Hotel prices in Spain remained in May at 2004 levels according to a National Statistics Institute (INE) report today. This could be a significant reading if price inflation in fact is disappearing from the sector. As the report notes, most of the recent increase in business has come from Spanish nationals.
Spain is running a large trade deficit. Tourism is one of the key ‘exports’. The combination of a high euro, and continuing domestic inflation has been hitting this badly. The non-increase is obviously a measure of the pain reading. Hotel and tourism prices have been rising at an annual rate of 5% plus since the start of the century.
Given that a large proportion ( half ?) of tourists to Spain come from Germany, France and other Euro countries, the rise of the Euro is unlikely to be the sole reason for the difficulties.
“the rise of the Euro is unlikely to be the sole reason for the difficulties.”
This is partly true, but remember with the euro going up the non-euro rivals get cheaper: Turkey, Slovenia, Tunisia, Hungary etc.
Plus it is the inflation differential that is also important in the case of the Southern group generally: 2% points extra over 4 years makes a difference.
Of course they’ve had too much inflation in part because the interest rates have been too low for them.