03/07/2021

Good tourism is not low-cost tourism

3 min
A couple of tourists take a selfie in front of the Boqueria market on June 26 in Barcelona.

Germà Bel and Ferran Mazaira have just published an interesting article in the economic magazine 5cèntims.cat on the effects of the restrictive measures on the creation of hotel places implemented by the municipal government of Barcelona from 2015, the year in which the new council decreed a one-year moratorium on licenses to build new hotels, a moratorium that would be consolidated with the approval of the Special Urban Plan for Tourist Accommodation (PEUAT).

The authors study the impact of that measure on hotel prices in Barcelona. To do so, they build an estimate of what would have happened without it, and they do so based on a very sophisticated analysis of prices in 85 European cities with more than 300,000 inhabitants between 2011 and 2017. The conclusion, synthetically, is that the freezing of licenses increased the prices of Barcelona hotels between 34% in high season and 16% in low season.

Obviously, the fact that the freeze has pushed up prices is not surprising. Any market where supply is restricted will tend to experience a price increase above what it would have been without the restriction. The value of the work at hand is therefore not in the detection of this effect, but in the extent of it, and the study concludes that it has been significant.

From here, we can ask ourselves four questions.

The first is whether the municipal government foresaw or wanted this effect. The authors question this, but this is a question, more psychological than political, which seems to me to be of little interest.

The second is whether this effect is socially positive. It seems to me that it is, and I will try to justify it.

We all talk about the need for "higher added value" tourism, which makes a lot of sense. However, what tourists spend is the sum of the added value and the cost of what they consume, and what they consume is mainly transport (aircraft depreciation, fuel), food and purchases of products (the vast majority of which are imported, whether they are bought on Passeig de Gràcia or in La Roca Village). Whichever way we look at it, it is impossible to increase the added value of tourism without increasing the prices it pays. In this sense, we should welcome the increase in the prices of the hotels where they stay and do what we can to prevent the post-pandemic depression from leading the sector into a downward price competition that would harm us all.

The third question is whether those increases were excessive; lest we strangle the sector (or, in other words, kill the goose that lays the golden eggs) by wanting to increase added value.

The article in question does not go into this aspect. Even so, a superficial observation of pre-Pandemic prices is reassuring. It is indeed true that Barcelona's hotel prices were somewhat more expensive than those in Madrid or most German cities, but they were somewhat cheaper than those in cities like Prague or Budapest, considerably more than those in Vienna or Amsterdam and much more (in the order of half) than those in Paris, London, Rome or Istanbul.

The final question is who benefits and who should benefit from the price increase. The added value is the sum of three components and a different subject appropriates each of them: the businessmen (by increasing profits), the workers in the sector (by improving their remuneration) and the community (by increasing the taxes paid by the hotels). It is obvious that in the first instance the beneficiaries of the restriction have been the hoteliers. As for wages, we have to remember that the tourism sector pays well below the average and, therefore, that the increase in prices, although it does not guarantee that the sector pays better, at least makes it possible (and, to be fair, we have to remember that in those years the sector renounced the scandal of the subcontracting of room cleaning staff, the kellys). As for collective interests, we have to bear in mind that the Generalitat and the Barcelona City Council have just approved respectively an increase in the rate and a surcharge on the tourist tax, so that a night in a 5* hotel is going from generating 2.25 euros to the public coffers to generating 7.5.

In short, what is being done with Barcelona's hotels is the same thing that all wine designations of origin that want to preserve the quality of their products and the prosperity of those who make a living from them do: restrict production. The measure is good, the question is how we share its fruits fairly.

Miquel Puig is an economist