically own the internet on Mallorca. That's one success story. The other potentially huge one is the hydrogen plant in Lloseta. Not big now, but it could become huge. Watch that space. The elephant in the room however, is that whatever new business they manage to attract, it will involve a lot of imported talent. And that will put even more pressure on housing. It's already expensive. They'll need to pay their imported talent well. But that's something that needs addressing anyway. Average salaries here are pretty paltry (the root problem really). But then, most of the labour pool isn't exactly highly skilled. The ones that have skills move to other parts of Europe where their talent is in demand and they'll get paid well for it. But if there's an opportunity, maybe they'll return (?). But then, skilled talent can be imported from lots of places. As long as you're paying the going rate. Mallorcan silicon valley? Don't hold your breath. Chicken. Egg. A complex problem with a murky relief. There's no magic wand on this one.