Spanish beer isn't flowing and Brexit is part of the problem

Madrid

THE beer isn't flowing like it used to in Spain's tourist hotspots, and Brexit is part of the problem.

Sterling's decline has made UK travellers even more price sensitive this summer holiday season, pushing some to choose cheaper beach destinations in Turkey, Egypt and Tunisia. Fewer British visitors means not as many cold brews being downed. Tourists from the UK and elsewhere drink around 25 per cent of the beer consumed in Spain annually.

"The fall in the pound affects their spending power in Spain," said Jacobo Olalla, head of the brewers' association Cerveceros de Espana. "It's something that could get worse if there's a hard Brexit."

British tourists have an outsize impact on Spain. It's their top destination and about 18.5 million visited in 2018. That makes their ebbs and flows important not just for beer and food, but the entire tourism industry, which accounts for nearly 12 per cent of Spain's economy.

The pound is down about 16 per cent versus the euro since the 2016 Brexit vote, and reached the lowest in almost a decade this month. In June, the number of British travellers to Spain fell 5.3 per cent from a year earlier to 2.1 million visitors, the weakest start to the summer season in four years.

Overall, the number of international visitors to Spain is still rising, but the pace has slowed from the double-digit rates seen in 2016 and 2017. Similarly, growth in beer consumption is also losing momentum.

Mr Olalla says bar and hotel managers have been warning him of a slowdown, and Spanish brewer Mahou-San Miguel Group has noticed weaker sales, particularly in the Canary and Balearic Islands.

It's not all the fault of the UK and its battered currency. The collapse of German budget airline Germania has meant fewer available flights to the Canaries, according to Carlos Cendra of Spanish travel analytics firm Mabrian Technologies.

Spain is also dealing with cheaper competition around the Mediterranean. British tourists who travel abroad every summer are typically looking for resorts they can book through a tour operator. Many are indifferent to location, tourism executives say. The deciding factors are price and safety.

The average cost of a room in a three-star hotel booked on Spain's Costa del Sol is 87 euros (S$134) per night, more than double the price in Antalya, Turkey, data from Mabrian show.

Add in weaker sterling and that's making British travellers even more price sensitive.

Spanish destinations saw a pickup when a spate of deadly terror attacks in Tunisia, Turkey and Egypt drove tourists away. While concerns aren't entirely eliminated, attacks targeting tourists have become somewhat less frequent.

Bookings from the UK to Spain have fallen by around 3 per cent this summer season, according to GfK Travel Insights. Turkey and north African countries including Tunisia and Egypt are up nearly 40 per cent.

"The weakness of the pound against the euro is the most likely cause for holidaymakers' willingness to venture further afield," UK tour operator Thomas Cook said in April.

There are also signs that British tourists' flagging interest in Spain could continue. Mark Buchanan has noticed a drop in bookings for 2020 with his company, The Spain Event, which organises bachelor and bachelorette parties in Spain.

"The reasons for reduced expectations for UK tourism are down exclusively to our good friend Brexit," he said. "It's not so much visas and ease of travel but the effect it already had on the pound and the impoverished economic outlook for the UK." BLOOMBERG