Towards a higher quality, more sustainable tourism industry
After the recent boom in tourism, of 2018 growth of international tourism slowed down in all regions of the world, with the exception of the Middle East where it increased substantially.
January 2nd, 2019
Nevertheless, the number of international tourists reached 1,403 million in 2018, 5.6% more than in 2017. Although this growth is still notably high, the moderation in tourist arrivals indicates the sector has entered a more mature phase in most regions. The World Tourism Organization (UNWTO) estimates that growth in global tourism will remain dynamic in 2019 at around 3.5%, a figure closer to the growth potential estimated by the UNWTO itself1.
For Spain, the trend in the sector was very similar to the global situation. In 2018, 82.8 million tourists visited Spain, 1.1% more than in 2017, once again an all-time record for tourist arrivals. Spain has therefore remained the world’s second biggest tourist destination in terms of tourist arrivals, only behind France and ahead of the United States.
- 1. The UNWTO estimates that potential growth will decrease from 3.8% in 2019 to 2.5% in 2030. See UNWTO, «Tourism Towards 2030, Global Overview».
Top class destination
Spain consolidates its ranking as the world’s second biggest tourist destination
Despite the fact that the data are clearly positive, as in the case of global tourism there are also signs of a slowdown in growth in the number of visitors for Spain’s tourism industry compared with recent years. One clear reflection of this trend is the modest rise in the number of overnight stays by foreign tourists, up by just 0.4% year-on-year until April. This is mainly because some temporary but favourable factors have disappeared, such as geopolitical instability in some Mediterranean countries that compete with Spain, such as Egypt, Tunisia and Turkey, as well as the phenomenon of Brexit2, which affects a very important group for the Spanish tourism market, namely UK tourists.
This moderation in the growth rates of tourist arrivals indicates the sector is beginning to consolidate its good performance. The sector is managing to maintain the exceptional numbers of inbound tourism observed in recent years, while expenditure by international tourists3 continues to grow at a good rate (until April, this was 5.0% higher than the same period in 2018). This improvement in tourism expenditure, which far exceeds the increase in the number of foreign tourists, is supported by the increase in daily spending, up by 5.7% between January and April compared with the same period last year. Part of this increase comes from changes in the composition of the tourism received by Spain, and especially because of the larger share of tourists with a greater spending capacity, such as Americans, whose number grew at a remarkable rate of 17.5% year-on-year until April. On the other hand, the number of tourists from the United Kingdom stabilised (+0.1% until April), a kind of tourism generally more inclined towards tourist packages and which, consequently, tends to spend less at their destination.
Expenditure by international tourists visiting Spain is increasing more than arrivals
Note: (*) Cumulative year-on-year change up to April. Source: CaixaBank Research, based on data from the Spanish Statistical Office.
Excellent forecast
According to CaixaBank Research forecasts, in 2019 the number of tourists visiting Spain will grow by 2.0%, reaching once again an all-time high
Looking ahead to 2019 as a whole, we expect the stabilisation of inbound tourism observed in 2018 to continue, both because of the slower growth in international tourism and because of the recovery of other international tourist destinations which will become more competitive and attract tourists from Europe. CaixaBank Research expects tourist arrivals to grow by 2.0% over the year as a whole, totalling 84 million people, yet another record for arrivals. Visitors from outside Europe (and especially Americans), totalling about 3.2 million tourists, will be the main contributors to the increase in the number of tourists in Spain. The British will remain the country’s main group with 18.7 million people, although this figure will not increase compared to 2018. We therefore expect tourism expenditure to continue increasing faster than the number of visitors in 2019 (3.6% compared with 2018), reaching 93.1 billion euros.
Spain's popularity
Spain’s popularity as a tourist destination on Google continues to grow in the United States
Naturally, the high season will be decisive for the good performance of the sector this year. According to CaixaBank Research forecasts, between June and September Spain will receive 38.1 million tourists, 1.2% more than in the same period in 2018. If our analysis also includes the dimension of country of origin, one very useful tool for studying the intention to travel among foreigners in different countries are the tourism-related Google searches carried out in these countries.
Google Trends shows that tourism in Spain is still a very popular search among the main countries of origin, suggesting the trends observed in 2018 have continued. Specifically, in recent months Google searches related to tourism in Spain made by people from Argentina, Portugal, Italy and, above all, the US, continued to be very strong, so it is likely that visits from these countries will remain dynamic. On the other hand, in recent months Google searches related to tourism in Spain have lost some of their popularity in northern European countries such as Germany, the United Kingdom and Netherlands.
Popularity of Spain as a tourist destination in Google searches
Source: CaixaBank Research, based on Google Trends.
Domestic expenditure boosting the sector
Domestic tourist expenditure has also boosted the sector and will continue to do so
While international tourism represents a major source of income for the tourism industry, it is not its only support. As can be seen in the following chart, more than a quarter of tourist expenditure in Spain comes from resident visitors.4.
Expenditure by resident visitors has also been very dynamic, growing considerably in recent years with increases of 6.4% and 3.4% in 2017 and 2018, respectively. This has been driven both by an increase in the number of trips made (1.0% in 2018) and an increase in average daily expenditure per person (5.2% in 2018). On the other hand, the length of stay has decreased slightly. In other words, Spanish residents are making more trips within the country and are spending more per day, although these trips tend to be shorter.
- 4. For more details on the composition of domestic tourism, see the article «Domestic tourism: there’s no place like home» in this Sector Report.
Tourist expenditure in Spain
% of total
Source: CaixaBank Research, based on data from the Spanish Statistical Office.
In the future, it is likely that domestic tourism will continue to perform well, although its growth is slightly more contained than in recent years, in line with the moderation in the growth of economic activity in Spain.
This positive trend in the tourism industry is having an effect on the labour market. In 2018, the sector employed 2.4 million people, 12.8% of the economy’s registered employment. Nevertheless, the trend in tourism employment had slowed down slightly, the number of employees growing by 4.0% compared with 2017, 0.7 pp less than the previous year, in line with the slowdown in inbound tourism. Even so, this growth created over 92,000 new jobs. In the first quarter of 2019, the growth rate was still strong with a year-on-year increase of 3.4%, boosting the Spanish labour market as a whole which grew by 2.9%. In this respect, it is worth noting that 16.1% of the new jobs created in Spain in the past year have come from the tourism industry.
Employment in the tourism industry is growing faster than the economy as a whole
Year-on-year change, 12-month moving average (%)
Source: CaixaBank Research, based on data from the Ministry of Labour, Migration and Social Security and Turespaña.
In 2019, we expect the rate of growth in tourism-related segments to be somewhat lower than in recent years, in line with tourism demand. However, this will not prevent the sector from continuing to create a large amount of employment, around 82,000 jobs.
The industry is currently transforming its products and services, shifting towards higher quality tourism. The data show larger growth in the expenditure by international tourists than in their numbers, resulting in higher expenditure per visitor. It is vital to support this trend in order to reinforce the sector’s profitability, given the likely stabilisation in inbound tourism.
Searching for excellence
The tourism industry continues to shift towards providing more premium products and services
The tourism industry has therefore continued to invest in improving its infrastructures, directing business towards more premium products and services. The trend in superior category hotels (4 and 5-star) is still strong with over half the market share and, in April, accounting for 52.3%5 of the total market, 3.6 pp more than five years ago. In contrast, the supply of hotel rooms in the other categories recorded a decline in terms of market share, given the limited growth in the number of rooms offered by these categories (0.6% year-on-year in April).
However, it is not only supply that is shifting towards the premium range but also demand. The occupancy rates for higher category hotels have remained above the sector average, reaching 64.1% in April compared with 52.3% recorded by the other categories.
- 5. Data on hotel rooms, occupancy and profitability (RevPAR) are analysed using 12-month moving averages in order to filter out potential seasonal and calendar effects that alter the analysis.
Revenue from higher category hotel rooms is twice that of other categories
RevPAR * (euros)
Note: (*) Revenue Per Available Room. Source: CaixaBank Research, based on data from Bloomberg.
As already noted, the main result of this shift is improved profitability for the sector. The main indicator for profitability, the Revenue Per Available Room (RevPAR), reached 56.6 euros in April, 1.6% more than in the same period last year, thanks to the larger share of higher category hotel rooms (RevPAR 76.4 euros) to the detriment of hotel rooms in the other categories (RevPAR 37.1 euros).
Within a broader context, these figures are far from trivial; in fact, they are extraordinarily relevant, not only for the tourism industry but also for the Spanish economy as a whole. According to the latest data from Spain’s National Statistics Institute (INE), the tourism sector represents around 11.7%6 of the national GDP. Given this high percentage, we can conclude that the sector’s performance has an impact on the country’s economy, both directly and indirectly. According to our estimates, the tourism sector has a knock-on effect of 63%; i.e. for every 100 euros of added value generated directly by the tourism sector, for the economy as a whole it indirectly generates an additional 63 euros, a very high figure.
- 6. Data from the Cuenta Satélite del Turismo, produced by the Spanish Statistical Office.
Strong contribution to Spanish GDP
Spain’s tourism industry contributed almost 13.6% to GDP growth in 2018
Another way to quantify the importance of the Spanish tourism sector is to evaluate its contribution to the GDP of the economy as a whole. Taking into account both its direct and knock-on effect on the economy as a whole, we conclude that the sector contributed 0.4 pp to GDP growth. In other words, 13.6% of Spain’s GDP growth has come from the tourism industry.
It is therefore evident that consolidating tourism’s good performance is of vital importance for the Spanish economy as a whole. The data suggest the sector will remain dynamic although it is beginning to stabilise and demand is unlikely to grow as much as in recent years. Given this situation, the main challenge continues to be sustainability and it is also vital to continue shifting the focus of its supply to attract higher quality tourist segments.
