Can Spain continue its economic revival?

Not long ago, Spain was regarded as one of Europe’s weaker links. Latest figures, released last week, showed it is now one of the strongest. Its economy is growing at the fastest rate since 2007, and three times as quickly as the United Kingdom.

Can Spain continue its economic revival? One reason to think so is the strength of its appeal to international tourists – it ranks 1^st out of 141 countries assessed in the World Economic Forum’s newly published Travel & Tourism Competitiveness Index. The capacity of travel and tourism to drive economic growth should not be underestimated, with the sector accounting for about one in eleven of the world’s jobs, and a similar proportion of global GDP.

Of course, some countries are better endowed than others with the natural and cultural attractions that make people want to visit. And with its long history and famous beaches, Spain has more advantages than most. But performance on the index is also about how well a country leverages its attractions. Topping the rankings for the first time, and with over 60 million visitors making it the world’s third most visited country, what is Spain doing right?

Part of the story is simply being in Europe, the world’s leading region for tourists, which accounts for six of the top ten countries in the index. Europe in general scores highly on several of the pillars on which the index is based, including safety and security, health and hygiene and international openness, with the Schengen area making it much easier than it is in many other regions for international travellers to plan multi-country itineraries.

Spain scores especially strongly on tourist infrastructure, a measure which includes hotel rooms, rental cars and ATMs. It also scores well on the extent to which the government prioritises the industry – as determined through metrics such as government spending, effectiveness of marketing campaigns and country branding.

Developing the travel and tourism sector is a complex task, requiring high-level political leadership in close collaboration with the private sector. Italy is an example of a country which is arguably as well endowed as Spain in terms of its rich history and natural beauty, but which has exhibited a less strategic approach to capitalising on its strengths; in consequence, it ranks only eighth in the overall listings.

However, there is no room for complacency in Spain. Like many countries in Southern Europe, it scores relatively low on measures related to the business environment – the main issues being excessive red tape in the issuing of construction permits and inefficiencies in the legal framework. Spain could also further boost its performance on the index by tackling labour market rigidities. As in many other areas, the reforms which would boost competitiveness in travel and tourism would also be felt more widely in the economy as a whole.

One overall message that emerges clearly from this year’s index is that competitiveness depends on understanding and catering to the demands of demographics which are growing in importance as travellers. These include the new middle classes from emerging markets, where surveys show that a family trip is considered to be the second highest priority after buying a car. Figures show that Spain is doing well, here, with a surge in visitors from China, Brazil and Mexico.

As the baby boomer generation ages, their demands as travellers evolve. Meanwhile, a rising generation of millennial travellers increasingly rely on the internet to research, plan and book their trips and share experiences while there. Spain scores well on a measure of online searches about its restaurants, nightlife and other attractions.

More generally, Spain is realising the growing need to create niche reasons to travel in a world where potential tourists have ever more options and ability to find information online. The tourism ministry in Andalucía, for example, notes a rise in popularity of holidays for activities ranging from bird watching to mushroom foraging.

Tourism has helped to sustain the Spanish economy in hard times – and Spain offers lessons to other countries in how to attract international visitors to drive a national economy forwards.

The Travel & Tourism Competitiveness Report 2015 is available here.

Author: Roberto Crotti, quantitative economist, Global Competitiveness and Risk, World Economic Forum

Image: People relax on Barceloneta Beach in Barcelona, August 24, 2010. REUTERS/Albert Gea