Introduction: Unraveling the economic tapestry of Spain reveals a stark reality: its economic well-being is intricately tied to tourism. Without this sector, the national GDP would have grown by a modest 0.8% in 2023 instead of the robust 2.4% estimated by the Bank of Spain. A staggering 70.8% of this economic growth can be attributed to tourism. Despite Spain breaking records with 84 million foreign visitors in 2023 (a 1% increase from 2019), it has relinquished its title as the world’s top tourist destination to France.
Bank of Spain’s Insights: Data from the Bank of Spain underscores Spain’s reliance on tourism. Expenditure surpassed €108 billion, marking a 24% increase from 2022, primarily fueled by rising prices in hotels, transportation, and dining. Looking ahead to the first four months of 2024, forecasts indicate a €30 billion expenditure, an 18.5% surge from 2023, accompanied by an expected 10.8% increase in arrivals.
Jordi Hereu, the Minister of Industry and Tourism, asserts that tourism continues on a prosperous path, contingent on maintaining current conditions for another record-breaking year. However, Spain faces challenges, some within the government’s control, such as extra taxes and flight fees, while others are contingent on nature. The twin challenges of global warming and persistent droughts cast a shadow on the tourism sector, forecasting a bleak summer with high temperatures and water scarcity diminishing tourist presence.
Caixabank’s Tourism Report: Caixabank’s “Tourism in Spain” report anticipates a normalization of growth rates in the sector from 2024 onwards. A 2.5% growth in the tourism GDP is projected, driven by the increased gross disposable income in the source countries as the inflationary shock moderates. Spain’s safety advantage over competing destinations like Turkey and the Middle East also plays in its favor.
Impact of Climate Change on Tourism: Historical destinations like Andalusia and Murcia have experienced declining visitors due to rising temperatures over recent years, leading to internal competition among regions for the economic power tourism represents.
The looming threat of climate change poses a medium and long-term risk to Spain. A projected four-degree temperature increase in the summer of 2024 could result in a 15% decline in tourism. Caixabank’s report highlights a shift in tourist spending patterns between 2019 and 2023, with increased spending in cooler regions and slower growth in warmer areas. Heatwaves lead to reduced tourist spending and altered peak consumption hours.
Spanish Tourism Sector’s Response: Spain, leveraging its competitive pricing, remains a top tourist attraction. To mitigate the negative impact of high temperatures, the focus should be on investing in an appealing nocturnal leisure and dining tourism offer. Coastal destinations should prioritize water activities and shaded areas, while urban destinations must ensure activities are conducted in air-conditioned or well-ventilated spaces.
Water shortages resulting from droughts are also hindering opportunities for the tourism sector, posing a challenge for attracting visitors from around the world. Some hotels have implemented innovative water control systems in showers and even advocate for water regeneration in their pools.
Regional Disparities in Climate Change Impact: According to the “Regional Report on Climate Change in European Tourist Demand” by the EU’s Joint Research Center (JRC), a scenario with a 3 to 4-degree Celsius temperature increase could lead to nearly a 10% decline in tourist demand for Spain in July and August.
JRC’s estimates suggest that the Region of Murcia and the Balearic Islands could experience tourist declines above 5% in 2024 under extreme temperature increases. In contrast, Cantabria, Asturias, and Galicia stand to benefit with increases in overnight stays of 7.2%, 4.2%, and 3.2%, respectively.
Consequently, Spain’s GDP could shrink by around 0.6% to 0.7% due to the loss of tourism income.
Other Challenges for the Tourism Sector: Beyond the challenges of oversaturation in specific tourist destinations, Spain faces the daunting task of destigmatizing its tourism offering, diversifying it, and continuing to work on training and digitalization of the workforce. There is an increasing struggle to find and retain qualified talent, necessitating Spain to enhance efficiency in services and address challenges posed by high temperatures.
Another issue, related to taxes, is the fee for traveling to Europe: the ETIAS fee. This new EU-imposed tax is based on a system that controls visits legally and in advance. Similar to the existing US ESTA fee, introduced in 2009 and costing €21 with a validity of three years, citizens from 60 non-EU countries (including the US, UK, Japan, Singapore, and the UAE) will be required to pay the ETIAS fee.