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Tourist Rental Income 2007
 

Once it was easy to blame September 11th, Afghanistan, Iraq and the War on Terrorism for the malady affecting the Spanish Self-catering Sector.
However, there have been no major incidents recently but the decline continues.

. . . so what has gone wrong?

The simple answer is that nothing has gone wrong that has not been going wrong for at least 2 decades and the more recent events have simply accelerated the inevitable.

The situation is briefly summarised as follows -

For more than a decade the sector has addressed the ever-increasing problems of over capacity and adversely changing market trends.

Travel habits have changed. The traditional annual 2-week family holiday is being replaced by several short breaks.
The size of the average holiday group has fallen dramatically.
Air travel prices now encourage mid-week travel and long weekend duration.

The actual number of holiday visitors to the Spain has risen significantly during the last decade (47 to 59 million) but these figures are misleading because the present market trend is for shorter holidays.

The number of properties available for self-catering rentals has increased from approximately 400,000 to 1,200,000.

Applying these figures to arrive at an average supply/demand per property basis we get -

1997 - 21 weeks per property

2007 - 4.4 weeks per property

See how this was calculated.

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Due to the shift from the commercial sector to owners direct bookings, holiday promotions and booking procedures have become so fragmented and the discounting so aggressive that the consumer is now in control, i.e. it is a buyers market!

Inflation in the Euro Zone and fierce competition from emergent and recovering resorts has further aggregated the excess of supply over demand trend.

Finally the cheap flight war and the looming construction industry recession have to be taken into account even though their eventual effect might not be negative.

Mike King July 2007

ABOUT THE AUTHOR: Mike King has lived and worked in the Moraira Area since 1971. Currently he manages Villa Holiday Services of Moraira, a rental agency that specialise in Villa Holidays in Moraira and Property Sales in the Moraira Area.
Mike is also responsible for a popular advertising and information website about the Moraira area.

 
Links to other articles about Spanish real estate and renting.

1. Spanish Real Estate - A Crash or some Adjustments?

2. Spanish Real Estate - The Future.

3. Spanish Real Estate Survey - The Most Popular Areas could be the Best Investment.

4. UK Tax Amnesty for Owners of Holiday Homes

5. Tourist Rental Income 2007 - What's gone wrong? Overview of the situation.

6. What will happen next? Spanish tourist renting during the next 10 years.

7. How the Spanish authorities could react to the tourism crisis.

8. Making the best of it - advice for Spanish property owners who rent!

9. Property Values and Tourist Rental Income - Written in 2004. A very long article which foresees the present economic depression.

10. Spanish Young Persons Rental Subsidies.

 

Comparing 1997 & 2007

 

Comparing 1997 & 2007 - Supply & demand for self-catering accommodation.

Overview 1997 Overview 2007
There were approx. 400,000 properties available but the true figure can never be determined due to lack of control by the Spanish authorities.
 
There are now approx. 1,200,000 properties available for rental.
Some property owners rented directly via magazines, such as Private Villas, Holiday Villas and The Lady.
The annual cost of an advertisement in Private Villas was 600.00 + VAT
However, most rented through tour operators on a guaranteed rental basis.
 
Most property owners arrange rentals directly via an advertisement on the Internet.
The average annual cost is 90.00 + VAT.
Tour operators and villa holiday companies no longer offer any form of guarantee to owners.
The majority of self-catering holidays were organised by tour operators and specialist companies such as Something Special, Beach Villas, European Villas, Star Villas, Villa World etc.
These holiday companies marketed directly or via high-street travel agencies (mostly owned by the tour operators themselves).
 
Very few self-catering holidays are now provided by tour operators.
The majority are direct bookings with the owner and the holidaymaker books flights and car-hire directly.
Most self-catering holidays were "packaged" (Accommodation, Flights and Hire-Car). Flight companies were owned and operated or chartered by the tour operators. Most flights are provided by low-fare airlines, booked directly by the holidaymaker.
Charter airlines have either ceased to trade or converted to low-fare airlines.
 
Almost without exception all companies were bonded - ABTA, ATOL OR AIOTA.
 
Very few holiday companies offer any bond at all.
The self-catering sector was thriving and growing. Villa with pool holidays, in particular, were the luxury, more expensive packaged holiday option.
 
The self-catering sector has deteriorated to the cheap, bottom-end of the market and the emerging cruise and long-haul sectors now classed as luxury.
47.00 million tourists visited Spain (the majority from the UK).
A two-week holiday was the norm with the changeover day almost exclusively on Saturday for the mainland.
 
An estimated 59.00 tourists will visit Spain with the majority still from UK.
7-day holidays are the most popular and holiday groups are smaller.
   

1997 - The demand per property

Tourist Days
(Millions)

47.000 million visitors stayed an average of 12 days. 50% stayed in self-catering accommodation. (47,000,000*12*50%) 282.00
On average 400,000 property owners used the property for 28 days and occupied with 4 persons. (400,000*28*4) - 44.80
The total demand for rented accommodation =

237.20

The total demand per property, assuming capacity of 4  (237,200,000/400,000/4)

148.25
= 21 weeks

These figures, although purely hypothetical, give a true indication of the situation in 1997 - i.e. 21 weeks per property!

2007 - The demand per property

Tourist Days
(Millions)

59.000 million visitors stayed an average of 8 days. 60% stayed in self-catering accommodation. (59,000,000*8*60%) 283.20
On average 1,200,000 property owners used the property for 28 days and occupied with 4 persons. (1,200,000*28*4) - 134.40
The total demand for rented accommodation =

148.80

The total demand per property, assuming capacity of 4 (148,800,000/1,200,000/4)

30.83
= 4.40 weeks

Without proper statistics the situation cannot be reviewed  with any accuracy. What is clear is that there has been NO REAL INCREASE in Spanish tourism in 10 years, meanwhile the supply of rental accommodation has INCREASED TO CRISIS LEVEL.
1,200,000 properties is the estimated number available for rental. This does not take into account the reported 3 - 4 million stated to be unoccupied (mainly in Spanish cities).

To get back to 1997 performance and fill 1,200,00 properties for 21 weeks, on exactly the same basis, would take 175 million tourists annually This is equal to the combined tourist arrivals for France, Spain and USA - World's Top 3 destinations.

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It should be clearly understood that very little can be calculated with any degree of accuracy except the yearly tourist figures (World Tourism Organisation).
Consequently it is only "figure crunching" but does provide a broad outline of the problem.

I have managed Villa Holiday Services for the past 20 years. For villa-with-pool holidays in north Costa Blanca -

In 1997 the average villa was rented for an average of 24 weeks, some for as long as 35 weeks, and most owners were paid a guarantee sum.
Most holidays were 2 weeks and changeover day was Saturday.

For 2007 we have half the properties, which we are expecting to fill only for an average of 14 weeks.
We gave "Early Booking Discounts" at the beginning, offer "Last Moment Bargains" at the end and made large villas available for small groups with "Under-Occupancy Discounts".
All owners have non-guarantee contracts and can expect around 60% of the 1997 rental.
Few holidays are more than 7 days and changeover days are Saturday, Tuesday and Thursday.

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