| Local guide for Tourists and Residents to Moraira, Teulada, Javea, Calpe and the Costa Blanca.
Victoria Cars - Click to book online for the best possible rates for Costa Blanca car-hire! Victoria Cars - Collect/return at Moraira, Calpe, Denia, Torrevieja or the Costa Blanca airports! Victoria Cars - largest flet in Costa Blanca. Book online for the cheapst rates!


Homepage | Advertise | Contribute

Maps | Cheap Flights Articles

ARTICLE DIRECTORY - Index to Articles
LEGAL NOTICE - Article submission or Reproduction Sponsored Listings

Costa Blanca Holidays
Moraira Villas with Pools

Renting & Services
Moraira's Leading Agency

Costa Blanca Car Hire
Alicante, Valencia, Murcia

Property for Sale
Moraira Benissa Benitachell




Readers comments are invited regarding any articles and can be made anonymously.
Please click for the Comments Submission Form

Property Values and Tourist Rental Income 2004



Once it was easy to blame September 11th, Afghanistan, Iraq and the War on Terrorism for the current malady affecting World Tourism in general and, in particular, the Costa Blanca Self-catering Sector.
However, there were no major incidents during 2004 but there is certainly no improvement.

. . . but 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 below, please follow the links for full details -

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

The attack on the WTC started a chain of events which has led to the present travel recession and the effect is probably not possible to reverse.

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.
The result is that, although the number of holiday visitors to the Costa Blanca has not fallen significantly, accommodation prices most certainly have.

Inflation in the Euro Zone and fierce competition from emergent and recovering resorts has further eroded accommodation margins.

Travel habits are changing. The traditional annual 2-week family holiday is being replaced by several short breaks. Air travel prices now encourage mid-week travel and long weekend duration.
Off-season low fares have encouraged

Finally the cheap flight war and the looming construction industry recession have to be taken into account.

So what is the solution of property owners?

Index to the Full Article


Overview of the Present Situation
The Development of Villa Holidays
Since 11th September 2001 to Date
Spanish Self-catering Tourism – What will happen next?
Air Travel to the Costa Blanca
Air Travel to the Costa Blanca – What will happen next?
Economic Recession in Spain
The Tourist Construction Industry
What will happen to Spanish Construction?
What should villa owners understand about periods of recession?
How do the Spanish Authorities react to periods of recession?
What is the answer for property owners who rent?



<< Back to Overview >>



The Development of Villa Holidays 

If one starts looking back to the mid-70’s a much more logical explanation emerges which both highlights the current market trends and provides insight to remedial action – 

During the late 50’s and early 60’s – The World Travel Industry experienced a remarkable upsurge and foreign travel became a reality for everyone. At this early stage, for various reasons, only packaged holidays were economically viable for most tourists and the “villa with private pool” sector was the luxury top end of the market and generally not available from tour operators.

During the 80’s - A number of specialised villa companies emerged such as European Villas, Beachvillas, Starvillas, Something Special, Jamesvillas etc. (who were bonded by ATOL and/or ABTA) plus a number of smaller villa companies who were  agents for the ATOL holders only really provided the accommodation.

During the 90’s - The major tour operators expanded into this self-catering sector by absorbing these specialists and smaller companies and contracting the accommodation directly or via rental and service agencies in the resorts.
These tour operators were also owners of various charter airlines, such as Britannia, Caledonian, Air 200 etc.
They also needed retail outlets for all packaged holidays, both hotel-based and self-catering and began to buy up the independent travel agencies. Eventually we began to see Thomas Cook, Lunn-Poly and Going Places etc. in every high Street – these owned by the major tour operators.

During these early years - Self-catering holidays could not be arranged independently at an economical price so the major tour operators still had the upper hand as they were controlling the Flight Market.
However the tour operators made surplus flights available through “bucket shop” type operators and sales of charter seats soon became a major revenue earner for them.
At the same time we saw the appearance of villa holiday magazines, of which “Private Villas” was a pioneer, and gradually the independently-arranged package became a reality.

Throughout the whole period, from around 1970 until today - Europeans have been acquiring holiday/retirement homes, mainly in Spain, Portugal and Florida and now more than 1,000,000 Britons have a home abroad and around 1,500,000 Spanish properties are owned by non-resident foreigners.
Quite recently, James Main (ex MD of European Villas and later a director of Thomson Holidays) made reference to these 1,000,000 holiday home in a report, which I quote -
”The UK travel industry endeavours to arrange for around 24 million holiday clients a year. If we assume that each overseas property owning household consists of 4 people, who visit their property just twice a year, it would equate to eight million people. If we further assume that immediate friends and family account for another two holidays, it only has to be rented another three times to wipe out the entire UK travel industry”

From the period just after the recession of the 90's until the present time - many Europeans, firstly from Germany and then the UK, have acquired holiday homes in the Mediterranean coast of Europe.
For the 1st 20 years of the development of Spanish resorts progress was relatively slow and, by 1990 there were only 500,000 non-resident property owners in Spain. This is expected to reach 2,000,000 by 2010 – provided, of course, that the current developments are completed and sold on time!

By the year 2000 - The Internet was becoming commonplace in most Europeans homes, this provided the perfect medium to promote and sell holiday accommodation and more and more travellers booked their independent package online – mostly via re-emerging villa specialists and directly with the owner.
Online booking also provided a tremendous boost for the so-called “Low Fare Airlines” and, some considerable time before Sept 11th the tour operators began to experience difficulties.
The 1,000’s of high-street travel agencies, which were by now owned by the tour operators, were losing their share of the market faster than they could react and, saddled with huge overcapacity, prices they were forced to reduced prices to dangerously low levels.

<< Back to Overview >>



From 11th September 2001 to Date

By 2001 - The whole travel industry was entering a period of change and it was becoming obvious that rapid adjustments were necessary to avoid a downward spiral into recession.

Then “it hit the fan” – or rather al Qaeda hit the World Trade Centre!
This single, devastating act of terrorism started a chain of events which accelerated the onset of the crisis that the Travel Industry was facing and, after 3 years led to the present situation.
The already-troubled tour operators, were faced with a greatly reduced level of early sales due to the invasion of Afghanistan in 2002 and the Iraq war in 2003.
Their short-term remedies were to cancel contracts and consolidate (by switching clients into the remaining properties) and to sell surplus holidays at greatly reduced last-moment prices..
The following year they were forced to reduce the number of holidays on offer and cut back even further on their overseas commitments.

After 3 years of cutbacks - The total British tour operators’ commitment in the Costa Blanca in 2004 was calculated to be only 20% of the pre-Sept 11th level.
When the travel industry is faced with dwindling demand the solution is to reduce the supply in order to maintain price levels but the private sector of villa owners is unable to do this as they cannot act as one body.

Many owners were forced to market their property directly - mainly via Internet advertising sites but even this did not provide them with satisfactory income.
Initially Internet promotion was amazingly efficient and cost-effective. Search-engine registration was free and, because there were so few pages to display, “before the fold” positioning was easy.
This is no longer the case and can be demonstrated by clicking below -

Search Google for “villa holidays” – 1,550,000 results
or “holiday villas costa blanca” - 219,000 results!
or for “holiday villas Moraira” – 63,600 results!

The only way now to achieve worthwhile results is to invest heavily in page optimisation and/or pay Google (or another search engine) for every client that clicks through.
These are displayed as “Sponsored Results” or marked as advertisements, as required by the Internet Authority. You will see them everywhere on the Internet as all search-engines have affiliates who display their ads. and receive a cut of the revenue for clicks.
Recently these costs have amounted to between £30 and £40 per holiday sold.
So how on earth can a villa ad. site afford to charge just £100 per year for a single villa ad. and promote it to the extent that it sells (say) 10 holidays?
Neither is it within a single villa owner’s ability or pocket to promote sales on a single villa web-site.

The Low Fare Airlines: Overall the only ones to prosper from all of this have been the so-called “low fare” airlines and, they have manipulated the market so well, that they cannot even be called that any more, with August 2004 prices rising to a stunning £320 “no meals, no frills, no client care” return fare from Gatwick to Alicante.
MORE ABOUT – Cheap Flights to Alicante

Finally we arrive at the present day and, to complete this “can of worms” we have to consider the effects of serious inflation in the Euro Zone. Through all of the years, good and bad, the Costa Blanca had one great asset (apart from the sunny climate) and that was that it was cheap to live when you got there.
Sadly now that is far from the case. Since the launch of the Euro in 2001 food and drink prices have increased by around 60% (to almost the same as the UK) and restaurant meals have more than doubled.
Meanwhile, with a cheap US$ and affordable trans-Atlantic flights, Florida is, once again, attracting self-catering tourists as are other non-Euro countries such as Turkey, Croatia and the Caribbean.
The fact that the Spanish economy is heading for a serious recession is not really important in the context of villa rentals except for possible “manoeuvres” by the Spanish authorities.
MORE ABOUT - Recession in Spain and its effect on Property Values
MORE ABOUT - The Spanish Authorities possible reaction to recession.

<< Back to Overview >>



Spanish Self-catering Tourism – What will happen next next?

This is quite difficult to predict due to the many different factors. My guess is that the overall situation will not start to improve for a year or two but the properties on offer will divide into sharply contrasting categories, let us say the “luxury” and the “basic”.

Some villa owners will react to dwindling demand by improving and enhancing their properties as it will become a “buyer's market”
These properties will hold their rental value or just slide a little.

Other villa owners will do nothing except continue to reduce prices.
Eventually a market will open up for these basic properties from new EU member countries as their travel industries develop.

<< Back to Overview >>



Air Travel to the Costa Blanca

Low-fare air travel was one of the few industries to prosper in the post-September 11th period of uncertain economic conditions as they continued to pick up cost-cutting corporate travel as well as the leisure trade.

EasyJet and RyanAir are the two giants of the low-fare sector although, until now, Easyjet has dominated the Luton/Gatwick to Alicante route. 

EasyJet reported record pre-tax profits of £71.6m and a turnover of £552m.for the year to 30th September 2003. However, it looks as though EasyJet will not do so well this year as it recorded a loss of £24m for the 6 months to the end of March 2003. Although passenger numbers were up 40%, to 9.3 million, the average fare paid by passengers fell 10.7% to £37.45 due to "unprofitable and unrealistic pricing". 

So what seems to be going wrong for EasyJet? Low-fare business has blossomed at regional airports thanks to operators such as Bmibaby (Nottingham, Cardiff and Manchester), Flybe (Birmingham, Southampton and Exeter), Jet2 (Leeds/Bradford), Mytravel Lite (Birmingham), Thomsonfly (Coventry) and Air Scotland (Edinburgh and Glasgow) as well as Britannia direct (everywhere).

All of them have nibbled away at EasyJet’s dominance by offering low fares from a more convenient airport and driving down fares. Easyjet's German network faces even more competition and now RyanAir has announced its Valencia slot for 2005

Additionally British Airways, Iberia and Monarch are now matching their low-fare rivals, pound for pound, with online “less-frills” flights.

This obviously cannot continue!

Online Flight Offers to Costa Blanca (Alicante or Valencia) from London Airports for the period mid-August 2005 returning in 7 days.
Researched on 19 September 2004 
At this time of Iberia and Easyjet have not yet announced their tariffs but BA and Monarch have entered the game with some truly remarkable price cuts.
FLIGHT  EasyJet Monarch B.A.  
Saturday 20th Gatwick    Not Listed £291 £130
Saturday 20th Luton   Not Listed £219 Not Available
Tuesday 16th Gatwick Not Listed £138 £95
Tuesday 16th Luton    Not Listed £146 Not Available
Thursday 18th Gatwick Not Listed £146 £95
Thursday 18th Luton  Not Listed £174 Not Available

Although there seems to be a clear indication that the era of rock-bottom fares could soon be over, early bookers for Spring and Summer 2005 can still cash in as airlines seek to increase market shares and knock out their opponents.

Cheap flights erase EasyJets profits. BBC News.
Budget Airlines. CNN News.

<< Back to Overview >>



Air Travel to the Costa Blanca – What will happen next?

The two giants (EasyJet and RyanAir) are at each other's throats. RyanAir recently announced their new Gatwick to Valencia Service and EasyJet poached their slots to Ireland. Meanwhile Apodo, eBookers and Expedia are displaying only cheap flights from Iberia, British Airways, Monarch etc. (Could this be because the low-fare giants don't pay commission to anyone?) and the regional "hounds" are baying for blood.
My opinion is that only the early-booking consumer will win as something has to give. The giants have lots of cash behind them so the regional services might be the first to have problems and will belly up or be taken over.
Finally the two giants will call a truce or merge. I think that all this will happen quickly, probably within 3 years. After this we will still have BA, Iberia and Monarch etc. offering scheduled services and “EasyRyan” will provide “no-frills” but no longer such “low-fare” flights.

Early-bird flight buyers beware! Pay for your low-fare airline flights with a credit- (and never debit-) card or buy it through an ATOL tour operator or ABTA travel agent - that is if you can find one to take the risk!

 << Back to Overview >>



Economic Recession in Spain

The Background: The Spanish Economy Spain's supports a GDP that, on a per capita basis, is 80% of that of the four leading West European economies.
Jose Maria Azner’s center-right government successfully gained admission to the first group of countries at the launch of the Euro and has continued to work towards liberalisation, privatisation, and deregulation of the economy by introducing some tax reforms to that end and unemployment fell under the Aznar administration but still remains the highest in the EU at around 12%

Economists fairly well agree that the principle problems are still Spain’s archaic labour laws and lack of skilled labour in industry and commerce. However, great improvements in these respects have occurred since Spain’s entry into the EU in 1986.
2.4% growth in 2003 was considered satisfactory considering the generally faltering European economy.

In March 2004 there was a change of government to centre-left.
With over 51,7 million tourists a year, behind France (77M) and ahead United States (41,9M) Spain is ranked as the second major tourist destination in the world and most come to the Mediterranean coastal regions and islands.
Also extremely important is the “Tourist Construction Industry”. Since 1990 the number of non-resident property owners has increased from 500,000 to over 1,000,000 and has been calculated to increase to 2,000,000 by 2010.

The chart below shows comparative data for 2003 for various countries.



Estmated 2003

Gross National Income per capita

Revenue per Capita 2003

per capita

2002 estimate


40 m

51.7 m






60 m

23.9 m






80 m

72.0 m






80 m







290 m

41.0 m





Points of Interest – For anyone living in Spain neither the GNI nor the TAX are credible or believable. The true GNI is considerably higher due to the large “Black Economy” and a large proportion of the VAT is paid by tourists.
Spain has an excess of tourists over the resident population so the taxes generated by tourism is extremely important, likewise the income generated by Tourist Construction. It should also be remembered that, with a buoyant property market, the taxes paid by buyers of second-hand property is not insignificant. In fact it probably matters very little whether the buyer is acquiring a new or resale property as the transfer tax is about the same.

Unemployment – The figure shown for 2002 is based on a workforce of around 14 m and 1.6 m unemployed. Since then it peaked in January 2004 at 12.57% (1.76 m), had dropped to 10.36 (1.45 m) in July.  The month of August saw a rise of 1,500 to 11.43% (1.6 m).

Typically the summer figures are the lowest with 11.07% (1.55 m) for July and August 2002.

The current trend would indicate a rise to 12.86% (1.8 m) by January 2005. However, with redundancies due to tourism winding down and lay-offs in the construction industry, unemployment seems to be working towards the crisis level of 2 million or more. Obviously this will be much higher in the coastal regions.

Sources –
The Spanish Economy

<< Back to Overview >>



The "Tourist" Construction Industry

The Tourist Construction Industry would have appeared to have been supporting the failing economy since 2002. The largest current market, by far, is the United Kingdom. Without going into why so many British people are inclined to acquire a holiday home in the sun it would seem that this will quickly come to an end. The funding for overseas properties come mainly from borrowing against the equity on their property in the UK and/or a cheap Spanish mortgages but now both sources are starting to dry up.

The Bank of England is determined to dampen the inflation in house prices and reduce borrowing by raising the lending rate.

The Bank of Spain has also seen the danger but cannot adopt the same measure within the European single currency as they are committed to a base rate of 2%. However, within the past month, their remedy seems to have become apparent. Mortgages are still available at 70% of the valuation and, as yet, values have not fallen but a new element has now appeared on the valuation – the “market tendency element”, which is generally 20% minus.

The Real Estate agencies, which have been popping up all over the UK and Spanish resorts, are now coming under pressure. A major scandal broke with an article about Ocean Estates International in the Sunday Times on 19th September. The paper claimed that Ocean Estates had been blatantly ripping off clients with unrealistic rental returns and impossible promises of short term profits by buying “off the drawing board”.  This is not the first time that the Sunday Times has had a go at Ocean Estates. Previously the topic was the alleged offer for sale of properties affected by “land-grab” laws.

<< Back to Overview >>



What will happen to Spanish Construction?

I believe that the Spanish Economy, especially Tourism and Construction are heading for a serious recession. Hopefully it will not be as severe as in the ’90, when property values in coastal areas fell by more than half. A recent article suggests that prices will fall by up to 20 - 30% hopefully it won’t be worse than this.

<< Back to Index >>



What happens during periods of recession in Spain?

One of the worst kept secrets about Spain is the so-called “black economy” and one wonders sometimes how the authorities, who must certainly be aware, show such a blatant lack of regard to the obvious frauds.
The revenue is lost in VAT (IVA), social security contributions, personal income tax, company profits and non-resident’s rentals. This all results from the huge clandestine industry based around self-catering tourism and its supporting services – rental agencies, cleaners, laundry services etc. as well as the maintenance of pools & gardens, painting and even building improvements, extensions etc.
I have a personal theory about why it is permitted and that is that the authorities don’t want to cook the goose that is laying the golden eggs. The wonderful, fabulous revenue derived from tourist spending, the employment created by a new housing boom and the 7% transfer tax every time a property changes hands makes the revenue that could be collected from this clandestine industry pale into insignificance.

Now that this is all about to change I believe (and this is only another personal opinion) everyone concerned should take care. I believe what happens is that faced with falling revenues, increasing unemployment costs and pressure from trade associations (who’s members are also hurting) the tax, social security, tourist council and other inspectors get out on the streets and make it all good with a few hefty fines. At the same time they satisfy the trade association lobby and shift the (greatly reduced) business to those who pay taxes and make contributions.

I may be wrong about this but we did see a lot more such activity during the recession of the ’90.

There are sure to be those who will say that I am biased, as VHS is an established rental agency registered with the Tourist Authority, but I can truthfully state that this is not the case. We have been around a long time, during good times and bad. When tourism was booming we needed more properties (just like everyone else) gave rental guarantees to most and had good profit margins. When times have been tough we have had all the villas we want and just have to work harder to sell a lot more holidays at reduced margins but no risk from the rental guarantees – its roundabouts and swings.

<< Back to Overview >>



What is the answer for property owners who rent?

If you book directly -

Quality – Remember that it is now a buyers market and clients will be shopping around for the best value. They will be looking for newly-built or recently modernised properties with vital items such as modern furnishings, a washing machine, fully-fitted kitchen, TV with CD player and/or satellite dish, air cond. or ceiling fans and central heating (during the winter).
Other items, such as a dish-washer, security alarm, secure walls and gates, 100% private pool and/or sunbathing area, heated pool etc. will make a considerable difference to your overall return.
If your property is old, has sparse mod.cons. and you have a tight budget - then do not try to do it by halves! It is better to make the rentals really cheap.

Selling Prices - Early bookings are all important, especially for 2005 due to the flight-cost situation and you might have to sell some weeks at the last moment.
Set a fair price for your villa by researching tour operators and agencies in the area (if you have not already done so).
Advertise this as the price and show the discount for early-bookings to start. Don’t even suggest last-moment reductions at this stage and always state the date that the early-booking offer ends.
As soon as this period ends then start to sell at the full price.
When you get to 5 weeks before start your last-moment discounting. Typical discounts for 2004 were from 20 – 60% reduction.

Services – The writer does not believe in cutting back on these just because the market is depressed but you could leave service options open to the client. Receiving a key through the post is considered by some as the worst aspect of renting directly and this is no longer necessary. There are agencies everywhere who will hand over keys and maps or provide key safes for an annual rental.
If you use local “clandestine” services you should find that, from now on, local agencies are not that much more expensive and provide a tax advantage as their costs are deductible.
Additionally, many of them provide “Joint Venture” rental contracts – so you could have your cake and eat it as well!

Advertising – The returns on magazine advertising are loosing ground in favour of the Internet but even this medium is not as economical as it was. Beware of the sites that offer a really cheap yearly ad. rate and/or commission.
Check out their performance by typing into a search engine the keywords commonly used by browsers e.g. “villa holidays” combined with the resort name. Try these two –
Their ad should appear on the first page although some clients will search up to 3 pages. If you cannot find them easily then your clients won’t either!
If you do find them then check if it is a “Sponsored Listing”. This means they pay for clicks.
Click through to their home page and check their Google Rank. For a localised site 4 is the best that they will get. If they don’t have a Google Ranking or if it is low then it means that they pay little attention to page optimisation and or they it is a new site and, as soon as they stop paying for clicks, they will disappear altogether.
If you need a Google Toolbar to search or see the rankings then click here.

If you book via an agency, villa rental company or tour operator –

 Then the above rules apply just the same!

Either way you should study the present situation regarding the Spanish Authorities.

<< Back to Overview >>



25 September 2004

Mike King

ABOUT THE AUTHOR: Mike King has lived and worked in the Moraira Area since 1971. Currently he manages Villa Holiday Services of Moraira who 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.