Ten Per Cent: The role of discounts

Money off, money off!

The question is, is price the most important thing? To read all the gripes and anecdotes, you would think that it is. There is no doubting the fact that the holidaymaker is a whole load more price-sensitive than may have once been the case, but is price the most important thing?

There are certain alleged truisms from the management/business world that not everyone is inclined to believe. One is that workers are not motivated by money; another is that businesses should never “sell” on price. Depending on your point of view, you will think these to indeed be true or bollocks. The real answers are, as always, far from black and white.

Which leads us to money off. To discounts.

Via Facebook, one of the local tourist office people asked me if I had thought about discount coupons in HOT!, and then went on to mention the bag of popcorn that’s doing the rounds, together with some cards for discounts at some restaurants. The answer to the question was, well, no. If a business wants to offer a discount, it’s up to them. The wider question is how effective is the discount approach?

On the face of it, you would think it was a no-brainer. 10% off, in flood the tourists. But it’s not as simple as that. If, for example, you get a whole load of places in an area making the same or similar offers, then where’s the difference? A business feels almost compelled to match the offer, even reluctantly. If the result is a load of repeat business, then ok, but that’s really the issue. It may be attractive to the holidaymaker, but how good is it for the business?

The argument against discounting is that it elevates price to the top of the marketing mix tree. Price becomes the selling point, and this runs counter to pretty much all marketing theory. But what you are unlikely to find in all that theory is any study of discounts in a temporary market – which is what a tourism market is. Unless you take into account those visitors who return year on year. You don’t build a business, long term, on discounts. You may do so through price, as part of the overall package, but this assumes that the prices are right in the first place. A customer doesn’t become loyal on the basis of a discount; he is loyal only to the discount, not to the bar or restaurant.

A Mallorcan restaurant owner was umming and ahh-ing about a discount. In the end, he decided against because he was worried that other Mallorcans would come in and take advantage – never underestimate the Mallorcan desire to pay as little as possible. Even without some local free-ish-loading, the point is that he would stand to lose 10% that he might have got anyway. Which does also assume his package is right – in terms of the food, service and the price.

I’m not convinced about the discount as an incentive, partly because the tourism market is too diverse to be sure. At the low end, a restaurant with relatively high prices is unlikely to attract business even with a discount. At the high end, why would you offer a discount? At the low end, a place with lowish prices might get additional trade and experience an erosion in margin, with no guarantee that the customer would spend more than they might otherwise have done, or will come back, especially if the place next door is doing likewise.

It’s an interesting subject though, and one – where the temporary market is concerned – that is deserving of investigation. Sounds like something else I’m going have to do. But if anyone has any thoughts on the effectiveness, or otherwise, of discounting in tourist resorts, it would be good to hear from you.

Any comments to andrew@thealcudiaguide.com please.

Gets In Your Eyes: Not from January (the smoking ban)

In the lead up to national no-smoking week in Spain, a survey – reported on in yesterday’s “Diario” – finds that 70% of Spaniards support a ban on smoking in bars, restaurants and the like and that a third would be more likely to go to bars once a ban is in place.

There has been much confusion and misinformation regarding the precise implementation of the smoking ban and when it will come into effect. To reiterate … it will cover enclosed public places, such as bars, which does, however, still raise some question as to what is or isn’t enclosed. But be that as it may. Spanish law is rarely clear. There are moves already, though, for some exemptions. Hotels are likely to be able to maintain a percentage of rooms as smoking; 30% is the figure being bandied about. I guess if people want to smoke in their rooms, then this should be up to them, but the hotel exemption does smack a bit of the hoteliers exerting pressure if they are fearful of loss of revenue. And if this is the reason, then it does rather undermine the logic of the ban elsewhere. The government, and others, have been at pains to say that revenue will not be harmed; quite the contrary in fact.

The timing of the ban is becoming clearer. A week ago the health minister made a pretty unequivocal statement that it would come into effect on 1 January next year. This has long seemed to be the logical starting-point, assuming they don’t change their minds. The regional health ministers are due to be consulted in June, the law would be brought before parliament in the autumn and, bingo, you have your ban. Talk of it coming in much earlier has never sounded realistic.

But when it comes in, and it will, how smoothly might it be implemented? Recently I have been into different bars and wondered how on earth they will do it. Take somewhere like Cultural in Puerto Pollensa. If you were an airplane, you would have been grounded and not allowed anywhere near its airspace; the interior is its own ash cloud. It’s hardly unique. There are also some bar owners who, believing themselves to be, er, “well in” with certain authorities, which they may or may not be, are suggesting that they will ignore any ban. Let’s see, shall we. Though how comprehensive the checking and how well-staffed the smoking plod might be is anyone’s guess. At a time of public-sector cuts, this is unlikely to be a growth area in employment. Which will probably mean a spate of Jose Public dobbing in a bar to plod. Or, more likely, a rival bar doing the dobbing in.

The irony of the ban in bars will be that they will still be able to have cigarette machines. Or maybe it isn’t so ironic. Terrace life will be unaffected, unless terraces are somehow deemed to be enclosed. Anticipate any amount of confusion about this, added to which are the legitimate worries of night bars where the noise plod wait for the stroke of midnight to go and hound anyone talking above a whisper on a terrace while having a smoke.

Any comments to andrew@thealcudiaguide.com please.

Battlefield: Hotels go on the all-inclusive offensive

There we were thinking that some new model of all-inclusive might be on the horizon, one that embraces bars and restaurants into the system. We might have been thinking this; the tour operators might have been suggesting it. The hotels don’t seem in any mood to go along with it. This is the impression formed by statements from heads of hotel associations in Menorca and Ibiza; there has not been a similar statement from Mallorca, only ones that are more veiled in their sympathy with views in other Balearic islands.

The other impression is that the hotels are going on the offensive in defending the all-inclusive offer. Or perhaps this does all tie in with the tour operators’ mixed-offer all-inclusive (discussed on 12 March) in that positions are being adopted, with the hotels taking an assertive high ground from which they might be seen as the good guys in admitting outside bars and restaurants into their all-inclusive “club”. The tour operators are demanding an increase in all-inclusive while at the same time wanting the so-called “complementary offer” to be a part of it. The hotels, seen as the villain in the all-inclusive piece, seem to want to play hardball.

The picture of bars and restaurants being painted by the hotels is one of complaining and of a failure to do anything to attract tourists. It is the hotels, so the argument goes, that assume all the risk and that make the effort; the complementary offer is being challenged to step up to the plate in attracting tourists. Moreover, the hotels’ line is that they have every right to challenge incentives such as happy hours and “menus” (presumably they mean menus del día) offered by bars and restaurants. This challenge comes and has come in the form of all-inclusive.

We seem to be heading to a state of all-out war between the hotels and the complementary sector. The hotels, in addition to all-inclusive, have been moving ever more into the territory once secured by the outside businesses – more entertainment, TV (Sky and football), even Sunday roasts. Entertainment may actually be cut back this summer as a way of reducing costs, but in mostly all other ways the hotels are attacking the complementary offer. This war could be a precursor to some truce or negotiated settlement, e.g. the mixed-offer all-inclusive, but what the hotels are angling at is that it should not be they alone who assume the costs and risks of marketing to get tourists to come in the first place.

The hotels are overstating the case; they are but one aspect of promotion. Nevertheless, they have a point when accusing bars and restaurants of only complaining and apparent inaction. And ever more, the complementary sector is seen as leeching off of the efforts made by the hotels. But this growing antagonism can also be seen as the result of shifting circumstances: economic conditions, stronger competition from other destinations and so on. For years, there was a symbiotic relationship between the two. This has gone or is going. It might only return if the tour operators are genuine in wishing to establish the mixed-offer.

One could accuse the hotels of being disingenuous. They are, together with government, town halls and tour operators, the frontline assault forces in tourism promotion. Clearly they are, and they know it, hence the possible disingenuousness. They are also, generally speaking, far better resourced than businesses in the complementary sector. (It might also be noted that some hotel groups run their own outside restaurants.) Their self-interests are served by co-operation, such as in being parts of local hotel associations which conduct their own marketing, but at least they do engage in co-operation. Does the complementary sector act in a similar way? Self-interest is even more extreme here. Do bars and restaurants band together to push a resort? Well, do they? I’m unaware of this happening. Where co-operation does exist, it tends to be as a means to kick against something – all-inclusives, the latest regulation. Negative rather than positive. And when something comes along which might require some co-operation, such as with the estación náutica concept in Alcúdia, self-interest comes to the fore; what has ever happened to this idea?

The hotels have thrown down the gauntlet. To quote, in translation, from yesterday’s “Diario”, the president of the Menorcan hoteliers says: “we do not see any effort at any time by the restaurant sector to bring tourists to the Balearics.” There is, in all of this, a horrible sense of bitching and bickering as the great edifice of tourism threatens to collapse around the hotels and as all the supply that has risen around them also tumbles and falls. Yet for the hotels to attack the complementary sector is – though they wouldn’t admit this – the consequence of their being beholden to the muscle of the tour operators; the reverse of the situation that once used to exist, a situation that used to allow for mutually beneficial co-existence with the complementary sector. The hotels are, therefore, going on a bullying offensive while simultaneously they are being rendered less potent by the masters of the industry – the tour operators. They are hitting out at the weakest link in the whole tourism supply chain, because it suits them to be able to try and cling to a power that is diminishing in a market that has changed fundamentally; they are less the victims of the all-inclusive war initiated by the tour operators than the complementary sector, but they are victims nonetheless, clutching at the spoils of war and abandoning their one-time compatriots in the bars and restaurants. Lines drawn for the battlefield.

Any comments to andrew@thealcudiaguide.com please.

Ooh, Isn’t He Bold?

Bold. Boldness. New tourism minister Ferrer is going to be bold. Or at least he said something along these lines several times when addressing the press at the Fitur tourism exhibition in Madrid. This boldness will involve “profound re-developments”, the breaking of “old habits” and a speeding-up of bureaucratic procedures as they affect hotels and their ability to undertake modernisations. Bold words. We’ll see. To Ferrer’s credit, though, it might be recalled that he was one of the mayors – following the hotel collapse in Cala Ratjada and the kerfuffle regarding the lack of a building licence – who admitted that work on hotels, in Alcúdia, regularly went ahead without all the requisite licences because of the tortuous bureaucracy and paper trails between town halls and government. One of the strengths Ferrer is meant to bring to the post of tourism minister is that, having been mayor of such an important tourism town, he has a wide appreciation of issues facing the tourism industry. We’ll see.

Whether Sr. Ferrer has an opinion about the impact of a smoking ban, one doesn’t know. But the argument is now raging on both sides, the national anti-tobacco committee having weighed in with its pack’s worth, stating that visitors from countries with strong anti-smoking laws cannot understand or indeed accept the current permissiveness in Mallorca and Spain. The committee flatly rejects the idea that a ban would cause the “total ruination” of the bar and restaurant sector. Well it would say this, but it is probably not wrong, and it has come up with figures in respect of the effect on employment that followed the previous tightening of smoking in bars and restaurants. It had been argued that this would result in the loss of some 23,000 employees; there was, according to the industry ministry, an increase of some 100,000 employees between 2005 and 2007 (the previous law kicked in on 1 January, 2006). One might, though, say that the previous law seemed to be largely ineffective; there was little major change, certainly in Mallorca.

Any comments to andrew@thealcudiaguide.com please.

Smokey And The Banned-It: Part Two

Following up on yesterday’s piece about the smoking ban, the local health minister has dismissed – as you might expect – the idea that this will lead to “total ruination” of the bar and restaurant sector. She has also sought to remind everyone that the ban is part of a wider European Union-inspired drive to enforce total prohibition in public places in all countries by 2012. When all else fails in the winning of hearts and minds, blame it all on Brussels. She has also been at pains to point out that more stringent enforcement has been applied elsewhere, such as in the UK, so that’s alright then; it’s all a question of degree. Where she has more justification is in pointing out that a ban has not proved to be particularly harmful in Italy, another grand smoking country, and though the measure has proved to have popular support in Italy, she might have added that Italian bar owners have been adept at finding the odd loophole. Without naming them, she says that bans have resulted in increased numbers of customers in some countries. It might be interesting to know which ones.

As always, it comes down to how politicians want to spin the issue. Sra. Buades (the health minister) has not seemingly referred to the Croatian backtracking or to the lack of enforcement in Greece, but despite all this, one can pretty much safely assume that the ban in Spain, and therefore Mallorca, will go ahead, albeit that no date has been set.

On this topic, my thanks to Dave for drawing attention to the harmful impact of the smoking bans on country pubs in Scotland. He calls for “more freedom to choose, less proscription”. Amen to that, whatever the cause, only problem being, Dave, that Europe ain’t going to let there be a choice.

Any comments to andrew@thealcudiaguide.com please.

Smokey And The Banned-It

The smoke-don’t smoke argument is hotting up. The glowing embers of a cigarette tip threaten to become a mighty conflagration, if predictions are correct as to the impact of the proposed smoking ban in public places. The trouble is that these predictions are of course self-serving. They verge on the apocalyptic. The Balearics restaurant association is forecasting the “total ruination” of the bar and restaurant sector.

The law on no-smoking in bars and restaurants has yet to be enacted. Exactly when it might – or might not – be brought into effect is still not clear, though it is meant to be this year, a year that, according to the Spanish hotel and tourism association Exceltur, will be worse than last year in terms of tourism. In other words, recession is still wreaking havoc, and the last thing that’s needed is a smoking ban.

Whether the prediction regarding this year’s tourism is indeed accurate is open to debate. A strengthening pound and the Euro concerns caused by the Greeks could yet see a turnaround in Mallorca. Personally, I would question the prediction. Further evidence that might rebut it comes from increased consumer activity in the UK, while the great competitor – Turkey – has its own problems, those of supply. Nevertheless, the timing of the smoking ban may not be the best. A question is, though, when would be the best time. Never, if the bar and restaurant owners had their way.

The total ruination that the federation believes will occur will manifest itself in the form of a ten per cent drop in turnover, which doesn’t sound like total ruination. But on top of takings reductions over the past couple of years, a further 10% drop would be significant.

One has, however, to distinguish between different markets and different types of bar or restaurant. For the tourism restaurant market, a smoking ban would be unlikely to have much impact for the simple reason that the ban is not due to be applied to terraces, which is where most tourists eat. That non-smokers on a terrace may have to continue to suffer nearby smoke is not really an issue. They have long had to endure this, with no discernible effect on restaurant trade.

Where a ban would be most likely to have a detrimental impact would be on smaller bars which either have no terrace or only a small one and on nightclubs which cannot allow terrace business after midnight (or maybe it’s eleven – who knows for sure?). The federation is probably right to highlight “locales de ocio nocturno” as being the sector of the so-called “complementary offer” that has most to lose from prohibition – to the tune of 15%.

In the case of the smaller bars, there should be genuine concern. Both tourist and resident markets could be affected by a ban, especially the latter. Yet this raises an issue regarding the overall supply of bars and cafés, of which there are too many. Perhaps a shake-out might be deemed a good thing, though this is a pretty heartless argument. Moreover, unlike, for example, the impact of all-inclusives which has been and is one of changed market conditions, the impact of a smoking ban would not be. A smoking ban is a form of societal engineering that creates an arguably unfair market condition.

In the UK, if a bar goes to the wall as a consequence of the smoking ban, it can be argued that alternative forms of business or employment exist, given the great diversity of the UK market as a whole. The same conditions, however, do not apply to somewhere like Mallorca. The apparent over-supply of bars is largely a consequence of economic necessity. A smoking ban may be as prejudicial to the wider economy as much as it is to small bar owners. In Croatia, another of Mallorca’s great competitors, a total ban introduced last year was partially reversed because of the apparent harm that it caused. And Croatia is hardly a highly diverse economy either.

The saving grace, at least where tourism is concerned, may be that visitors from other countries are now used to not smoking when out at bars or restaurants, so that any change in Mallorca would not be a great issue. However, it is the case that some visitors enjoy the liberal smoking laws that currently exist. Or maybe one is making too much of all this. And maybe the federation is as well. In the UK, habits have changed. Far fewer people smoke than used to be the case, the result of publicity, education and also a smoking ban. Tradition, of sorts, it may be for the Mallorcan bar to be a smoker’s haven, but were it no longer to be, then would that really be such a bad thing?

Smoking bans elsewhere –
Bulgaria: a total ban in public places is due to be introduced as from June this year.
Croatia: a law banning smoking in bars etc was reversed in September last year, allowing for either designated smoking areas or, in the case of small bars, for owners to choose if bars are smoking or non-smoking (as is the case at the moment in Mallorca).
Cyprus: a ban in public places came into effect at the start of the year; as with the Spanish proposal, smoking can continue on terraces.
Egypt: who knows? There was a ban imposed in 2007 in “public places”, but it has not been enforced. In practice, there is none.
France: smoking rooms are permitted but with strict conditions.
Greece: there have been similar provisions as to those now in Croatia, but enforcement is lax. A total ban was supposedly imposed from 1 July last year, but there has been a backlash.
Italy: as in France, strictly controlled smoking rooms are permitted but are rare, and in the country generally tough restrictions have proved to be popular.
Turkey: smoking has been banned inside bars and restaurants since last summer.

World Cup Song

Further to yesterday, I received a comment bigging up a thing called “Green Fields Of England” by George and the Dragons. Here it is – http://www.youtube.com/watch?v=n_9WJ6WKeS4.

Any comments to andrew@thealcudiaguide.com please.

Shut That Door!

Now, here’s a potential little treat, courtesy of the Spanish Government. Once again, thanks to Ben for giving me the heads up on what, this time, might just have some important ramifications for bars and shops. I say might because, as ever with some law in Spain or Mallorca, things are not exactly transparent. Maybe they are just not reported well, or maybe no-one really knows. Anyway, to cut to the chase. 

As part of its broader law on a “sustainable economy”, the cabinet agreed a measure at the end of last week that would impose certain temperature and humidity requirements on establishments such as bars. Moreover, this measure would also mean that doors which open on to the street (and presumably also a terrace) cannot be left open. This would require the installation of automatic doors that open and shut as customers and staff pass through. The point of this would be to maintain mandatory temperatures inside, and these are – no higher than 21 degrees in winter and no lower than 26 degrees in summer. 

Firstly, just read those temperatures again. The winter one seems ok, but the summer one? 26 is 79 in old money. That is fairly warm. Clearly, this all seems designed to cut back on air-conditioning use. While this measure would not make AC units obsolete, the investment that may have gone into them would now be open to question. And what is meant by summer? If the temperature inside is below the 26 degrees – naturally – in, say, May, do they have to crank the heating up? There are also any number of bars and restaurants that make a virtue of air-conditioning as part of their publicity. Not at 26 degrees they won’t be.

The confusion about what this all might mean is not helped by different references in reports. There is one suggestion that it may only apply in certain instances – administrative centres and cultural venues have been mentioned – but “El País”, for example, refers to the splendidly vague concept of “public spaces”, which can be interpreted as meaning anything and anywhere. There is also the reference to opening onto a street, so does this include terraces or doesn’t it?

If one assumes that this is intended to apply across the board, terraces, streets, whatever, you can begin to imagine the implications. Surely the government does not plan to have every single bar operating automatic doors. Or does it? Bars have enough on their plate without having to fork out for such systems. And then there is the ambience angle, ironically, as the measure is all designed to control ambient temperatures. Bars, restaurants, shops want their doors open. It shows that they – the bars – are open and that the interior and exterior are seamless.

Just think about the practicalities. Imagine a bar packed with sweaty boozers during a big football match. Doors closed, the temperature at least 26. They’ve got to be kidding. Maybe they really don’t mean every bar and in every situation, but you can’t be sure they don’t, and you can’t be sure that, in the pursuit of saving the planet and meeting a 20% target of reduced carbon emissions, they don’t intend it. But one has got used to legislation which is not as it may seem. The definition of evenings and noise in Mallorca, that law from the summer; well that seemed to mean one thing and then they said it didn’t, or more likely someone realised it was absurd and so they quietly put it to one side.

This measure does not yet have royal assent, but that’s a formality. As to when it might be implemented, don’t know. But if it is as broadly based as it might be, then I think you will be hearing quite a bit more about it.

Leader Of The Pack

And continuing what is likely to be theme of the month, the hotels and others have called upon President Antich to form an alliance with the heads of other regional governments across Spain, for which tourism is a vital part of their economies, in leading a lobby to get the central government to back track on the planned rise in IVA. In the report from the “Diario”, the head of the hoteliers’ federation in Mallorca is quoted as arguing that the IVA rise will be a worse move than the so-called eco-tax of some years ago, which was aborted almost as soon as it was introduced. 

 

The strength of the opposition should not be underestimated and the argument against a rise is valid. However, it is also a case of special pleading. What about everyone else who is set to be affected by a two per cent rise on the top rate? Take away the one per cent for the tourism sector, and what might happen? Three per cent on the top rate? 

 

The central government has to find money from somewhere. The alternative of course is cut public spending, but how? New funding is already in place for, for example, that investment finance for the hotels and additional assistance for those in need over the winter. A constant in the economic development of Spain during the boom years has been the role of public spending, especially for construction and civil engineering projects, and therefore for the construction industry, an industry neutered by the current lack of private finance from the banks. Without public spending in some parts of Spain, Mallorca for example, the economy would all but grind to a halt, save for tourism being bashed about by recession and now a possible tax increase. 

 

The crisis, more than anything, has emphasised the underlying weakness of the Mallorcan economy and the short-sightedness of a model based on two key industries without a diversity to act as a safety net. There is an inevitability that taxes will need to rise, despite my assertion that a lowering might actually lead to increased revenues, and if not in the tourism sector then in the wider economy, resulting in shackles placed on consumer spending and thus a further limit to the capacity to come out of recession. In economics, recessions are often referred to with the aid of letters – a U is a fall, bumping along the bottom for a while and then coming up, a V is a sharp fall and then a sharp rise. Then there is a third – a W, two V’s in other words. And that may indeed be the consequence of tax rises, a short-term recovery followed by another slump as consumers put their wallets away.

 

 

To other things, well, one other thing – the weather. The fortnight of storms that seemingly brought summer crashing to an end gave way, bang on 1 October, to a return to sun. It is extraordinary the number of times changes to the weather do seem to coincide with the first day of a new month. And the late summer weather has been remarkable. A temperature of 32 degrees has been registered in Sa Pobla, the weather station commonly used as the benchmark in the north, and meaning around 29 on the coast. Next week is forecast to see a drop to more normal temperatures of 22 to 23, and after that … ? Hold on to your hats when November arrives.

One More Time

Following on from yesterday … . The central government’s tourism ministry reckons that an increase in IVA (VAT) of one per cent (to 8%) for certain tourism-related activities (accommodation, transport and bars/restaurants) will have no effect on the number of tourists. It also reckons, as noted in “The Diario”, that the average price of a hotel stay (one night presumably) will rise by a mere 50 centimos as a consequence. The secretary of state for tourism believes that the fact that the rise will not be implemented until 1 July next year (as would be the case for all categories of IVA, including the general rate) will act as an incentive for bookings prior to this date. While true, it’s also a tad disingenuous, a case of looking for a benefit from something essentially negative. The government is possibly on firmer ground when it points out that the hotel sector has been the beneficiary of a vast amount of investment finance, though to what extent this is actually being exploited one doesn’t really know. 

 

The date for the rise in IVA is probably not coincidental. It will kick in at the start of the third financial quarter in Spain – IVA inputs and outputs are calculated each quarter and payments or credits issued accordingly. The third quarter covers, of course, the peak months of July and August. 

 

The wider point, though, is the drip-drip effect of a tax rise. With complaints about prices having been given a good old airing everywhere this summer, you can bet your life that once it becomes known that there is to be an increase, the forums and all the rest will be full of even more damning Mallorca’s so expensive propaganda. One per cent, in the scheme of things, does not amount to much, but it does add to a cumulative perceptual impression of price rises. The tourism ministry, not least the local one in Mallorca, should be paying heed to those complaints. Indeed, the president of the regional government has expressed his concern about the planned rise. 

 

The response by the central government to the criticisms of the tax rise from the boss of Thomas Cook suggests, at least in part, that it has been stung into making a statement, with its tourism ministry, headed by Joan Mesquida, himself a former director general of the Guardia Civil and National Police (interesting career progression, but there you go), to the fore in issuing this response. The suggestion that he, Mesquida, was actually seeking to keep the 7% rate – one that came from the Spanish tourism promotion organisation, Turespaña – has been rebutted. The party line, so to speak, is being held. But it speaks volumes that the intervention by the head of the second largest tour operator should provoke a response. The true power in the tourism market resides with the tour operators. The tourism ministry, as the frontline contact with the tour operators, should be seeking to distance itself from the argument and looking to keep the operators sweet, but of course it can’t and is so backed into a corner, even if officials might actually agree with Thomas Cook. It will be interesting to hear what TUI, as the leading operator, might have to say about all this.

The Back Seat Of My Car

We are in a period not of price inflation but of outrage inflation. It continues. It was the cost of car hire (again) yesterday. At least someone had the good sense to right the gross coffee distortion by penning a note to “The Bulletin”. But elsewhere we were told that the “alleged” shortage of cars to hire and their inflated prices is a situation the industry has created. Well yes, that’s true but only in the sense that lack of access to finance has been the primary cause of fleet reductions. If people want to beat up on anyone, then let it be the banks. I say once more, however, this is a situation that has been known about for months; it should come as no surprise. Moreover, it is not a situation unique to Mallorca nor indeed Spain. Similar gripes are to be heard from tourist armies in the likes of Tuscany, wishing to motor around the green lands of northern Italy in a formerly less expensive Alfa Romeo cabriolet. 

 

The regular calls for “government” or “authorities” to “do something” are laughable if they come from those who, under different circumstances, are only too happy to be the beneficiaries of a market relatively free and unhindered by central intervention. Perhaps they might wish to call on governments to prevent the making of profits on the sale of property (not great at the moment admittedly, but that, strange to report, is because of the workings of the market). There is a sense of having cake and eating it as well about all this. Or anywhere but the back seat of my hire car. 

 

One writer called on the paper to pass on letters to the “authorities”. Were it to, the “authorities” would no doubt say gravely that they will look at the matter, pose for a photo and do precisely nothing. Or, they will have a word, to which the reply will be – you lower our rents and our taxes and then we’ll talk about prices. 

 

The government could, one supposes, “do something” were it minded to. The tourism industry in Mallorca is a strategic industry. One element of that industry, the hotels, is to benefit from low or zero finance, courtesy of the Balearic Government, in order to undertake certain redevelopments. This, so the theory goes, will help to kick-start the other strategic industry – construction – while bringing about upgrades in hotel stock that are deemed necessary in the face of competition from other destinations. But the hotel sector is fundamental. I’m not sure the same can be said about hire cars or indeed bars and restaurants. The government would only “do something” if it somehow had hold of the purse strings. The hotels have been told they can create spas and the like within existing complexes but they can’t actually build out – these are the terms on which that finance is available. Were there to be a central fund for other sectors that serve the tourism industry to avail themselves of, then the government would be able to “do something”, such as, perhaps, impose certain constraints on prices charged. But why would they? To do so would require an accord with the banks, who would otherwise see a source of their business taken away, even if they might be currently disinclined to lend finance. And you would end up with a quasi-nationalised bank to fund aspects of the tourism industry, with strings attached. It wouldn’t happen. Even were such a system of finance to be created, it would have to be applied across the board. The car-hire sector is not a special case. 

 

Yes, there are examples of higher prices this year, but there are also examples of small companies benefiting. They are taking up the slack from the larger agencies unable to meet demand for cars. They may well be charging higher prices, but they are also being given a shot in the arm. 

 

One should not underplay the potentially bad PR that high prices create, but one needs to be aware of the short-term circumstances that have brought about these prices; circumstances not of the car-hire agencies’ making. These are circumstances being repeated in other countries as well. Were the current charges being quoted by some agencies to persist, once normal circumstances are re-applied, then there would be cause not just for concern but also for genuine accusations of profiteering. But these are unlikely to arise. There are also suggestions as to the operation of some sort of cartel. I would like to know what evidence there is for these allegations. Despite what some might argue, rules of competition do actually apply in Mallorca, both in the legal and the market sense of the words.

 

And those rules of competition bring one back to what goes on in the bars and restaurants. It is they, above all else, that go to shape prices and products. If a café does indeed charge 3.50 euros for a coffee, well that is its affair. If the one next door is charging the normal 1.50, then the 3.50 café may not be in business that long, but it depends what sort of a place it is. One of my email correspondents, Lynne, points out that bars etc. are supposed to display their officially stamped price list. The point being that you can check the price before ordering. Don’t like the price, go somewhere else. But maybe that 3.50 café has an ambience or style that you do like. More expensive, but you pay a different price for different products. That’s the market for you.

 

Wrapped up in all these complaints about prices is an unrealistic notion that somehow bars and the rest have an obligation, a responsibility to the resorts and the island as tourist destinations. They do not. Their responsibility is to themselves. And it is their responsibility to price and to provide product that the market demands and that has an edge over the competition. Let me tell you about external responsibility, or how it was summed up by the assistant director of Bellevue. There is none, except for the environment. In Bellevue’s case, they do what they do – his words. And so it is for any business, be it bar, restaurant, or whatever.

 

Glen, another correspondent, in the context of the gripes about bar prices, wonders whether the only reasons that some people go on holiday are to eat and drink. It’s a fair point, and the impression some of these letters gives is that these are the reasons. Oh, and hiring a car as well. Someone else made the point to me the other day that the Brits seem to believe that wherever they go on holiday it should always be cheaper than at home. The car-hire issue is one thing, but as for the rest … you make it as cheap or as expensive as you want, but please spare us these spurious conclusions based on specific and arguably isolated examples. And I maintain that the crisis and the exchange rate have heightened awareness as to actual spend, causing a perception of higher prices even where these do not exist. To repeat from yesterday – just give it a rest, please.