Spain: Catalonia's tourism economic pillar and the risks of its management

20-08-24

Tourism has established itself as a fundamental pillar of Barcelona's economy, ranking as the third most important source of revenue for the city, surpassed only by Real Estate Tax (IBI) and capital gains. 

In 2023, tourists left Barcelona an impressive total of €9.6 billion, representing more than double the municipal budget and contributing to 15% of employment in the city, generating 130,000 jobs. At the regional level, the impact is even more significant: Catalonia as a whole earned tourism revenues of €20,878 million, 26.7% more than in 2022, consolidating tourism as 12% of Gross Domestic Product (GDP) and 14% of employment.

In 2023, Catalonia reached a record 21.2 million visitors, a figure that could be surpassed this year. This tourism boom has boosted job creation, with one in four new jobs in the region linked to the sector. 

Catalonia remains Spain's top tourist destination, leading over autonomous communities such as the Balearic Islands, the Canary Islands, Andalusia and the Valencian Community, all of which have more than 10 million annual visitors. This leadership is not by chance, but is supported by business initiative, which has managed to expand hotel capacity and attract a greater number of tourists despite administrative restrictions. A clear example is the doubling of the capacity of five-star hotels in Barcelona and the 50% increase in the number of cruise passengers visiting the city.

The perception of tourism among Barcelona residents is, for the most part, positive. According to a municipal barometer, 70% of residents consider tourism to be beneficial for the city, which contrasts with the phenomenon of tourism-phobia that has manifested itself elsewhere. This support is understandable when one considers the economic benefits that tourism brings, not only to Barcelona, but also to other regions of Catalonia. The Costa Brava, for example, experienced 85% occupancy in July, slightly below the 90% recorded in 2023. However, the outlook for the year is optimistic, as bookings are being deseasonalized and showing growth for the months of September and October, which bodes well for a positive annual balance.

Despite the importance of tourism for the Catalan economy, local and regional administrations seem to be taking decisions that could jeopardize this crucial sector. One example is the announcement by the Mayor of Barcelona that tourist apartments will be banned from 2029. According to the sector's employers' association, this measure could have a negative impact of 1.5 billion euros on the city and, if extended to the whole of Catalonia, the losses could amount to 3 billion euros per year, in addition to the elimination of 10,417 jobs.

Tourist apartments represent approximately 40% of the accommodation offer in Barcelona. Their disappearance would mean a drastic reduction in the city's capacity to welcome tourists, which could have devastating consequences for related sectors such as transport (cabs and buses), hospitality, nightlife and commerce. In this context, the Barcelona Hotel Guild has warned that its associates contribute 400 million euros annually to the public coffers in the form of taxes, in addition to the 95 million collected by the City Council in tourist taxes. This tax has become the third source of municipal income, only surpassed by IBI and capital gains.

The future of tourism in Barcelona and Catalonia could be further compromised with the planned increases in the tourist tax from October, which will raise the minimum to four euros per person per night. It is estimated that these increases will generate more than 115 million euros per year for the Barcelona City Council. It should be noted that this tax applies not only to overnight stays in hotels, but also to stays on cruise ships, with a percentage going to the Generalitat and another to the City Council.

In short, while tourism remains a key driver of the Catalan economy, current political and regulatory decisions could threaten its long-term sustainability. Restrictive measures, increasing taxation and security concerns could kill a sector that has so far been a pillar of growth and economic stability for the region. It is crucial that administrations find a balance between regulation and support for a sector that, with the right management, can continue to be a bastion of prosperity for Catalonia.

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