LDN - Business

Tourism a boon for Spain's economy but a bane for some locals

[May 21, 2024] By Belén Carreño and Corina Pons

MADRID (Reuters) - Fresh from a tour of Real Madrid's glittering Santiago Bernabeu stadium in the Spanish capital, Guadalupe Rebollo says a holiday in Spain with her 15-year-old daughter is a better deal than one on the beach in her native Mexico.

The Rebollos are part of a record surge in foreign visitors to Spain that is helping its economy outperform European peers and create jobs at a rapid rate. However, it is also straining services such as housing and transport and stirring resentment among locals.

How to make the boom sustainable and share its benefits more widely are the tasks facing Spain's decision-makers, and some of them think driving tourism upmarket is the way forward.

But for the Rebollo family from Mexico, affordability is one of the factors that makes Spain so attractive, along with its cultural highlights.

Rebollo, 45, said their recent vacation at home had cost them the equivalent of 2,500 euros ($2,700).

"Here we are going to spend a little more than that, but getting to know other countries, paying for plane tickets and tours," she said. "The truth is that it is very good value for money."

Millions of other visitors agree and the tourism surge has helped put Spain, long the laggard among Europe's big economies, into the lead, now outperforming the wider 20-country euro zone, which grew a scant 0.3% in the first quarter of 2024 compared to Spain's 0.7%.

While France cut its 2024 growth forecast and Germany only just skirted a recession, held back by a dependence on industry and a vulnerability to fluctuations in commodity prices and geopolitical tensions, Spain expects its economy to grow 2% this year.

Expansion is being driven by growth in services as well as public and private consumption fueled by job growth, said Angel Talavera, head of European economics at Oxford Economics.

Tourism accounted for 71% of real growth in the Spanish economy last year, according to tourism lobby group Exceltur. Consumption by non-residents accounted for nearly a third of Spain's 2.5% growth in 2023, according to BBVA.

But many Spaniards feel they are not reaping the benefits, and the driver of Spain's success is increasingly being met with protests.

"It is true that we are going like gangbusters, but this phenomenon must be managed," Tourism Minister Jordi Hereu said on May 8. "We are not going to ban people from coming to Spain, but we can put limits on the tourist offer."

Measures are already being taken, with local governments placing limits on new holiday home permits.

In Barcelona, local authorities asked for a bus route to be removed from smartphone apps to the popular tourist destination Park Guell because the service was saturated.

Nor are Spaniards getting the feel-good factor from the boom. An April survey by the Spanish Sociological Research Centre found that although 60% of Spaniards acknowledged that their personal economic situation was "good", 59% also said the situation in the country was "bad" or "very bad".

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People stand next to decorations at an outdoor market in the downtown district of Salamanca, in Madrid, Spain, May 18, 2024. REUTERS/Violeta Santos Moura

Cheaper wages are drawing investment in new hotels, which are opening at a rate of one every four days, allowing Spain to overtake the UK this year as the most attractive country in Europe for hospitality investors, according to CBRE.

UNDER-PRICED

Antonio Catalan, president of AC Hotels, Marriott's partner in Spain, said his hotels had seen a 17% rise in foreign visitors in the first quarter who were spending 27% more, due mainly to higher room rates.

"Spain is under-priced and has too many customers," he said.

A record 85 million people visited in 2023 and that upward trend continued in the first quarter of this year, with visitor numbers growing nearly 18% to 16.1 million, although that may have been boosted by Easter falling within the period this year.

Those who come are spending more, thanks in part to efforts to develop the luxury market, which some regions see as a solution to overtourism.

Visitors to Spain last year spent 109 billion euros versus 63.5 billion euros in France as tourists flexed their credit cards in restaurants and designer stores.

Foreign tourist spending grew by 27% in the first quarter from a year earlier.

Tourism has also helped boost job growth, with unemployment falling to a 16-year low even as immigration helps fill vacancies in the services sector.

The sector created 197,630 more jobs in the first quarter compared to last year, representing one out of every four jobs created during the period, according to Turespaña, the state-run agency that promotes Spanish tourism.

Those new jobs are helping to boost private consumption to complement spending by tourists.

But Oxford Economics' Talavera warned Spain's economic boom was not sustainable.

"Tourism cannot grow at this rate permanently, nor can public spending continue its expansion," he said.

Rebollo and her daughter, meanwhile, planned to spend two weeks in Europe, including a few days in France, "but we'll spend more time in Spain because we've noticed it isn't expensive and Paris is," she said.

($1 = 0.9245 euros)

(Reporting by Belen Carreño and Corina Pons; additional reporting by Joan Faus and Inti Landauro; writing by Charlie Devereux; editing by Toby Chopra)

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