Hotel industry comprises one of the biggest areas of touristic business in Spain. PESTEL and trend analysis for the hotel industry in Spain reveals that though the severe financial crisis caused a temporary decline in this sector, hotel business quickly recovered from the crisis and is currently on the way to a new period of prosperity. Spanish political, economic, and legal conditions are rather advantageous for both employers and employees in the hotel industry and should encourage its extensive development in the nearest future.
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Spain Political Analysis
- According to the data collected by The World Bank (2013), the index for political stability in Spain is currently growing, though it was significantly under 0.00 index during 2006-2011 (par. 2). Therefore, the risks of destabilization of the government are higher than in other Western European countries but are not as critical as it was during the previous years (A. M. Best Company Inc., 2015, p. 3).
- The lowered rates of government stability experienced by Spain during the recent years Spain influenced hotel industry by making the country less attractive to foreign investors. However, current government stability is favorable for foreign investors.
- The Value Added Tax in Spain is due for any services sold in the country, including hotels and cultural events.
- 2013: The Spanish government increased hotel tax from eight to ten percent (Berman, 2012, par. 2).
- The taxation policy significantly affects the hotel industry, as high hotel taxes decrease the rates of tourism. The two percent hike in hotel tax in Spain has not caused significant changes in the hotel industry, but further tax hike is not desirable.
Hotel Industry Specific Regulations
- In Spain, hotels are obliged to communicate the rates they apply to the Local Tourism Authority and to place them in a visible place (CMS guide, 2008, p. 58).
- Detailed regulations approved by the Ministry of Industry govern health and safety issues in the hotels, including the size of the room, disabled access, fire and escape plans, etc. (CMS guide, 2008, p. 59).
- A hotel license from the Regional Tourism Authorities is required to commence trading.
- The hotel industry regulations in Spain are highly effective in ensuring the safety of the customers and the fairness of charged fees.
Social Welfare Policy
- Spain has a smaller welfare state than most central and Northern European countries.
- The social services provided by the Spanish social security include protection in case of maternity, illness, unemployment, retirement, etc.
- Healthcare and education are universal (Aguilar, Escobedo, & Montagut, 2013, p. 5).
- The social welfare policy in Spain protects the employees and should promote the development of hotel industry by attracting new employees to this sector.
- 40-hour working week.
- Vacation of 21 business days.
- Fifteen days (including weekends) for marriage.
- Four months for maternity leave.
- Employment laws in Spain are mostly similar to the laws of other Western Europe countries. However, the salaries in Spain are lower than in northern Europe, and, therefore, the Spanish hotel industry is not very competitive in terms of attracting expatriates and other foreign employees, though is competitive in attracting foreign investors.
- Fair competition is supposed to be ensured and controlled by the country’s antitrust authority – the Comisión Nacional de la Competencia (CNC) (Spain: Anniversary of the Spanish Competition Act, 2013, p. 1).
- The competition law is enforced by the Competition Service (Servicio de Defensa de la Competencia) and the Competition Tribunal (Tribunal de Defensa de la Competencia) (Spain: Anniversary of the Spanish Competition Act, 2013, p. 1).
- The competitive regulations in Spain create a fair environment for the competitors in the hotel industry and should promote its further development.
Spain Economic Analysis
- The severe economic crisis recently experienced by Spain has dramatically influenced the business cycles in the country. The great recession of 2008 has caused a significant decrease in the business activities.
- The business cycle trough in the summer of 2013 was followed by the recovery period continuing till now (Global business cycle map, 2015, par. 1).
- Though Spain experiences business cycle trough, the business in the country is supposed to witness the successful recovery and expansion during the nearest 10-20 years.
- The interest rate in Spain started declining in 2008. After a dramatic decrease, it continued a gradual falling up to 2015.
- Spain’s benchmark interest rate is set by the European Central Bank and is currently at 0.05.
- Spain Long Term Interest Rate is at 1.78% (European Central Bank, 2015, par. 1).
- The decreased interest rate in Spain reflects its economic instability and presents a serious threat to all industries, as weak economic is not likely to attract investors.
- Money supply in Spain continues to grow. Money Supply M1 in Spain is 663777 EUR Million while Money Supply M2 is 1032192 EUR Million (IEconomics, 2015, par. 1).
- The increased money supply affects interest rates of the country. The expansionary monetary policy in Spain can lead to further decrease in interest rates.
- Hotels and restaurants comprise 11.5 percent of the consumer price index in Spain (Ernst & Young, 2013, p. 239).
- After a drastic decrease in inflation in 2008-2009, it experienced a period of growth interrupted by repeated decrease starting in 2012.
- Currently, consumer prices index in Spain continues to fall nearly 0.5 percent on a monthly basis (National Statistics Institute, 2015, par. 1).
- The hotel industry significantly impacts the consumer price index in Spain, as hospitality is one of the main contributors to the wider economy. Therefore, the development of hotel industry should be one of the main priorities of the government.
- Unemployment is one of the most vital problems in Spain. From 2008, the unemployment rates were growing and reached the all-time high of 27 percent. Currently, positive tendencies are witnessed, as the jobless rate is 21 percent now.
- Spain’s hospitality sector supports a significant number of jobs equivalent to 12.4% of the total workforce (Ernst & Young, 2014, p. 239). Therefore, the government is likely to put much effort in promoting the development of hotel industry as it plays a crucial role in providing employment opportunities.
- Disposable Personal Income in Spain increased to “215100 EUR Million” this year and Spain Real Household Personal Disposable Income is at a current level of 98.80 (Federal Reserve Bank of Dallas, 2015, par. 1).
- There is a significant difference in the disposable income of the top and the bottom of the population of Spain
- Spain’s lowered disposable income rates are likely to make the country attractive to foreign investors due to the lowered expenses needed for paying the local employees.
- Spain’s Currency is Euro.
- The exchange rate for Euro is nearly €0.77= $1.
- The exchange rates in Spain totally depend on the general tendencies faced by Euro, as the country does not use its country-specific currency. Such situation leads to the high interest of the population of the European Union using the same currency to the tourism in Spain, which directly influences the hotel industry.
Spain Socio-Cultural Analysis
- As of July 1014, Spain had a total population of nearly 48 million (CIA, 2015, par. 1).
- Nearly half of the population is aged 25-54 years, and the median age is 41 years (CIA, 2015, par. 2).
- Urban population comprises nearly 77 percent of total population.
- Roman Catholicism is the prevailing religion (94%) (CIA, 2015, par. 1).
- Spain is known for a wide range of sports and leisure activities.
- The country has a reputation for its delicious food being known as a representative of the Mediterranean diet.
- The highly diverse landscape offers both beautiful beaches for summer holidays and amazing mountains for winter holidays.
- The experienced financial crisis in Spain has influenced certain aspects of the Spanish lifestyle, but the country remains highly attractive for tourists willing to experience the famous advantages of the Spanish lifestyle.
- Nearly 99 percent of the population aged above 15 can read and write (CIA, 2015, par. 26).
- The quality of education in Spain is considered lower than in other Western European countries.
- Fifty-five percent of adult population has upper secondary education. This index is lower than the average percent for most of European Union countries.
- Lowered level of education in Spain contributes to lowered wages, which can be an attractive factor for foreign investors.
- Spanish wealth gap is considered one of the biggest in the European region, as it the most unequal in Europe.
- Top twenty percent of the society is approximately eight times richer than the bottom of the population.
- The unequal income distribution in Spain affects the hotel industry, as it should create a high demand for low-paid jobs in the hospitality sector.
- Spain, along with other Southern European countries, appears to be rather social immobile.
- In Spain, the influence of parental background on person’s educational and job opportunities is rather high (OECD, 2010, p. 185).
Attitudes to Work and Leisure
- Work-life balance is one of the primary priorities of the Spanish population.
- Spaniards are less likely to consider career the most important thing of their life than the population of Northern European countries.
- Spanish people value leisure relatively high, which creates a great demand for hotels among the population of the country.
- The level of satisfaction from purchasing for family and self in Spain is medium and is similar to other Western European countries.
- The importance of other’s admiration of possessions is low while willingness to try new technologies is medium.
- Most Spaniards tend to give much value to leisure time and consider gaining more time for family life as one of the biggest goals. Such situation is likely to promote the high demand for services provided by hospitality sector, including the hotel industry.
Spain Technological Analysis
- Spain is known for its rich history of inventions, both in the old times and during the last centuries.
- Spain occupies the ninth place in the rankings of world science, but the budget cuts caused by Spanish financial crisis significantly decreased the rates of new scientific discoveries
Rates of Obsolescence
- Obsolescence rates in most industries in Spain are relatively low.
- The low level of obsolescence in Spain attracts foreign tourists interested in using services based on the state-of-the-art technologies.
Government Spending on Research
- Spanish system for science and technology heavily depends on the public sector, which makes it highly susceptible to any changes in the economic status of the country.
- Though the government tends to spend much money for research, the Spanish financial crisis caused the deep budget cuts that significantly decreased the rates of new scientific discoveries.
- The institutions working on improving existing and creating new technologies in Spain collaborate with industry representatives and transfer new technologies to the potential customers.
Spain Environmental Analysis
- Spain shares the Iberian Peninsula with Portugal and is surrounded by the Atlantic Ocean and the Mediterranean Sea. Such location gives to the country numerous stretches of coastline that are attractive sites for tourists.
- Spain possesses the Balearic Islands and the Canary Islands, which are popular touristic destinations.
- Spain is the most mountainous country in Europe.
- The country’s unique advantageous geographical location is one of the most influential factors positively influencing the hotel industry.
Climate and Weather
- The country’s big territory causes big variations in climate and weather across it. The climate is mostly mild, which is a great advantage for tourism-related industries, including hotel industry.
- The coastal regions in the South and Eastern parts of Spain have the Mediterranean climate, which is highly beneficial for the tourism. These territories are perfect for visiting during the whole year.
- The mild climate is likely to remain one of the primary benefits promoting the development of touristic services and the hotel industry.
Spain Legal Analysis
- 1963: The first special Act in Spain prohibited anti-competitive practices.
- 1989: The second competition Act that introduced a modern system of competition law enforcement in the country as a result of Spain’s accession to the European Economic Community. This act provided SDC and TDC with bigger resources and more efficacious tools to carry out their duties (Spain: Anniversary of the Spanish Competition Act, 2013, p. 1).
- 2007: The third competition Act, which created the Comisión Nacional de la Competencia (CNC).
- The competition laws in Spain are likely to be favorable for investors and positively influence the hotel industry.
- The government has launched a package of incentives aimed at promoting job creation and private business
- The minimum is set by the Government each year (currently nearly 650 Euros).
- All employment contracts in Spain are registered at the employment offices though written contract of employment is not necessary.
- The employment laws in Spain are aimed at protecting and being favorable to the employees.
Health and Safety
- Occupational safety and health are ensured by the Ministry of Employment. The Ministry governs the National Institute of Safety and Hygiene at Work and the Labour Inspectorate, which are the bodies responsible for enforcing appropriate laws.
- The regulatory framework of the main elements of occupational safety and health legislation in Spain is advantageous for the workers and strictly governs the employers in the hotel industry.
Product and Service Safety
- 1978: the enactment of the Spanish Constitution, which guides the defense of consumers.
- 2003: Royal Decree Number 1801/2003, which defines the health and personal safety standards applicable to any product or service (Gutierrez & Buigas, n.d., p. 5).
- 2007: The General Law on the Protection of Consumers and Users
- Hotel industry provides services and products that are eligible to the mentioned regulations and should conform to the accepted standards of safety.
The Analysis of the Major Trends Attracting Tourism in Spain
After the Spanish financial crisis and subsequent decline in tourism in Spain, the positive tendencies started developing in 2014. There are several main tendencies contributing to the stabilization of tourism sector and attracting the visitors from all over the world to Spain.
One of the current positive trends in the Spanish tourism sector is the returning flow of investors, both local and foreign, eager to invest in the hotel business in Spain. The affordable assets and renewed trust in the Spanish economy encourage investors to consider hotel sector in Spain an attractive area of business.
Barcelona and Madrid are the main investment destinations, as Barcelona is one of the most popular recreational and cultural sights in Europe while Madrid is a destination for a large amount of business travel. Gulf companies comprise the largest group of foreign investors though European investors are also active. Such trends result in better services offered by Spanish hotels, and, therefore, contribute to higher numbers of international visitors.
The orientation to low-cost services is one of the evolving features of the touristic companies working in Spain. Such trend positively influences the number of visitors, as more people can afford a vacation in Spain nowadays than it was before the financial crisis. Many companies, including those operating within the hotel industry, modify their policies and services toward this growing trend to remain competitive and attract more customers (Euromonitor International, 2014, par. 3).
The Analysis of the Major Trends Attracting Holiday Tourism
Holiday travel is one of the main types of tourism in Europe, as many people are willing to spend the holidays in an unusual destination. Spain offers a wide variety of holiday travel services due to the warm climate and abundance of natural and cultural attractions. Several trends developing in touristic business in Spain attract tourists and contribute to the Spanish economy.
The popularization of Sun-and-Beach tourism in Mallorca is one of the most influential trends benefiting Spanish holiday tourism. The island has an abundance of historical and cultural sights. The largest group of holiday makers, who are attracted by picturesque beaches, warm climate, and exceptional touristic amenities, comes from Germany and the United Kingdom. The economy of the island is highly dependable on the tourism industry.
The quick expansion of the Internet services contributed to the popularization of Sun-and-Beach tourism in Mallorca, as World Wide Web enabled a large group of potential customers discover the opportunities of having a holiday in Mallorca. Online applications and sources provide the information about the holiday resort and give an opportunity to choose between numerous variants of housing options (Yusta, Monge, & Vega, 2008, p. 485).
The PESTEL and trend analysis for the hotel industry in Spain reveals that the industry has managed to recover from the decline caused by the Spanish financial crisis quickly. The country’s political, economic, socio-cultural, technological, environmental, and legal framework is favorable for further development of hotel industry and promotes positive trends attracting tourists to Spain.
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A. M. Best Company Inc. (2015). AMB country risk report. Web.
Berman, C. (2012). Spanish hotel tax rises to 10%. Web.
CIA. (2015). Spain demographics profile 2014. Web.
CMS guide to principal hotel-specific laws in Europe and China. (2008). Web.
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