The Russians Aren’t Coming, They’ve Arrived

Do you know who Alexei Mordashov is? No? Well, you should do, and so I shall tell you. His name gives a bit of the game away. Yes, he’s Russian. He doesn’t like being referred to as an oligarch, but that is what he is. He is the main shareholder in Severstal, Russia’s largest steel company, and the 29th richest man in the world, according to the “Forbes” billionaires list. His personal wealth is said to exceed, twelve-fold, that of one of Spain’s richest men, Gabriel Escarrer of Meliá Hotels International.

Mr. Mordashov, like Sr. Escarrer, has a keen interest in tourism. Mr. Mordashov owns 25.06% of TUI AG; that’s TUI, the German tour operator and the most important player in tourism in Mallorca and Europe. His shareholding makes him the largest single owner of TUI shares. He intends to increase further this shareholding, though probably not beyond 30% at which point he would be obliged to make an offer for all the company’s shares. He has been described as the most powerful man in Mallorca, which, for those of you who had, until now, never heard of him, might come as a surprise.

A couple of weeks ago, Mr. Mordashov did a helicopter tour of Mallorca. He dined at the Robinson Club Cala Serena in Cala d’Or, winner incidentally of first prize in TUI’s “Umwelt” championship 2011 (environment to you and me). There he was joined by the man who has done more than anyone to make TUI what it now is, the company president, Michael Frenzel, and various associates of TUI, such as the head of RIU hotels which own 5.1% of TUI shares.

This other-worldliness of extreme wealth and luxury might be deemed relevant only for the celebrity or VIP pages of certain publications, but there is far greater relevance.

To describe Mr. Mordashov as Mallorca’s most powerful man is not to overstate his importance. His personal power is derived from that of TUI. And TUI is the power in the land.

The past few days have been good ones for the mega rich. The Meliá plans for Magalluf could not have been conceived without very deep pockets. The money that has been directed towards Sóller and that will be sunk into Capdepera is courtesy of Dubai and Qatar. Put into the equation the vast wealth of Mr. Mordashov and a picture may be emerging; one that will have the cash-strapped regional government, minded to give the private sector its tourism industry head, salivating.

Mr. Mordashov has said that his interest in TUI is strategic, which it undoubtedly is. A shrewd businessman, a trait he shares with Herr Frenzel, he is well aware of what this strategy will involve. Russian and Ukrainian tourism, only at present in its infancy, will go massive. Last year, as an indication of Mr. Mordashov and TUI’s interests, a joint venture between TUI and Severstal was launched.

The Russian overseas tourism market is only starting to realise its potential. In 2008, a mere 11.3 million Russians travelled abroad on holiday, less than a tenth of the country’s population. To put this into some perspective, in 2006, 69.5 million trips abroad were made by Britons, two-thirds at least of these trips being on holiday.

Russian tourists may not be everyone’s cup of tea or shot of vodka, but they tend not to be short of readies, to the point of flaunting their money. The BBC “Fast Track” show recently ran a feature on how new money (much of it Russian) was affecting an old resort in Tuscany (Forte dei Marmi). It wasn’t to everyone’s glass of vino. The resort had undergone a change, with luxury brand name fashion stores evident and, yes, some uncouth flaunting of wealth.

The brand names are not unsurprising, however, as Russians are said to be heavily influenced by them. In my local pharmacy the other day, a Russian man was holding a bag with a Prada label, while his wife engaged the chemist in an uncomprehending exchange. And the exchange was itself relevant. The chemist, she can speak English and German more than adequately, said that these new languages were making life very difficult.

She, though, as with many people in Mallorca, is going to have get used to the new languages. And quickly. The Russians aren’t just coming, they’ve arrived and they are going to be arriving in far greater numbers. Mallorca will be very different in ten years time. That’s what Mr. Mordashov calls strategy.

Any comments to andrew@thealcudiaguide.com please.

Smiley, Smile

“The Balearics (are) a summer destination and in winter there are not many alternatives.”

These are words that will not be music to the ears of anyone much in Mallorca or the other Balearic islands. And certainly not to a succession of tourism officials who have sought to promote Mallorca in the winter and to promote specifically its “alternatives”. We are treated, through the words of these officials, to an endless diet of gastronomy, to an endless round of golf, to an endless tour of cultural sites. But to no avail. There aren’t many alternatives. Who says so? TUI. And worse still, TUI Germany.

The moaning that occurs regarding the lack of winter tourism is primarily one inspired by the absence of British tourists and by the absence of aircraft belonging to airlines from the British Isles rumbling along the runway in Palma. There are tourists in winter, however, and they are mainly German, courtesy of Air Berlin’s regular services from all over Germany.

Notwithstanding the winter lifeline that Air Berlin throws Mallorca, for TUI Germany to state that the Balearics are a summer destination should make tourism officialdom and all others who claim that there are alternatives to “sol y playa” (sun and beach) squirm in the vacuity of their endless desires to promote the alternatives. The desires count for little or nothing, as do whatever is meant to have been happening to realise them. “There is a lack of initiative to give life to the (winter) season.” Who says so? TUI.

If it really wanted to, TUI could probably do something about the “many places that are dead” in winter (again, its words). But why should it? There are plenty of other places that aren’t dead. Anywhere but Mallorca, let alone Ibiza or God-forsaken Menorca.

TUI Germany’s director-general and his two able lieutentants were holding court the other day in Palma. The three wise men followed the ibero star to Mallorca, bearing gifts but unable to turn dross into gold. But what gifts they were. The level of all-inclusive will rise to 33% from its current 20. Gifts to the consumer who has driven the demand (says TUI). And the consumer is the gift to Mallorca this summer. “The level of sales is very, very good.” And guess what type of hotel is increasingly enjoying these very, very good sales.

At roughly the same time as the kingdom of TUI and its court was assembling in Palma, elsewhere in the city a different type of court was amassing. The new kingdom of Bauzá. It must be utterly disheartening for a Mallorcan and Balearic leader to know that his own court is largely irrelevant and that the real power has just arrived from the north.

You know that story about the German businessmen who wanted to buy Mallorca. I’ve never known if there was any substance to it or if it was simply an urban myth. It doesn’t really matter, because Germany runs Mallorca anyway. The castle and stripes are not the flag of Mallorca. The real one is a smiley logo. TUI’s.

When TUI puts in its court-like appearance, it is offered tribute by the media and the lickspittles of officialdom. When Völker Böttcher, the TUI boss, speaks, it is as though there were a papal visit and address. What TUI says is far more important than anything that comes out of the Balearic parliament or from the mouths of a Balearic president or tourism minister.

It is in the gift of TUI to do something about winter tourism, were it minded to. And were it minded to, it would simply reinforce the fact that Mallorcan officialdom has been incapable of doing anything. This officialdom talks a good game – of golf, mainly – but knows, or should know, as TUI knows, that the only real game in town and across the island is sun and beach. It always has been and always will be.

It is also in the gift of TUI to do something about summer tourism. Like turning its back on it. It wouldn’t do so, of course it wouldn’t, but it can do pretty much as it wishes. Hence, a 13% increase in all-inclusives. What’s to stop it? TUI can make or break the island. It’s the real power. You just have to lump it, and smiley, smile.

Any comments to andrew@thealcudiaguide.com please.

All That Noise And All That Sound: Playa de Palma

“The noise that is made does not correspond with the reality.”

This could be a maxim for much of what occurs – or rather doesn’t – in Mallorca, especially when it comes to major projects. Never a truer word spoken, and it took a German to speak them. A couple of weeks ago TUI’s Volker Böttcher expressed his frustration with plans for the regeneration of Playa de Palma. “We hear many things but don’t know what they will be.” All that noise and all that sound.

Playa de Palma, where TUI are concerned, is important. It represents a stable, staple even, element of the tour operator’s portfolio. Böttcher said that in twenty years time it will still be important, but this future importance doesn’t overlook present deterioration and a future which includes new and exclusive hotels. This is meant to be the future. Or was. The plan for Playa de Palma is in disarray.

The noise surrounding the regeneration has emanated from far and wide, even from higher echelons of national government. The iconic significance that has been attached to the project makes the wailing because of its collapse, partial or total, that much louder amidst the sounds of false icons and ambitions crashing into the bay of Palma.

The project has always been highly ambitious, which is not a reason for its deserving to fail. It has envisaged a transformation of the extended resort, one designed to establish long-term competitiveness for what is the most emblematic of Mallorca’s tourist areas. The scale of the ambition has, though, been its downfall.

The regeneration has been proposed for what are currently productive hotels and for residences. It is this that distinguishes it from urban renewal programmes, some of them aimed at creating tourism which doesn’t already exist, and from altogether smaller, essentially one-off projects to upgrade coastal towns, such as have been the case in the UK. Add to this the need for wholesale expropriation of hotels and dwellings, and what you have with Playa de Palma is something of a leap into the unknown, the remodelling of a tourist area in people’s lifetimes. As far as I know, it is unique.

Talk of expropriation raises its own issues. Apart from a psychological dimension, there is that of agreeing valuation and all the likely legal wrangles that would arise, the swiftness with which compensation might be forthcoming (and it hasn’t always been swift in the past with other infrastructure schemes) and precisely where the money would come from, not just for compulsory purchase but also for the whole project. There is the mere matter of some four billion euros to be found, roughly a third of it from the public purse. We now have the Balearics president calling on the European Union to cough up for tourist-resort modernisation. For Playa de Palma in other words.

The consortium that is overseeing the plan accepts that it has made mistakes, mainly of a presentational nature. It believes though that regeneration cannot be effected without expropriation and re-building. It’s right. It can’t be. When its director of planning, Joseba Dañobeitia, speaks of hotels built from the ’60s into the ’90s being incapable of competing with other, newer destinations, he should also be adding that whole resorts can’t compete. Playa de Palma, and the same applies elsewhere, is hamstrung by its past, by having been a first-mover in mass tourism and having been left behind both by greater modernity and by tourist expectations.

But what is now left of the regeneration plan is some tarting-up and a piecemeal approach whereby individual owners can seek to enter into agreements with the consortium for their property or land to be purchased. Rather than an integrated, root-and-branch approach, you end up with the worst of all solutions; something which is neither here not there.

The consortium insists that what has been envisaged is not a “revolution” or “luxury” but simply an improvement to tourism quality. The trouble is, as TUI’s boss has alluded to, that no one has been clear as to what has been really envisaged. Hoteliers insist that what is needed is a maintenance of three-star accommodation, that which satisfies the sort of market that has been meat and drink to Playa de Palma for years. Perhaps so, but going forward would this be acceptable to the likes of TUI which has called for hotel upgrades? The plan, in basic terms, is not complicated. Aesthetic improvements and better hotels, and if this means fewer hotels, then so be it; there is over-supply as it is.

Playa de Palma will remain important to TUI, but twenty years is a long time. It has been long enough to see Playa de Palma and much of Mallorca engulfed by what maybe should have been foreseen but wasn’t, namely the emergence of quality rivals. I have no wish to make light of the proposals for expropriation and of the impact this would have, but they should send in the bulldozers tomorrow. And not just in Playa de Palma.

Any comments to andrew@thealcudiaguide.com please.

Empire Of The Sun: German and British tourism

The sunbeds’ battle has been won. The question is how long the war will drag on. Some hoteliers are preparing for the withdrawal of the vanquished, accepting the dominant hotel occupancy force. Sunbedsraum. Peace in our time. The resorts quietening to the sound of retreating Tommies now whistling in the distance and drowning in the horizon where the sun goes down on a modern empire.

From the mid-70s to the mid-80s, at the height of imperial might, the British represented 40% of the foreign tourism market on Mallorca’s beaches. It was a tourism army that, in its numbers, eclipsed that of Germany. At the end of the first decade of the twenty-first century the percentages have been more than just reversed. German tourism, at around 50% of the total, is double that from Britain.

It is indeed the case that some hotels are adapting to a weaker British market or are contemplating the previously unthinkable – a post-British market. This may all be in response to the short-term shock of the past couple of years and the collapse of the pound, but as alternative tourism markets emerge for the hotels and tour operators to sink their teeth into, could it be we that we are witnessing the end of Mallorca’s Britannic tourism industry?

Chances are that we are not. Talk of the apocalyptic demise of British tourism – not now, but some time – is an absurd exaggeration. These things have a habit of going in cycles. German tourism itself has not always enjoyed a completely harmonious relationship with Mallorca, despite a love affair between Germany and the island that goes back half a century. Not so long ago, Mallorca had to repair a rupture caused by a perception that German tourists were somehow unwelcome. Repaired it was, and the relationship has been given new life.

But the relationship with Germany has always seemed, even during the period of British dominance, to be stronger. And the relationship goes deeper than just tourism. It can be seen on the high streets, such as they are – Lidl, Schlecker, Müller and, at some point, Media Markt. Two of the best-known estate agencies are of German origin – Kühn & Partner and Engel & Völkers. TUI is bigger than its rival Thomas Cook, a company which has reclaimed its “Britishness” since the MyTravel merger, but which retains a strong German flavour. Air Berlin is more than simply an airline shuttling German tourists to and from the island; its local boss has headed the Mallorca Tourism Board.

It is a relationship, therefore, which has appeared to be altogether more “serious”. “Real” business rather than just the bar. Not that there aren’t of course German-run bars. There are. But it’s an oddity that even in a place like Alcúdia, which is not as “British” as some might have you believe, the German bar is thin on the ground, almost to the point of non-existence.

This “seriousness” may all have to do with the nature of the relationship and a competing historical perception of Mallorca. For years, many a Brit would look down his or her nose at Mallorca, the consequence of an image problem that was only partly accurate. Notwithstanding the emergence of a beer, sausage and oompah German tourism culture in the likes of Arenal, Mallorca did not suffer to anything like the same degree from being viewed negatively in Germany.

The Germans have bought into the whole “paradise island” deal in a way that the British have never done. Clichéd it is, but the Germans use the expression quite unashamedly. For Mallorca and its tourism at the end of the first decade of the twenty-first century, it is just as well that they do. TUI says that its winter tourism to Mallorca from Germany has started with “much dynamism” and that next summer there will be a growth in the numbers of German tourists.

The Germans are still very much in love with Mallorca, but even with the Germans, the signs are there. More tourists next year, but more in all-inclusives. Hotel prices have been lowered while those in other destinations have increased. And the Germans are being tempted into a different affair, that with Turkey. TUI in Germany now takes more tourists to Turkey than it does to Mallorca.

The battle in Mallorca may have been won, but the eastern front has been well and truly breached. And that is a war Mallorca is in danger of losing, if indeed it hasn’t already lost it.

“We lived an adventure. Love in the summer.”
“Lie in the sand and visualise. Like it’s ’75 again.”

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.

This Mess We’re In

Real Mallorca. Pronounce “Real” correctly and it sounds “ray-ahl”. Pronounce it incorrectly, in English, and it is real. Real mess, as in right mess. Not even a hundred days have passed since the new owner, Javier Martí Mingarro, took over, having paid something around 4 million euros for this basket-case of a club. Yet now, he has announced that he has nary a euro to spend. And so the club is up for sale – again. Part of the problem is that banks won’t extend credit. Well, what a surprise. Perhaps someone might have asked them before pen was put to paper and the club went into new ownership. 

Even less of a surprise is the fact that Real Mallorca is awash with debt. Anyone could have read the papers to learn that some 64 million euros (and rising) of short-term debt existed, to say nothing of the other 20 million or so. Anyone could have checked the books and discovered that monthly outgoings on first-team players and other staff amounted to 360,000 euros. Not everyone would have been able to say that other players and staff would not have been paid for two months.

A real mess. A real mess that has been gathering force for some time, thanks to the debt run up by the former owner, Vicente Grande. Force and farce, the latter surrounding the ludicrous episode with Paul Davidson who made a monkey of the fans, the club and his one-time cheerleaders in the local English-speaking press.

What is it with football clubs and pretenders to the ownership thrones? For Real Mallorca, read many others, such as Portsmouth or Newcastle United. Whatever one thinks of Mike Ashley, he did at least have money and did pay off the club’s debts. Real Mallorca cannot even bank on this happening, because the banks won’t chip in. And who can blame them? 

Football appears to attract, more than any other “business”, charlatans, dreamers, egoists and nutters. In England, there is at least more money sloshing around from TV. Not so in Spain, unless the club happens to be Real Madrid or Barça. What does Mallorca get from TV? 1.3 million a month. One comes back also to the fact that the club doesn’t even own the stadium with its capacity not that much greater than that of … hmm, Portsmouth’s Fratton Park. There may be real estate lurking elsewhere, but what would be its prime asset, one that might act as collateral, is not its to put up as security. Again, small wonder that the banks are unwilling to play along. The only salvation is that the team, remarkably, is doing well this season.

 

The so-called “humid space” that is La Gola in Puerto Pollensa enjoyed a visitation a couple of days ago. Up popped the environment minister, Grimalt, alongside Mayor Cerdà to do some sort of topping-out ceremony on the parking area. For once, he wasn’t cutting some tape or helping to plant a tree. The environment minister does get about. One day he’s opening walkways in Son Bauló, then he’s doing the same around Artà, the next he’s giving the boss of TUI Germany a hand with the spade and planting the first pine in the TUI Bosc (forest). The latter is a splendid example of corporate sponsorship for parts of Mallorca. I am all in favour. Indeed, I have previously suggested that resorts could be sponsored. Maybe they will be. The sale of naming rights can bring in a pretty centimo. Just ask Mike Ashley who wants to flog off the naming of St. James’s Park. But there is one more sponsorship that TUI should consider. Indeed one ownership it should consider. 

TUI Real Mallorca. TUI-owned, lock, stock and barrel. There you go. Problem solved.

Getting Better All The Time

You may remember that the chief exec of Thomas Cook hit town a couple of weeks back and had some damning things to say about the projected IVA rise and the amount of money that is spent on promoting Balearics tourism. At the time, I wondered what TUI might have to say. Not very much, it would seem. Whereas Thomas Cook came to metaphorically partially bury the local tourism industry (well, I do exaggerate of course), TUI came to plant a tree in the same Mallorcan earth. The Germans wear their green credentials with pride, and so the boss of TUI Germany headed off to a nature park with a spade and a baby pine. There would appear to be a TUI forest – really, TUI Bosc it is called – in the Llevant park. From small pines do mighty tour operations grow. TUI has been banging on about sustainable hotels, or something like that, for a while, all part of making the über-green Germans feel at home when the recycling gestapo rifle through the hotels’ litter bins. 

 

The only slight drawback to this TUI forest malarkey is that some wag might append an “h” to the end of the Catalan word Bosc, and I make this point not with reference to a well-known German manufacturer of white goods and quality gardening equipment. As part of the TUI greening of Mallorca, the obermeister was also on hand to dish out prizes to local hotels that are doing their bit to save the world. TUI may be applauded for its environmental responsibility, but it doesn’t stop them taking away in other areas – like launching an exclusively all-inclusive brochure.  

 

In the circumstances, a troll off to the nature park with the environment minister was probably not the time to stand shoulder-to-shoulder with Thomas Cook and have a go at the rise in tax. Instead, as reported in the “Diario”, the TUI boss reckoned that this year had been “complicated” and that 2010 would also be complicated. The year of living complicatedly. Or two years of doing so. Swine flu, bombs and bad weather make life complicated, or in the case of the former some irresponsible, sensationalist reporting by the German red-tops make life complicated. The lousy weather in the second part of September, a time when the Länder normally disgorge great numbers of Germans to come for a late burst of Mallorcan sun, may have curbed these visitors’ enthusiasm, but rubbish weather in September is hardly unknown. Maybe every year is complicated. 

 

Fortunately, not everyone sees complications. Take the secretary-general of the World Tourism Organization. He’s been on walkabout in Spain** as well, not with a Bosch spade and a bag of fertiliser, but with some reassuring words for Spanish tourism – to the effect that things will get better from the middle of next year. From which the tourism industry will doubtless take heart. 

 

Setting aside the fact that “complicated” and “getting better” do appear to be at odds with each other, are these about it when it comes to pronouncements? One fancies that there is rather more to all this tourism bossery than offering vague statements about complication and getting better. If not, then I am at their disposal, willing and able. And I’ll even bring my own spade.

 

** The WTO is in fact based in Madrid.