Related news: Mallorca tourism: Prices and tourism competitiveness

On Thursday, the president of Baleària , Adolfo Utor, informed President Marga Prohens that prices in Mallorca and the Balearics are leading tourists to seek alternative destinations. As the boss of one of the shipping companies that the islands are reliant upon, he well understands the cost of transport, the prices of goods and any disruptions to supply.

While he was speaking in general terms about prices and their impact on tourism, he specifically drew attention to the Spanish market (with which he is most familiar). This, he observed, has fallen this summer because of rising prices in the Balearics.

There is a general complaint about prices and the cost of living - residents are affected just as much as tourists - and so an argument about a loss of tourism competitiveness . Inflation and higher energy costs have been cited for many months, although Spanish inflation is now generally lower than most of Europe and energy prices have been contained, while economic growth is higher than much of Europe.

It is undeniable that there have been cost pressures and that goods and services have become more expensive. But the Balearics are hardly unique in this regard. Where there are additional strains, these lie with, for example, the costs of insularity , a factor that politicians have been attempting to address for years. There is now agreement for the Special Economic Regime , whereby the Spanish government guarantees (in theory at any rate) a certain investment each year and also gives fiscal aid to businesses.

But this aid isn't as great as it might be. The EU keeps it in check. A Balearic demand to be given similar status to the Canaries and thereby have greater aid is unlikely to succeed. The Canaries are classified as 'ultra-peripheral' to the EU. The same argument can't be made for the Balearics, even if attempts are made at doing so.

There are other factors - rents are generally higher than most of Spain; labour costs are higher, in the hospitality sector in particular, one that is directly related to tourism - while if there are certain shortages of supply, these can tend to be accentuated in the Balearics. There have recently been some issues with agricultural products because of drought conditions on the mainland - melons, for instance. Distributors have said that they are still able to supply but that the prices have risen.

Last year, when post-pandemic tourism recovered to the extent that tourist numbers were almost identical to what they had been in 2019, business turnover was excellent. But bottom lines weren't because of the cost pressures. Inflation may have since come down, but businesses such as hospitality looking to boost weak profitability in 2022 have faced a further round of collective bargaining salary increases.

All this plays into an apparent loss of tourism competitiveness, which can only be gauged objectively from figures for tourist arrivals and tourist spending . These figures are currently only available up to June, but what they show is some high variability.

Adolfo Utor highlighted Spanish tourism, and it was the case that this fell by over eight per cent in June (compared with 2022). But for every other month of 2023 it had risen. To end-June the annual rise was 12.8%. Spanish spending in June was naturally down, but by a lower percentage - 5.4%.

As to the foreign markets, the UK outstripped all others except 'Rest of the World' in June. Tourist numbers rose by 20% and total spending by just under 20%. The increase in tourist numbers for the six months was 13%.

In June, though, four markets recorded dips - France by 14.5%, Switzerland by 16.7%, Belgium by 31.8% and the Netherlands by 34.5%. With the exception of France, these were all down for the January to June period. How does one explain these, as the performance of their respective domestic economies is much the same as the rest of Europe and the UK? Were prices in the Balearics a factor therefore? Of these markets, by the way, France was roughly one-sixth the size of the UK and Germany. The Netherlands, larger than both Belgium and Switzerland, was around one-tenth the size.

In overall terms, foreign tourism in June was up five per cent (9.8% for January to June) and total tourism , to include Spain, was up 2.4% (10.4% for the six months).

How is third-quarter tourism faring? The answer is that we can't say with any certainty until figures give us something to go on. Talk of a loss of tourism competitiveness may be premature. We will have to wait and find out.

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Prices and tourism competitiveness in the Balearics

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