We Told You So: Lack of bank credit

On every bright horizon lurks a dark cloud or two. The optimism for the coming season is not, it would appear, being matched by a sector of the economy every bit as important to tourism, if not more, as hotels, bars and restaurants – the banks. Their purse strings remain pulled tight, so complain business associations. Without their injections of credit, bars find it difficult, if not impossible, to undertake the type of work that is typical of this time of the year – some improvements, some decoration, the purchasing of stock or new equipment. The lack of credit is reflected along the chain. Suppliers have pulled back in extending particularly generous terms, often for the same reason as their customers are experiencing difficulties – their own access to credit.

As the world’s tourists all descend from the skies onto Mallorca this summer, so the sight of a bar without a lick of fresh paint or some chairs minus wicker where wicker used to be will be the inspiration for complaints that standards have slipped. You can already detect the sound of indignant keys being stroked.

If not bars and a chipped tea-cup, then the annual whipping-boys of the car-rental world. To three years of crisis, hire cars are now subject to the effects of natural disaster; the earthquake and tsunami in Japan mean limited supply. On top of this, car sales fell in March anyway; by some 48% in the Balearics, though only a modest percentage of this was attributable to rental agencies not renewing their fleets.

Despite an understandable complaint that the banks might be more forthcoming and be more willing to join in with a general air of pre-season jollity, and also despite whatever impact a distant disaster might have on the price of a week’s car hire, is there perhaps a sense in which retaliations are being got in early? Don’t blame us, blame the banks, and the banks are as much a factor for the car-hire agencies as they are for bars or restaurants. A shortage of credit over the past couple of years has had an effect.

The apologists of the bar and car-hire trades are sharpening their keyboards as fast as the disgusteds of wherever press the send button on their emails or internet forums. The apologists are pressing their press releases. It’s not our fault if bars are in a bad state. Just blame the banks; oh, and the government while you’re at it for the smoking ban. Oh, and throw in the hotels and all-inclusives as well. On and on it goes. As ever.

It is something of a new excuse for the apologists that they can turn to the forces of nature. This year Japan. Last year Iceland. And one turns a wary eye skywards, as the anniversary of Ash-Cloud Wednesday looms. In fact, the volcano hasn’t been forgotten. It is still being trotted out as a reason for certain inactivity this year, on account of last year having been affected, albeit for a short period and before the season really got going, and having meant a poor year.

The excuses never cease. You can understand them. Up to a point. There is a legitimate beef when it comes to the banks, but were things so difficult then why are businesses preparing and readying themselves for the season? Cash is coming from somewhere, even if the Scrooge-like tendencies of banks and suppliers suggest that cash has ceased to flow.

The truth is that you never really know for sure. There may well indeed be bars that are facing an impossible situation because of a lack of liquidity, but the tendency towards a manipulation of the press, by the very obvious mechanism of the press release or conference, can rarely be taken as the whole truth and nothing but the truth. If it is indeed the case that the effects of smoking ban have been so deleterious, then should not there now be whole towns with barely a bar still open?

This is not to make light of difficulties and obstacles which are placed in front of bars and other businesses, car-hire agencies included. There are difficulties, but the propensity on behalf of various business associations to flood the media with bad-luck stories and the headline-grabber, e.g. 70% loss of revenue owing to the smoking ban or whatever, should make you stop and question them for a moment.

It was informative, the other day, that a director of a well-known business on the island said to me that his company was good at working the press. But this is how it is. Good companies, good business associations do just this. And in the case of the associations for the bars, the intention is either to shame the banks or to simply get the excuses in. So if things don’t work out according to the optimistic tourism figures, they can at least tell us that they told us so, even if the fact that things don’t work out has nothing to do with the excuse given.

Any comments to andrew@thealcudiaguide.com please.

Conflicting Evidence: Car rental in Mallorca

The car-rental situation continues to cause the occasional apoplexy and disgusted of Tunbridge Wells letters to you know what. And if one is minded to be selective in terms of what one reads, then one can argue the case both ways – that there is a problem or there isn’t. Take yesterday. In “Ultima Hora” there was a piece which quoted the views of one agency – Goldcar. This said that 30,000 tourists, mainly German, would not be coming to Mallorca because of a lack of supply of cars, and that they would be going elsewhere, where presumably they can get a car.

A point about this is that the circumstances which might be causing a shortage of cars in Mallorca are the same in other countries – recession and lack of credit. The apparent car scarcity is not unique to the island. But then there was another article, one from “The Diario”, which painted a somewhat different picture. Far from there being a shortage of cars, the problem it was portraying was a shortage of customers. Perhaps those 30,000 Germans, or whoever they are, have indeed not chosen Mallorca. If so, they have left agencies with excess stock on their hands. According to this second article, some 40% of the total rent-a-car fleet in Mallorca is garaged up because of insufficient demand, and that only in the very high season (end July and August) is there likely to be anything approaching full supply.

So how does one reconcile these two conflicting points? The answer is that one doesn’t. Or one probably plumps for the Ultima Hora version, if it lends support to one’s claims of shortages and excessive prices. And on prices, the “Diario” goes on to say that, at present, typical daily rates are between 25 and 30 euros for a small car and between 40 and 45 for a medium-sized vehicle, and that these will rise to around 45-50 and 60, respectively, when demand really kicks in during high season. If so, then these prices are hardly in the category of some of the more outlandish claims that have been made about the cost of car hire, including of course the what one has to presume was a typo when “The Bulletin” quoted Harry Goodman as paying 7000 euros for a week’s hire; even at 700 that would probably be for something pretty grand (7 April: She Bangs: Car-hire prices).

Any comments to andrew@thealcudiaguide.com please.

She Bangs: Car-hire prices

They’re still banging on about the price of car hire, as they’ll no doubt bang on about it throughout the coming season. But some of the banging-on and some of the messages are curious. At the weekend, “The Bulletin” dragged out some website report advising early booking for the Whitsun period – to avoid “peak prices … evolving from the high demand”. This report then went on to say, as though it was stating something new, which it most certainly wasn’t, that a reason for high prices is the reduction in car fleets. Yes, well I think we knew that, thank you very much, as in we knew this last year as well as this. Big deal. Elsewhere in the paper, a lady was doing some more banging-on: another cup of coffee and another expensive car for hire. Ho hum. Ever the anecdote, ever the inconsequential.

However, just read those quotes again. Something doesn’t necessarily chime with all the banging-on that has brought forth dire warnings of visitors fleeing Mallorca and heading for havens of low-cost car hire (if any such place exists). That something is “high demand”. Well, if there is high demand, then are people being deterred by prices? It would appear not. But what about these prices? The report is quoted as saying that one could expect to pay “even as much as 136 pounds for a car rental in the Mini-category” – for Whitsun week. Even as much as? The price doesn’t sound that excessive, certainly not in the 7000 a week for a small car that Harry Goodman surely didn’t pay but was said to have done, or the 700 a week that one presumes the paper actually meant to print. Hyping up “hikes” in prices when the prices do not appear to be unreasonable seems distinctly strange: me suspects the exaggeration of a so-called and self-congratulatory “campaign”.

Then there was something even stranger in yesterday’s “Diario”, because it went against the whole justification for these alleged hikes – that reduction in car fleets. The headline said that there had been a rise of 214% in Balearic car registrations (during March), a record for Spain. The by-line added that the Balearics were leading the way in the increase in car sales thanks to – “the renewal of car-hire fleets”. Record sales, renewal of fleets; strange and very interesting. It’s very interesting because, assuming this to be correct, then the price-increase justification through limited supply is undermined, leaving one to conclude that, if there are indeed excessive prices being charged, then this may well be the result of agencies pursuing a bit of profiteering – as has been alleged by the banger-on-ers. Maybe. It might rather depend on how many and which agencies have been engaging in the purchase of new vehicles.

Unquestionably, there are now conflicting messages emerging. On 3 March (Keep The Car Running), I reported that the word was that there would be a fall of 5,000 hire vehicles this year. However, the total number of sales in March alone was not far short of that figure and this was made up, in large part, by those to agencies (albeit that no precise figure for agency sales has been given); total sales for the whole of the first quarter have risen by over 100%, equating to over 8,000 vehicles. There are factors driving, as it were, car sales, one of them being the rise in IVA (VAT), planned from 1 July.

The sales figures place a different complexion on the car-hire story. And if one takes that report, maybe what we have is evidence not of a market going belly-up but one that is actually rather buoyant, enjoying “high demand” and at prices, quite frankly, that are not excessive, because there is in fact more supply around than was being predicted. One waits, with interest, the further banging-on and criticisms regarding old bangers.

Any comments to andrew@thealcudiaguide.com please.

Wrote Me A Letter: Car-hire prices

“Dear Sir,
My wife and I have been coming to Majorca since Nelson was a lad; from a time when you could hire a 2CV for the price of a cup of coffee and take to the roads of this beautiful island and drive carefree, admiring the sights of this paradise island and shunting into a passing mountain goat or some dear peasant of a Majorcan farmer on his horse and cart who was only too delighted to then offer to pay for the damage. But now we are expected to part with upwards of eight grand for a week’s hire of a Fiat Smallo without a handbrake. The authorities must do something about this, and about the price of a cup of coffee, or we will choose not to come again. Ever. So there.

Yours, D. Gruntled, Epsom”

“Dear Sir,
I read with horror that the price of car hire in Majorca is to rise by one hundred per cent this year. The authorities must do something about this, or this beautiful island will lose all its tourists. What do the car-hire agencies think they’re playing at? Running a business? And may I also express my dismay at having had to pay one euro, fifty centimos for a coffee in Puerto Pollensa the other day. The authorities must do something about this. There is, after all, an awful lot of coffee in Brazil.

Yours, B. Onkers, Eastbourne”

“Dear Sir,
I wish to protest in the strongest tones that my husband Giles nearly choked on his over-priced cup of coffee in Puerto Pollensa when he read of the latest increase in car-hire prices. Are these car-hire johnnies insane? A VW Touareg automatic should be no more than a hundred or so euros for a fortnight – AT MOST! The authorities must do something about this. I would suggest that they begin by horse-whipping the lot of them.

Yours, Eleanora Madd, Little Gaddesden (and sometimes Crestatx)”

As you might have guessed, more news about the the price of car hire going up. Again. Ho hum.

Andy Murray
There are those among the ranks of the expatriate brigades who are either tennis fans or are Scottish, or are both. There are even those who support Andy Murray. An extraordinary thing in the Lash column in “The Bulletin” yesterday. It would seem, and admittedly it isn’t always clear what he’s talking about, that there is to be a Hollywood film about the only tennis player in Britain or, as Riki has it: “the glorified Scots life story”. Does this mean that Murray pretends to be Scottish, as in he’s really English, or is not as glorious as some might think him to be? Whatever. It goes on: “What is not amazing, is Andy Murray is still one of the world’s great tennis players where movie producers want Andy in the film itself as with training he could be a natural actor.” Right, I think we understand.

Any comments to andrew@thealcudiaguide.com please.

Keep The Car Running: The car-hire price story keeps running

One can predict with a certain degree of certainty that this year will witness further heat steaming from forums and newspaper letters pages. Heat steaming from an overheating hire car, possibly not, but the heat will be steaming around it. One can predict with a certain degree of certainty that this year there will be anecdotes as to inflated prices and calls for “something to be done”. The Balearic Government, the vague “authorities”, perhaps even God will be told to intervene and do something. There will be stories of we are not coming to Mallorca because, stories of the downward spiral of Mallorca’s tourism because. Look, don’t worry, I’ll write them for you. Give you a selection and you can choose which one and then forward it to the relevant website or to “The Bulletin”. No, really, I can write them for you, because I know what will be said. Again. In fact the stories haven’t gone away over the winter; they are now, unlike tourism, an all-year-round phenomenon.

Car hire, and its cost. At least the warnings are coming out earlier than last year, but warnings there are nevertheless. In 2009 there was something in the order of a 30% reduction in car-hire fleets in Mallorca and the islands, representing approximately 30,000 vehicles available. This figure is likely to fall by a further 5,000 this year. Just don’t say you haven’t been warned.

In case you are still in the dark as to why there will be fewer Golfs or Peugeot 207s clogging up the roads of Mallorca, let me explain once more. It is all the economy, stupid. The economy and the lack of bank financing. The banks took their bats home with them at the start of last year and hoarded them alongside the readies that previously had been handed over to car-hire agencies in order to acquire new fleets. The result? Fewer cars. And higher prices in many instances. Supply and demand. And the banks have still got those bats locked away in the vaults this year, to the tune of credit equating to 5,000 cabriolets or family saloons.

There is an added uncertainty though to the certainty of the outraged letters, and this concerns Hiper. In administration, this agency alone accounts for around 5,000 cars on the islands. The company is still operating and is likely to continue to do so, but at what level, one doesn’t quite know.

It is, however, instructive to learn that it is the larger concerns, such as Hiper, which are being hit hardest by the absence of financing. Smaller agencies did well last year as they were able to pick up the business the larger ones could not meet. One agency of my acquaintance appears to have had little difficulty in replenishing its fleet for 2010. It also watches carefully the prices of other agencies, especially the larger ones. While not looking to charge excessively, it would be crazy if it didn’t seek some profitable benefit by adjusting prices upwards. Supply and demand.

One does have to have some sympathy, however. Sympathy for tourists who may discover that they either can’t get a car or can and are being asked to pay a healthy whack more than previously. The apparent rise in car-hire prices (and for one anecdote saying they were/are excessive, you can always find another which counters this) is bound to have a negative effect, if only in that it stops encouraging visitors to move around and to enjoy something more than simply the hotel pool. The car-hire agencies are, though they may not consider themselves so, part of the overall promotion of Mallorca. The alternatives to car hire are not that brilliant. The number of excursion coaches was cut last year as well. Public transport, in the form of buses, can be good (and cheap), but it can also be completely useless. Try, for example, travelling from Alcúdia to the east coast of Cala Bona or Porto Cristo. Fine if you don’t mind spending several hours on a scenic route of the island’s interior, can do the trip on the day that the bus goes and don’t have to come back the same day.

No, I can understand people getting upset and demanding that something be done. But what? Cap prices? How would that work? Moreover, this is, after all, meant to be a free(ish) market. The best advice, the only advice is to shop around. The online broker agencies may offer better deals. Hard to know for sure, and the car-hire industry on the island is saying likewise; hard to know for sure exactly the number of cars that will be available, hard to know for sure whether there will be sufficient cars to go around. It might be less hard to know that some visitors will vote with their feet. And walk instead.

Any comments to andrew@thealcudiaguide.com please.

Tourism confusion and car hire

Good news on the tourism front on the front page of yesterday’s “Bulletin”. Or is it? TUI is reported as announcing that summer sales in the UK have risen by ten per cent. Sounds good, even if it’s not clear what period we’re talking about. When it says that TUI had an “increased first-quarter operating loss” but has seen improved trading in the second quarter, I confess that I am somewhat confused. Are we not still in the first quarter? Whatever. To add to the confusion, I was told yesterday that the figures were rubbish and that someone from TUI had said that the reverse was the case, i.e. ten per cent down. Who knows? You pays your money and you takes your choice, or maybe you don’t pays your money and you don’t makes a choice – First or otherwise. But look closely at the report in the paper, and you will realise that nowhere is Mallorca mentioned. The TUI announcement refers to sales in general. It also goes on to say that TUI has seen an increase of six per cent in British sales. Six per cent, ten per cent, Mallorca, the world? What is all this? Confused? I am, and so, I’d imagine, are you.

Elsewhere in the paper, one must congratulate a letter-writer for stamping on “the whining of some part-timers and tourists about conditions on the island”. He refers in particular to a previous letter about that something about which the authorities should be doing something and about which they have no right to intervene, the apparently inflated prices being charged by car-hire companies. That letter claimed a charge of a thousand pounds per week. So this latest letter-writer, “tired of the whining”, did a bit of googling and came up with a couple of quotes (among thousands of hits) that were anything other than unreasonable. Yes, there have been and are examples of high prices for car hire, but the recourse to single cases to seek to prove a point and with which to beat Mallorca with the “too-expensive” stick is tiresome and unbalanced. Look around, shop around and it never is as expensive. Now, just stop it.

Hiper in administration

The car-hire sector, the one that has caused and is still causing much heat because of increased rental charges, has received a bit of a shock. Hiper, considered the leading Mallorcan car-rental company, has gone into administration (the meaning, effectively, of “concurso voluntario de acreedores”). Resolution with banks is hoped for – within two weeks – and the company is continuing to operate. One to watch.