Rescue for tourism: too little, too late?

In Spain, the tourism sector’s contribution to GDP is a touch over twelve per cent. Almost three million people are employed directly and indirectly. On Tuesday, the Spanish government announced a package worth 4,200 million euros.

Loans, tax exemptions, tax deferrals there were along with beneficial arrangements for the renting of establishments and for employees with “fijo discontinuo” contracts, but there was no direct aid, there was no reduction of the tourist rate of IVA (VAT), there was little or anything to help specific sectors, e.g. travel agencies.

The tourism industry in Spain has pointed to France and Germany as examples of government support.

Germany committed 10,000 million euros. In addition, there have been massive amounts pumped into the likes of Tui in order to keep them afloat. For all the discussion surrounding the Spanish government’s loan of 475 million euros to Air Europa, this amount - by comparison with rescues in other countries - is chicken feed.

It’s not as if there hasn’t been previous aid. Of course there has been. It has mostly come in the form of ICO credit institution loans and the ERTE furlough scheme. It’s not as if there hasn’t been previous talk of funding for the tourism industry, such as the slice of the European reconstruction fund but which is more to do with medium to long-term modernisation planning than with short-term financial necessity. But now that a package has been announced, the reaction is one of being underwhelmed, angry even.

José Luis Yzuel, the president of Hostelería de España, the umbrella federation that represents Spain’s bars, restaurants, cafés and pubs, responded to the Tuesday announcement by saying that the government’s package did not “comply with the rescue plan that we need, which involves direct aid in order to survive”. The lack of direct aid was “incomprehensible”, especially considering what has been done in France and Germany.

For Carlos Garrido, the president of the CEAV Confederation of Travel Agencies, the measures announced on Tuesday were “clearly insufficient. There is not specific aid for the sector most affected by the crisis. A package that includes direct aid is necessary, as ICOs are not enough for recapitalisation.” Not enough, and they do of course have to be repaid, even if the terms for repayment are extendable, for a sector which fears the closure of around 3,000 agencies and the loss of some 28,000 jobs.

In the Balearics, the Confederation of Balearic Business Associations (CAEB) attacked the government’s scheme, reckoning that it was a load of hot air that will not help the hospitality industry. The CAEB restaurants association joined with others in insisting that direct aid is needed.

If the overall package left the industry disappointed, certain specifics were welcome, not least in the Balearics where fijo discontinuo employment is concerned. There are some 83,000 employees who have this kind of contract. For them, or rather their employers, the government is to apply 50% bonuses (discounts) on social security contributions from April to October next year.

The state budget had already included provision for these discounts in February, March and November, something which isn’t new as they have been included in previous budgets. The aim has been to incentivise the recalling of fijo discontinuo workers earlier (February or March) and their longer employment (November). The incentive has been in line with lengthening the tourism season. For next year, the incentive is for the main season. By the way, January and December have never been included, as the assumption has been made - largely correctly - that not even an incentive can encourage hotels to open in these months.

This is a good move, but only so long of course as hotels and other businesses feel that it is in their interests to open, and this raises - yet again - the whole issue of ERTE, which is to be reconsidered after Christmas. As things stand, the scheme runs until January. It is bound to be extended further, but it remains to be seen under what terms.

The Majorca Hoteliers Federation earlier this week argued that ERTE should stay in place for the whole of 2021, a reflection of a lack of optimism for next year’s season. And the Spanish government may, I say may, just be taking such an eventuality into account. Ever more ERTE has to be financed somehow. The apparently disappointing package announced on Tuesday could have been because the government has ERTE at the back of its mind and how much it might cost if it does indeed need to be applied during 2021.

A general feeling is emerging that the season will not be starting at Easter at anything like what it normally would. The Balearic tourism minister, Iago Negueruela, has earmarked the end of March for tourism’s reactivation. An industry view, however, is that the vaccination programme in different countries will not have had sufficient time and that the season is unlikely to start until June.

Forecasts, as we know, have proved to be wide of the mark. We can but hope that the industry is wrong and that Easter does represent a revival. But with Covid, vaccine or not, nothing can be certain, and the Spanish government surely knows this, which is why it may be holding fire in anticipation of further rescue funding.