2023-12-11 18:11:13
The tourism economy and the financing of local administration are two of Garriga’s areas of research, which in this interview analyzes the situation of the tourism sector and the problems of tourist municipalities
This fall, the large tourist municipalities presented a study in which they warned of the underfunding they had and demanded an improvement. The UdG has been analyzing this phenomenon for some time. What do you think?
It is a problem that affects all tourist towns, not just the big ones like Lloret or Salou. UdG economists such as Modest Fluvià, Ricard Rigall, Xavier Guixeras and myself have analyzed it in depth. We have an analysis made of the last thirty years and the conclusion is that there is a structural problem that requires a legal and comprehensive reform.
Give me numbers
In 1998, total debt per capita in census population in tourist municipalities was 2.3 times greater than the debt of non-tourist municipalities. If we calculate it, taking into account the floating population, the debt is still higher. The problem is that tourist municipalities have lower current income and lower capital income as well. In addition, they must provide services and expenses that, proportionally, are higher due to the increase in population they have during the tourist season. The conclusion is that tourist municipalities do not have sufficient income to provide the same services to their population. This can generate misgivings towards tourism. This was already diagnosed in the 90s.
What happened most recently?
From 2008 to 2018, all capital transfers to municipalities fell by 86% to tourist municipalities. This means another decade without investment, which particularly harmed the tourist municipalities, which were already accumulating an investment deficit. Faced with this lack of income, the only answer that the councils have is the Property Tax.
Second homes are a luxury asset and it makes no sense for them to pay the same IBI as a main home
And is more IBI collected in tourist municipalities?
Revenue per capita in tourist municipalities is almost double that of non-tourist ones. This is because they have more receipts (there are more homes) but also because the average fee is higher. The tourist municipalities are heavily in debt because they do not receive enough income to provide the same services, but the collection instruments they have, the IBI, are making use of them. Raising the IBI, but that doesn’t solve the problem. To all this, in recent years, the social discussion about second residences has been added. We have homes all along the coast that are empty for much of the year, which coexist with problems of a lack of affordable housing, either for the census population or for temporary workers who work in the tourism sector.
In other words, living in a tourist town is more expensive.
Living in a tourist town is an unfair burden. The Catalan average of IBI quota in tourist municipalities is 20% higher than that of non-tourist ones. It is an element that needs to be corrected. It is unfair that second homes, which are still a luxury good, pay the same as main homes. From an economic point of view this is not correct.
Hotels are being sold because there are companies that have been left in a very weak financial position due to the pandemic
What proposals have been made to correct this financial imbalance of the tourist municipalities?
There are many different ones. One would be to adopt the Italian model, which foresees that second residences pay a higher IBI. There they pay double IBI. This would bring additional income to the touristic municipalities that would reduce their deficit. Another solution would be to make better use of the tourist tax: they continue to be very low throughout the Catalan coast. There are other possibilities. For example, Luisa Esteve, a researcher in the Department of Law at the UdG, has worked hard on what are known here as Areas of Urban Economic Promotion (APEU), where private collaboration makes it possible to finance public services in these areas. Another possibility is capital transfers, or via local cooperation funds. There are different ways to alleviate this municipal funding deficit that tourist municipalities suffer systematically and structurally. I defend what Dr. Trayter, professor of Administrative Law at the UdG: a comprehensive reform of the Local Finance Act. It is a law that is 40 years old and there are many more structural problems, not only in the tourist municipalities, but also in the micro-villages. More than minor legislative changes, the important thing would be to reform this law.
The large municipalities of sun and beach offer a reduction in VAT.
It is a path without a path. First, it should be noted that the problem of municipal financing is not a problem only for large touristic municipalities. It is a problem that all municipalities suffer from, and the smaller ones even more so. What other issues have been added lately. State revenues are very responsive to inflation. The more prices go up, the more VAT collected. But let’s look at the councils: they are all raising municipal rates because inflation affects the costs they have to pay. The costs of the services they provide increase, but their income does not update immediately. Municipal taxes do not react to the inflation we have. There is a widespread problem of adjusting municipal funding due to the effect of inflation, but in addition there is this differential of tourist municipalities that must be addressed in a general way, not only for large municipalities such as Lloret and Hello
the intention of the Government’s decree to limit housing for tourist use is good, but the execution must be more refined
Another recent controversy that affects the sector is the decree of the Generalitat that wants to limit housing for tourist use. What do you think?
The intention is good, but the execution needs to be fine-tuned. I understand the intention of the regulations to try to contribute to solving the problems of lack of housing, but I think that it is not a sufficient way to achieve this. The housing problem also affects non-tourist municipalities. Other housing policies are needed. However, the current model of housing for tourist use must be better regulated, of course it is, giving a period of adaptation. Above all to achieve a well regulated and quality offer. And, when regulating it is important to take into account the differences present in Catalonia, it is not the same problem in Barcelona city as in a small tourist municipality.
Has the tourism sector already recovered the turnover volume before covid?
The tourism sector in the years 2020 and 2021 was completely collapsed. This created a very significant financial weakness. In 2022 it grew, this year it has continued to grow, but it has not yet fully reached the pre-covid level. The sector has taken a very important step forward. Before the pandemic, it had made large investments to improve the quality of hotel places, especially to transform three-star hotels into hotels of four or more. We have a very high quality tourist offer. This financial weakness has caused prices to tend to grow, but in line with the quality they offer. One of the indicators that shows us that the sector has not fully recovered is that of passengers at the airport, which needs to be given a new impetus.
Just a few days ago they presented a study on the profile of the airport passenger and came to the conclusion that one of the points with the most room for improvement is the low season…
The winter sun is what tourists who visit Girona in autumn and winter value most. Passengers who arrive at this time of year have a higher purchasing power than those who visit us in the summer. This is a type of audience that demands sun, nature, scenery and calm. These are things we already have, we just need to know how to sell them. The Costa Brava has the potential to attract visitors with a very high purchasing power.
The report you presented also targets some strategic markets.
Yes, he recommends bringing back flights to Eastern Europe and the Nordic countries as strategic sectors. Another market with a lot of potential is the Irish, with an increasing level of income and looking to take holidays outside the summer peak, but with destinations where the sun shines. These are opportunities that can help keep the hotel floor full and open
He previously referred to the financial weakness of the hotel sector. Is this what explains the large number of transactions we are seeing in recent months with many family businesses selling hotels to investment funds and large industry groups?
Certainly. When a hotelier who has made large investments has to spend two years with the hotel closed or at half throttle, his financial position is very weak and sometimes selling is the only solution. Tourism was the sector that needed the most specific aid to face the blow of the pandemic, and not enough has arrived. Family businesses have found it difficult to access large lines of Next Generation funds.
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Recent economic studies, such as the Regional Economic Yearbook, indicate economic growth, with an important contribution from the tourism sector
Make no mistake, GDP grows mainly in nominal terms, that is to say it grows more due to the increase in prices and not so much due to the increase in production
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