At A Fraction Of The Cost

Amongst the proposals for the new tourism law due to be enacted next year is one to allow for fractional ownership of hotel accommodation. The concept is one that, at first glance, might raise alarm bells – oh, oh, timeshare. The alarms would, however, be rung falsely. Fractional does not mean timeshare as it involves actually owning part of the bricks and mortar as opposed to a block of time, though time is, nevertheless, a factor.

Fractional ownership has become well-established, especially in the US. The concept was initially used, as far as the property market was concerned, in Colorado’s ski resorts. It is something normally for a high-net-worth upper market, rather than the great unwashed of the mass tourism market. But it doesn’t have to be and can range from three to five-star style accommodation.

The diffusion of fractional ownership into the European property market has been relatively slow, but it has been gathering pace. What it offers is an opportunity to acquire a holiday home in the knowledge that shares in the property can be sold on.

Of fractional-ownership opportunities currently available in Europe, two give an example of the sort of money that they can command. A residence in a Tuscan hamlet will set you back a minimum of 63,000 pounds; a golf resort on the Algarve comes in at no less than 79,500 pounds (or only 79,500 pounds if you prefer). It depends how much use you want to make of the property, but typically four weeks per year are about what you would get for your money.

Where fractional ownership has been applied to hotels, it has generally been in the form of private residence clubs, i.e. exclusive five-star complexes with all the trimmings you could pretty much hope for. They certainly aren’t cheap. If this model of exclusivity were to be followed, their sheer expense draws into question just how much impact they might have in Mallorca.

The tourism ministry would have us believe that within three years some form of revolution will have occurred in Mallorca’s tourism, based on hotel conversions into fractionals or condos. As far as the condo is concerned, it is bought outright and used as and when the owner wishes (though this can be limited if the hotel closes), making it more flexible than a fractional. Whereas fractional properties tend to imply something grand, such as a suite with three or four bedrooms, a condo can be as small as a studio apartment.

Condos can be sold as private residences within existing hotel-apartment buildings, which is what Meliá Hotels International appear to be planning for one of the hotels in their projected Magalluf megacomplex (the Royal Beach in all likelihood). Such a mix of regular tourism accommodation and private ownership could also apply to fractionals, though at the more exclusive end of the market (the private residence club), the anticipation would probably be to have fractional owners only.

In wider terms, both fractionals and condos hint at benefits. They are not, for example, all-inclusives. Might they also help to break the cycle of seasonality? The suggestion is that they would be available in winter, especially at Christmas and New Year times. But would they be? It is unclear whether a hotel would actually stay open out of season (which it would have to, as it would be managing the property).

What is also unclear is how much demand there would actually be. The high-end fractional is said to attract considerable interest, partly because it offers a good investment opportunity and partly because of its exclusivity. But what of other levels of the market?

The impact of fractionals and condos will depend on a number of things: the costs, the constraints, the locations and the accommodation itself. To what extent either will amount to the sort of transformation the tourism ministry envisages, time will tell, and it will take longer than three years. In the meantime, though, everywhere else is gearing up for fractionals and condos. Where, for example, is there already a fabulous fractional complex? Egypt.

There is one other issue. Though the fractional is not the same as a timeshare, it is near enough to bear similarities. Which brings us to how fractionals might be sold. Timeshare has a dirty name in Mallorca, because of the past tactics of certain operators in certain resorts. If fractionals are to be part of the way forward for Mallorca’s tourism, then their sale needs to be strictly controlled and regulated. If not: “Here, have a scratch card; oh look, you’ve won a prize, all you need to do is to come along to our office … .”

Any comments to andrew@thealcudiaguide.com please.

Necessity For Change: Tourism

Remarkable. Firstly, that I’ve got a good word for the Partido Popular; secondly, that it is displaying some uncommonly common sense. Where tourism is concerned, the PP have it over the other parties. They try not to obstruct where others do try. They make enemies along the way, and they are nowhere nearer striking a sensible balance between the needs of the established tourism industry (primarily the hotels) and those of the non-established, such as the holiday let business. But praise where praise is due.

A caveat. It was the hoteliers, in the form of the Mallorca hoteliers federation, that staged a conference entitled “Tourism, The Necessity For Change”. Change, where the hotels are concerned, is change that’s good for the hotels. Nevertheless, the outcomes of this conference are generally positive.

Amongst them is the likelihood that Meliá Hotels International will create a new “megacomplex” of four-star accommodation out of existing hotels (the Royal Beach, the Antillas Barbados and Mallorca Beach) and that this complex will be themed. The exact nature of this theming is not yet clear, but the wish to do so is one to be welcomed.

One hopes that the themes won’t be of the Flintstones variety; please God, anything but this. What one does hope is that it might be of a “theme” that Mallorca is crying out for, an all-year, all-weather complex; the theme would be akin to the Center Parcs concept. One fears that it might not be, in which case it would be a huge missed opportunity, but we will see.

Another outcome is that the tourism minister Carlos Delgado is minded to go ahead in permitting hotels to stage concerts. He could hardly say that he wouldn’t, having more or less single-handedly granted Mallorca Rocks its licences both as mayor of Calvia and now as tourism minister. He’s made his concert hotel bed, and now he has to lie in it; in different hotels. But good for him.

A further move, and one well heralded, is that the time when the tourism law is changed to enable condohotels seems to be drawing ever nearer. But one detects the first rumblings of division and self-interest amongst different hoteliers. There needs to a minimum size for apartments that can be converted to residential use (90 square metres), or there needs to be a stipulation that they are from existing three to four-star stock, or there needs to be provision to make sure that condos aren’t simply a “refuge for the obsolete”.

One would have thought that a refuge from the obsolete was a very good reason for allowing condos, always assuming investment were forthcoming to make them of sufficiently good standard. If the condo does go ahead, and it seems unlikely that it won’t, then this could be good news; residential apartments in hotels means that they won’t be all-inclusive.

The other side to this is that the condo idea, around for some years, is being exposed as blatantly self-serving when you take into account the fierce opposition of the hotels to the holiday-let sector. Forget all the other spin, this is the real reason for that opposition; one that allows the hotels to have the cake of conversion and of a lucrative residential tourism market and eat it, too, to the point of their gorging themselves.

And then there is something else. The PP government’s finance and business minister José Aguiló is flagging up an idea that is so sensible that is one that even ordinary Joe Soaps, who are neither members of governments nor anything in particular to do with the tourism industry, have thought up; and this is the idea of social-security breaks for businesses which lengthen the season, i.e. the likes of hotels which would stay open over winter.

The idea is such a no-brainer, one wonders why it has not been introduced and not even really discussed. One reason why it hasn’t is because of the debilitating culture endemic among many Spaniards and Mallorcans (and indeed other nationalities that have come to live in Mallorca) that you work for six months and then live off the state for the other six. It’s time for a cultural change and for an incentive for hotels to keep open, even on reduced staffs.

There is much to be positive about what the government has been saying these past few days. There is a “necessity for change”. The necessity has existed for years, but complacency, lack of will, lack of strategic thought have all prevented it. We might just have reached a stage when everyone finally understands the necessity and will actually do something about it.

Any comments to andrew@thealcudiaguide.com please.

The Good, The Bad And The Holiday Let

I’m going to give you a list of organisations. When you get to the end of the list, here are your questions – what do they have in common and what is missing? Here goes, and pay attention:

The hotel federations of Mallorca, Menorca, Ibiza and Formentera; the association of hotel chains; the association for agrotourism; the Mallorca Tourism Board; the chambers of commerce in Mallorca, Menorca and Ibiza; the federation of local authorities; the University of the Balearic Islands; the associations of small and medium-sized businesses in Mallorca, Menorca and Ibiza (PIMEM); the association of travel agents; the school of hostelry; airlines; tour operators; unions.

Ok, if you have said they have all been invited to form part of the Balearics Tourism Agency, then have a banana. This is indeed what they all have in common.

Pretty big agency, huh? Yes, but a reason behind them all joining the agency is to avoid duplications in tourism efforts. So, credit where credit’s due. The agency may now sound unwieldy, but better this than numerous bodies here and there doing their own things.

But what of the second question? What’s missing? Need some help? Just look at the list again. Which are the really big players? Tour operators, airlines, yes, but also the hotels. Still don’t know the answer? This is a tourism agency, don’t forget. Tourism requires accommodation. Are you getting warmer?

Nowhere in this coming together of pretty much all those who matter in Mallorca and Balearics tourism is any representation of non-hotel accommodation: the holiday lets. The tour operators are one player that has an interest in this type of accommodation, others do to a degree as well, but otherwise there is no voice at all.

Why isn’t there? The obvious answer is that there is no body to represent what is a highly fragmented part of the local tourism industry. Even if there were, how well organised it would be would be open to question. There are all sorts of reasons why owners of holiday lets might not wish to be part of an organisation. This aside, the chances are that it wouldn’t be invited anyway.

Two summers ago some grand strategy talking-shop was meant to have been organised by the tourism ministry. It never actually met, but had it done there were to have been two key problems to be addressed, those of seasonality and holiday lets. While mostly anyone associated with the tourism industry would agree that seasonality is a serious problem, only certain parties openly state that holiday lets are. Who were due to have been involved in this strategy talking-shop? The hotels and unions for a kick-off. Both of them antagonistic towards holiday lets.

Amongst the organisations being pulled into the tourism ministry’s agency now, there are few which might speak out in favour of non-hotel accommodation. You might hope that the university would offer an independent view, for example. But as for others, they will mostly tow the line, the one that the hotels, the unions and therefore also the tourism ministry promote: that holiday lets are a bad thing.

Not completely a bad thing, as the tour operators will be quick to point out. But their interests lie with the regulated and registered villas of Mallorca. The airlines might also point out that holiday lets are not a bad thing. What about PIMEM? Where would it stand on the issue?

PIMEM has a bar and restaurant division. PIMEM is quite vocal on different matters, such as all-inclusives. A bad thing, it has been saying recently. It has also been saying that permission for hotels to convert to condohotels would be a good thing.

A hundred or so hotels are already said to be planning to sell off rooms and apartments in anticipation of a change to the tourism law which would permit condohotels and which would therefore create a type of residential tourism, akin to holiday lets but to the hotels’ advantage.

PIMEM reckons this is a good idea because it isn’t all-inclusive and because it would benefit its restaurant members, given the type of tourist it would attract.

But this is precisely the same argument regarding holiday lets. Or one of them. So why doesn’t PIMEM come out and support these? Probably for the same reason that the tourism ministry won’t. It doesn’t want to upset the hotels.

The newly constituted tourism agency is a good thing in many respects, but in one, that of a whole sector of the tourism industry, it isn’t. The momentum against holiday lets is unlikely to let up. Unless there are now voices at the agency to say otherwise, it is likely to get very much stronger.

Any comments to andrew@thealcudiaguide.com please.