Juanmi Ferrer, president of the CAEB Restaurants Association, is expressing his concern about the upcoming tourism season. Although forecasts are optimistic and could even mean another record year in terms of tourist numbers, he points to the ongoing impact of increased costs on restaurants' profits.
He says inflation "remains out of control". "In 2024 restaurants had to absorb many price increases in order not to lose customers, but this strategy has generated a loss of competitiveness. Right now the aim is to contain costs and be able to continue offering a quality product without passing on all the increases to the customer. We do not want a repeat of the 2024 scenario. Forecasts pointed to an exceptional summer, but the reality was lower than expected turnover and a drop in productivity.
"Unlike other tourism sectors that have been able to adjust rates upwards, the restaurant sector continues to have difficulties in transferring the increase in costs to final prices. This has generated a stagnation in profitability, with businesses working with increasingly tight margins."
"Last year there were many people on the island, but there was less spending per tourist. We are faced with a drop in turnover and, what is more worrying, a reduction in productivity due to the containment of prices. The sector has its eyes set on the hospitality agreement and on how tourist spending, business profitability and the evolution of costs will evolve over the coming months."
Ferrer's reference to the agreement has to be viewed as a key context for what the restaurants have been saying for the past few months. Junior partners along with the nightlife sector in collective bargaining negotiations led on the employers' side by the Mallorca Hoteliers Federation, there is clear alarm at the kinds of demand that have been emanating from the unions.
Following the first negotiation meeting last week, Ferrer declined to comment, the UGT having presented its demand for a 19% pay increase over three years and for a reduction in the working week from 40 to 35 hours.
The UGT, the larger of the two unions involved in the negotiations, stepped up the rhetoric at the union's regional congress in Palma on Wednesday. Pepe Álvarez, the UGT general secretary, stated that "the vast majority of Spanish society" wants a reduction in the working week and referred to a demonstration in Barcelona on Tuesday which called for a cut to 37.5 hours. This has of course been proposed by Yolanda Díaz, Spain's employment minister.
On pay, Álvarez insisted that 2025 must be the year of salary increases. "Salaries in our country are very low while the profits of the companies are high." He drew particular attention to hospitality, observing that profits have been "multiplying year after year" and giving as an example the rise in hotel prices in recent years compared to the rise in wages in the sector.
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The simple fact is that people have less disposable income now. Everyone is being squeezed from every angle and a lot of people just about afford to have a holiday. So their spending habits once abroad have changed also. As for locals, its the same problem. Many people cannot afford to eat out anymore due to high living costs, so many businesses in hospitality will fold. Its been a boiling frog over many years and now its all coming to a head. Get ready for the "greatest" depression!
To be fair, this is a very real problem and one facing the hospitality in the UK too. Many restaurants etc could just about cope with the increases in food and wage costs but not the greed of local authorities and landlords who continue to increase rates and rents over and above inflation.